Welcome to the IG Design Group Full Year 2022 Results Webinar. First, we're going to play a pre-recorded presentation. After this, the management who are with us will answer your questions. This webinar is being recorded. We'll now play the presentation. Welcome to the Design Group PLC year-end 2022 results presentation. First of all, I'd like to introduce myself, Stewart Gilliland. I was appointed as non-exec chair in September last year, and I've recently taken up the role of executive chair from the first of June this year. Today, I'm joined by Paul Bal, our group CFO, who was appointed from the first of May this year, and also Lance Burn, who is our interim chief operating officer and has lengthy experience of over a decade, both in the industry and the group, supporting us here today. What I want to cover off is about the full year developments for 2022. I'll then pass on to first Paul and then Lance, who'll go into a little bit more detail around the financial and operational highlights for the business, and then I'll return to give a summary. Starting here with the results, clearly we've had good organic revenue growth of 11%, but our margins and profits have been hit by the unprecedented supply chain issues. Now, this is predominantly an American issue, as you'll see, our international business has actually weathered the storm far better. As a result of that, there will be no final dividend. Our focus throughout has been on customers, channels, and product. Our customer relationships have been strengthened. We've done everything we possibly can to give great service and great availability to our major customers, such as Walmart, Target, Costco, Tesco, Lidl, and Action. There have been some post-pandemic shifts in terms of consumer behavior, but I'm equally very impressed with the strong progress we've made with Eco Nature as a new brand that really does resonate with customers who are interested in sustainability. In recognition of the way that we've worked with customers, we've been awarded great awards from both Walmart and Tesco. As I said, the big challenge for the group is around the Americas, and Lance has gone into the new role there from the beginning of February, and he's starting to get the right focus on the business. I was fortunate to be able to witness that firsthand when I visited the team in April. The turnaround plan really is about getting back to basics, focusing on reducing complexity, improving efficiency, and rebuilding the margins of the business. Clearly, we have to review our strategy. Historically, our strategy is very much around M&A, and it now really needs to be about organic growth. We need to build a more resilient model to deal with the various challenges in the new world we operate in. That will be about reduced complexity, higher margins, a more resilient supply chain, lower working capital, and stronger teams. We've made a number of senior team changes, and we strengthened the board with two new non-executive appointments in Clare Askem and Claire Binyon. As you said, Lance is in as an interim role, managing the Americas and leading that turnaround program we've touched on. I started the process of finding a Group CEO, which I'll update on my progress within the summary section. Looking to full year 2023, we've got a stronger order book than we had this time last year, which again continues to demonstrate that strength of our customer relationships. We've got pricing that we need to put through to mitigate the continued cost pressures, and then we have the great news about our banking facilities being extended. There's a margin improvement, but a higher interest cost related to that. At this stage, I'd like to hand over to Paul, who'll go into a lot more detail around the financial highlights. Thank you, Stewart. It's a pleasure to join the board and be working with the emerging team to turn around the group's fortunes, grow profits, and deliver more cash while building a more resilient business model capable of navigating today's and tomorrow's cost and supply chain challenges. I shall start with a summary of the financials on slide 3. First, please note that we no longer report share scheme costs as adjusting items and comparative past profits and cash flows have been restated to show a like for like picture. The group's 11% top-line growth was organic. As Stewart said, it is a testament to the strong relationship developed with our customers over many years of delivering consistently strong service. From the perspective of building resilience, it was pleasing to see non-seasonal everyday business increase in our mix to now represent just over half of the group's sales. There is no getting away from the significant impact that the supply chain issues and cost headwinds had on the group. Underlying overheads were kept flat, but nevertheless, margins were down markedly and a small underlying loss before tax reported if one ignores the net GBP 3.5 million credit from this year's adjusting items. Similarly, as you can see, that adjusted EBITDA was also markedly lower. Despite the challenges to profits, the underlying operations remained cash generative and the group ended the year net cash positive. This is despite now bearing higher working capital levels that reflect both cost inflation as well as the need to ensure increased security of supply. If we now get into more detail, first with the profit and loss account on slide 4. It is pleasing to see that both divisions, the Americas and International, contributed to the top line growth of 11% by growing 7% and 16% respectively. Demand for our products remain strong and sales are now above pre-pandemic levels. Sharp cost increases, which were then compounded by freight availability issues, significantly impacted profit delivery and margins. This was particularly so in the Americas. Therefore, whilst the international business endured some margin dilution, the Americas delivered an underlying operating loss for the year. Maintaining overhead levels flat wasn't enough to prevent a small loss before tax in underlying or adjusted terms. EBITDA, however, has remained positive, albeit markedly down over the year. Adjusting items contributed a net $3.5 million in credit to the profit before tax, or $3.9 million to EBITDA. Besides the amortization of acquired intangibles, these are the combination of insurance recovery from the 2020 cyberattack, restructuring gains in the Americas as surplus sites are closed and that business reorganized, reversals of previous impairments triggered by the COVID pandemic, and aborted M&A costs incurred early in the year. These turn the underlying or adjusted loss before tax of $1.3 million into a small reported profit before tax of $2.2 million for the year. The tax charge is distorted by the prudent derecognition of U.K. deferred tax assets as we project future head office costs. Turning now to slide 5. If we now look at how the underlying or adjusted operating profits evolved over the year in a waterfall, we can better visualize and understand the impact of the different drivers that led to lower profits and margins. The value gain from the 11% revenue growth was partially offset by a poor margin mix as craft sales reduced. This category had received a boost during the COVID pandemic lockdowns as there was more time for such activities. However, it's very apparent that the impact of the cost headwinds was by far the biggest drag on results. Given the scale of this impact, I will come back to this driver on the next slide. In the 2021 financial year, we had benefited from some government support related to the COVID pandemic. In the 2022 financial year, we did not, nor do we have any government assistance to repay. This year, we benefited from writing back share scheme costs. The group's poor results make it highly unlikely that there will be any prior share awards vesting. In fact, you may have read that we've today also announced the closure and winding up of the Value Creation Scheme. Finally, there was foreign exchange drag resulting from a higher proportion of non-dollar revenues and dollar-based purchases during a time of exchange rate volatility. Going back to the significant cost headwinds, unprecedented post-COVID global supply chain disruptions have been the cause of abrupt and sustained inflation affecting many industries and businesses. We were no exception, suffering an escalating and significant impact on our operations in all territories from early summer last year. I'll summarize the three main challenges, how we respond to them, and how matters presently stand. Post-COVID global economic resurgence initiated severe reduction in the availability of sea freight containers. This pushed up peak season prices to over 500% above prior year. Embarkation and destination port congestion arising from the higher throughput and COVID-related absences of dock workers and road freight haulers further exacerbated delays. The slower return of empty containers to the Far East has prevented meaningful normalization of sea freight rates so far. The recent two-month lockdown of Shanghai, China's largest port, has continued to hamper dispatches. We sought to pass on the inflationary impact through a combination of seasonal retrospective in-flight price increases, go-forward price increases, and product re-engineering. Where possible, we have also negotiated the transfer of customer orders onto direct import or free on board terms, where our customers incur the cost and delivery risk from port of embarkation. Our bigger customers have been amenable to this, being able to leverage their scale. We also hold higher inventory for some of our bought-in lines for safety. All raw materials increased markedly in price. Paper prices in particular rose sharply as, catalyzed by the COVID pandemic, demand for pulp-based products dramatically increased to supply the boosted online channel, as well as paper-based sanitary products such as masks and wipes. We also held higher raw material inventory levels for safety where it made sense. More recently, higher energy costs have been further turbocharged since the Ukraine invasion. As well as their direct impact, they have contributed to further increases in paper manufacturing costs. Presently, some paper grade prices remain doubled. We're recovering these costs through aggressive price increases, sometimes up to 45% up for our leading U.K. and European customers. The great resignation, combined with generous direct-to-individual government support packages, depleted the available workforce in all territories. Labor rate rises were further fueled as employers competed for staff. We had no choice but to compete, but also be flexible in our resourcing. We invested in significant wage and salary increases to attract and retain caliber employees to keep our factories and creative studios churning out our great products and ideas. In some instances, raising hourly rates by 15%-20%. Turning now to the cash flow on slide 7. Clearly reduced profits meant less cash was generated. As the upper table on the right of the slide shows, this was compounded by the business operating with higher levels of working capital, driven by a significant increase in inventory levels. As I said, this resulted from a combination of the need to manage the risks of availability throughout the supply chain, be it freight or raw material or bought-in products, and also the cost inflation in the cost of these inputs. In essence, we focused on delivering on customer commitments at the expense of our cash flow. The optically higher tax payments reflect the geographic mix of where the group made its profits, as well as the prior year containing tax repayments in some markets. Despite these significant pressures, the group managed to end the financial year net cash positive. This indicates that the challenges we experienced were and remain a consequence of funding a stressed working capital cycle, as opposed to pointing to more structural capital issues. This is recognized and understood by the banks that are supporting us. On the financing front, as we recently announced, we amended and extended our banking facilities. The details of what has changed are set out in my final slide. First off, the facilities have been extended by nine months to March 2024. As you'll note, we also took the opportunity to reduce the absolute amount of facilities that we require based on our past and projected cash needs. This reduction in facilities mitigates the impact of the higher margins we will now be paying as the cost of debt rises. The covenants that will apply to the current financial year have been amended to better reflect our present financial circumstances and outlook, namely reduced profitability for this year. Next year, they will revert to the original more traditional covenants of leverage and interest cover. That our banks accommodated these changes reveals their willingness to support us through our current challenges and higher working capital needs. They also understand that this is a temporary fix as we'll carry out a more comprehensive revision of our debt later this financial year, following a reappraisal of our strategy. With this, I thank you, and I now hand over to Lance. Thank you, Paul. Unraveling the complexity of our USA business, including rationalizing background operations, coupled with the unhelpful consequences of the late 2020 cyber attack, remained FY 2022 distractions. However, the Design Group Americas management did not adequately anticipate, and so did not mitigate the key FY 2022 inflation drivers in sufficient time, resulting in profit downgrades in H2. The Americas team correctly acted to protect customer service and fulfill volume growth obligations, but also at the expense of incurring significant on-cost, such as deploying additional temporary labor in our domestic manufacturing facilities to meet customer outload dates. Such service ethic was rewarded, however, by the awarding of Walmart Supplier of the Year for an unprecedented second consecutive year. In total, Design Group has been three times winner in the previous four years. We have a very strong Walmart order book for FY 2023, and we are poised this year to fulfill on time and in full without incurring on cost. The Americas business did indeed complete the envisaged facilities rationalizations that contributes to FY 2023 increased resilience, namely closing 4 sites, consolidating our Hong Kong sourcing offices into one, and the successful relocation of our new Uteco press into our brand new Roll Wrap manufacturing facility in Byhalia, Mississippi, that paves the way for the orderly exit and closure of the Memphis site acquired from Impact Innovations in 2018. More facilities rationalizations are planned for later in FY 2023. To the reprogramming of our Americas business. Our strategy is a return to focusing on the fundamental principles of simplification, efficiency, and margin growth. We have three priorities that aim to drive an improvement in the financial performance of the Americas business back to an operating margin of between 5%-6% by FY 2025. These are, one, addressing the commercial proposition to align the product offering to the new price cost environment by simplifying the commercial architecture and reducing inventories. We use our category expertise to engineer product solutions to match desired retail pricing. We can design category architecture to advantage favorable margin mix. By example, our $140 million decor business that is entirely customer direct import is advanced by 2% margin year-on-year after absorbing system-wide on costs. Two, driving immediate and longer-term cost savings and productivity efficiencies that includes rationalizing management structures. Here, by example, in FY 2023 quarter one alone, exiting 50 management staff yielding $5.5 million saving in salaries headcount. That is a reduction of 8%. Three, balancing customer pricing to supply chain cost inflation to grow margins. By example, our Craft & Creative Play everyday category has implemented a 6% price increase effective the first of April, and has landed a second 10% increase effective the first of July coming. Importantly too, we are focusing on margin-accretive parcels of business and changing channel mix accordingly, favoring customers who support progressive and added value category solutions. As part of this three-step plan, one of the first actions has been a reorganization of the commercial and operational teams to simplify our activities in DG Americas. Reporting to the new CCO role, we have six distinct category teams, each comprising dedicated sales, product innovation, and creative design, all fully aligned to our customers' buying processes and all with focused and accountable leadership structures. Our operational teams are aligning behind the new commercial activities, and we now have line of sight of an additional $6 million variable cost efficiencies arising from commercial simplification. In addition, forward replenishment purchase orders are reduced full year to date, 50% year-on-year as we rebalance inventory to demand with the resultant working capital savings flowing from FY 2023, H2. Design remains at the heart of what we do. Innovation is our lifeblood. Leveraging our strong relationships with our leading partner retailers helps us secure new and more structured, less complex category architecture around clear price demarcation and product differentiation. This enables us to focus product development and design more directly to consumer requirements, so requiring less of each. Value does not necessarily mean cheap. Consumers understand good, better, best selections and the choices and benefits from them up trade in a purchase. This provides us scope to improve margin mix. Presenting our retail customers with such curated selections also improves our strike rate, being an increased number of designs selected for launch from a given number of designs presented. Less is more, if you like, and this greatly improves the efficiency of our creative resources, so we can do more with less. We have to date removed 10% of total SKU count from our category offerings, and this is enabling us to further reduce headcount early quarter 2 without impacting our FY 2024 commercial objectives. Our international businesses, referred to as DG International, comprising the U.K., North Continental Europe and Australia, have generally proven more resilient while experiencing the same supply chain disruptions and on costs. For the U.K., the added complexity of FY 2022 labor unavailability, particularly arising from Brexit. You'll recall the estimate of nearly 100,000 shortage of HGV drivers throughout 2021, 2022. The recent alarming developments in Ukraine have particularly affected the U.K. and European energy markets, exacerbating system-wide inflationary pressures and increasingly depressing consumer disposable income. However, our forward seasonal order books remain strong. Pricing and product engineering strategies are defending margins, and we continue to invest in to extract efficiencies. Post-COVID, consumer behaviors have changed regarding where they shop, what they buy, increasingly influenced by affordability, and typically favoring more one-stop-shop visits to long-established national multi-price point mass retailers. Such retailers in all our DGI territories have fared best throughout the COVID experience. By example, Action on continental Europe continues a store opening program of one per week, sustaining a six year, 14% CAGR growth in rooftops, through which Design Group has delivered 24% CAGR revenue growth. Our Australian business is more skewed towards the independent retailers who have enjoyed buoyant sales throughout as people have been forced to shop local during some of the most punitive COVID lockdowns on the planet. Seemingly, these shopping habits have maintained. The U.K. retail landscape remains challenging, but our leading retail partners are growing, and they continue to recognize the invaluable category expertise we contribute, exemplified by Tesco awarding Design Group U.K. the Tesco Supplier Partner Award 2022 for sustainability. I will now talk to sustainability. Sustainability is a core pillar of our ESG strategy and a category commercial U.S.P that I would like now to talk to. Our commitment to people and planet is equally important and are covered in the appendix. Some of our markets are evolving faster than others. With U.K. legislation most certainly more environmentally progressive, and with retailers and supply chains responding and innovating accordingly. At IG Design Group, our product strategy is informed by the philosophy of reduce, reuse, and recycle. We design all of our products to use the minimum amount of material possible, particularly removing unnecessary primary and secondary packaging. We have removed plastic blister packaging from our stationery and creative play ranges, returning to more traditional cardboard packaging and using recycled materials where possible. Our designs also seek to incorporate the least polluting or harmful of materials, such as replacing plastic entirely with paper equivalents where possible. An example is Christmas cracker content is now completely plastic-free. Our raw materials are either recycled or responsibly sourced, such as our paper coming from certified renewable forestry. Our manufacturing investments continue to drive sustainability credentials. Our DG Americas Uteco Press, housed in a brand-new state-of-the-art energy-efficient facility in Byhalia, Mississippi, joins four identical sister presses group-wide, all being entirely water-based ink, removing harmful solvent entirely from the printing process. We continue to work with our partners to support the ensuring of manufacturing our products to domestic market. Our Eco Nature packaging and social stationery brand is proudly our signature response to participating in the circular economy and is category margin-enhancing to both Design Group and partner retailers. Eco Nature assures consumers of responsible manufacturing here in our facilities in the U.K., supporting U.K. jobs and with the environment in mind, solely using recycled materials that are fully recyclable. We go further to fully offset the supply chain carbon footprint involved in bringing our Eco Nature products to market by annually planting dedicated U.K. forestry on our journey towards being a fully carbon-neutral brand. Notable other achievements in FY 2022 also include DG U.K. winning of Tesco's Supplier Partner Award for Sustainability for their supply of their Eco Nature products with selected lines rolled out in 750 stores nationwide following the successful trial in 2021. The development of our first to market shrink-free wrapping paper in 2020, which eliminates plastic waste through the use of recyclable paper labels, is another success story in the U.K., with Sainsbury's using only shrink-free gift wrap ranges for Christmas 2021 and repeating for Christmas 2022. New investments in our manufacturing facility in Europe will introduce customers there to our pioneering shrink wrap, SMARTWRAP solution. Finally, the Tom Smith Christmas 2022 range is entirely plastic-free and proudly accompanying the Royal Warrant will be the Woodland Trust and the Trussell Trust on pack logos, celebrating full carbon offset and our charitable affiliation, recognizing our annual donations and support to both. Thank you. I now hand over to you. Before I conclude with looking at the strategy going forward and an overall summary, I just thought it was useful reflecting on the strengths of the business, because that's the reason why many of you have invested within this business. Equally, it's the reason why I and Paul have actually joined this business. Yes, we've had some challenges, but the core strengths actually remain. We have fantastic relationship with the global retailers, with over 68% of our revenue coming from those top 20 customers, and many of those customers will continue to grow. They're winning customers that we can actually build our business with going forward. As you've heard, we had awards from both Tesco and Walmart, which recognizes that. We've got fantastic scale. 33% of our revenue is from in-house manufacturing, and that's something that increasingly is more important going forward, and many of our retailers are actually looking to get closer to home production because of the issues that have been around the supply chain over the last 12 months. We've got more scope to leverage even greater efficiency, and we sell over 1 billion units of product. It's not just also about the product we have today, it's also about innovation, and we've always been at the core for our business. Brands like Eco Nature, which we developed over the last two years, and Design Group brands account for 43% of our revenue. We also have immense value in the licenses that we have with Disney and brands like Tom Smith. We also have diverse revenue streams. 60% of our revenues come from minor season products, and the Americas provide over 69% of our revenue. I think we're in a very, very strong position. Our customers are backing us, our bankers are backing us, and our colleagues believe in the strength of this organization as well. Yes, we've had our challenges, but we feel we're in very good shape to move forward. Strategic priorities. As I said, historically, we've been very much focused around M&A activity. We now need to be much more focused on organic. The year demonstrated the need for much more resilient business model, and our group strategy is being revisited with the following objectives, reducing complexity, better leveraging expertise and scale, and improving mix. That will come through improving our margins, a more resilient supply chain, lower working capital levels, strong leadership and management teams at all levels of the group. Further details of this will be communicated with the full year 2023 interim results. I'd now like to just summarize from what you've heard today. Full year 2022 provided supply chain and cost shocks, exposing weaknesses in the Americas business in particular. Our investment in customer services and relationship did impact our margins, but I know this investment will pay back longer term. The group remained cash positive despite the increased working capital levels. We strengthened the board and the senior management team. Our debt facilities have been extended to March 2024. Looking forward to full year 2023, we start from a very strong position with a stronger order book than we've had previously, and that again reflects that great customer loyalty we have. The Americas turnaround plan under Lance's leadership is underway, and we're already seeing some progress being made. The continued hostile headwinds are being tackled through pricing. Higher working capital to de-risk continued supply chain and cost uncertainties. Higher financing costs will be partly offset by the improved margins. We aspire to reinstate dividends in full year 2024, and we're progressing the search for the group CEO. I've been particularly encouraged by the caliber of the candidates that are interested in this role and the interviews that I've undertaken so far. I would hope they're in a position to update on an appointment later in the year. As I've said, there'll be a strategy revisit to ensure that we can rebuild a more resilient business. Can I thank you for taking an interest in today's presentation? Thank you very much. Many thanks. We're now ready for questions. To ask your question, click on the Q&A button and type in your question. The first question is, many thanks for the presentation. How much does the lower revolving credit facility save you? Or why exactly was it lowered? Thanks for the question. I'll take that. Hello, this is Paul Bal, the new CFO. You'll have seen from slide 8, a setting out of how the banking facilities have changed. What's apparent from that slide is the fact that the cost of debt is increasing. Now, it's increasing in two ways. Obviously, base rates are going up, but secondly, as you'll see on the slide, the margin which is charged on top by the banks is set to increase. In our case, in fiscal 2022, we were typically paying a margin of just over 1% above base, and we now will see that rising to 2.5% and then rising further to 3%. Consequently, we have an increase in the cost of debt that we're facing. Alongside that, as you've seen, we have got increased levels of working capital that we're having to finance in a bid to secure the business and to secure the continuity of the supply of product to our customers and deal with the uncertainties that continue to exist in the supply chain. Taking both of those financial headwinds, we looked at whether we were utilizing our existing facilities in the most efficient way. The upshot was that we felt that we had a prudent set of facilities. As we projected forward and looked at our cash needs, we could see that there were significant parts of that facility that wouldn't actually be utilized. When we updated the refinancing over the last few weeks, we took the opportunity to reduce the amount of facility that we would effectively be paying for and use that to effectively offset the increased costs that we will see. What does that mean overall? It does mean overall that our financing costs will be increasing and we have highlighted that. We see the offset against the improved operating margins that'll be expected to be coming through. Taking this action, we have managed to try and contain our financing costs, but the trend on the financing costs will unfortunately be upward. Thank you very much. With regard to freight costs, what percentage of volume is on fixed contracts and how much on demand? Hi, Lance Burn. Across all territories, typically two-thirds of our requirements are contracted and the balance is floating. That's quite typical because you forward book containers on a weekly basis, and then the floating arrangements allow you to flex according to the replenishment volumes, typically every day. Most of our Christmas is on an FOB, so the liability rests with our customers. The difference year-on-year is the contracted rates were the same last year in terms of ratios, but the contract rates were reneged upon. This year, the contract rates have reflected the spot rates, so they're double year-on-year. They've been factored into all of our pricing. Right now, contracted rates and spot rates are broadly at equilibrium. That's where we're hoping and expecting them to stay for the balance of the year. Thank you. Have any of your customers reduced order sizes due to the deteriorating consumer environment? If not, would you expect this to come? Perhaps some historical context here could be useful. Simple answer is no. There's no examples of any volume reductions in all territories with all retailers. That, that's good. I think the historical context is retailers have been cautious in terms of their volume commitments year on year, so they haven't been factoring in significant growth. On that regard, I wouldn't expect there to be any cancellations going forward, and in many regards, retailers are pulling forward fulfillments where manufacturing has been completed because their focus is more now on availability, particularly given the experiences last year. In terms of everyday replenishment, volumes are slightly subdued because of lower consumer demand and retailers de-inventorying, which has certainly been in the news in the United States recently. That's stable. Thank you. Just a reminder for those asking questions, can you click on the Q&A button, not the chat button, to submit your questions. The next question is, thank you for the presentation, too. Can you add more color on the increased inventory and how you plan to normalize it? Is most of the inventory in raw materials or finished goods? And is there a chance that there may be a write-down if demand doesn't progress as expected, even though we have significant amount of order book covered? There are two dynamics at work here. We're actively reducing inventory holding on everyday replenishment, which was too high, but also in anticipation of reduced demand through the supply chain, the general economic climate that we're dealing with in all territories. That's in a controlled fashion. Very much focusing on replenishment of high churn lines, high volume lines. With regard to raw materials, what we're seeing at the minute is an increased inventory holding because of the increased unit price of those raw materials. A good example is paper that we're purchasing for the manufacture of Roll Wrap, which is double year on year. We've successfully mitigated that through price increases, but obviously we're taking the working capital burden of that until we dispatch an invoice later on in this summer. Just to put a sort of a financial lens on it, I mean, obviously our business, there are two main elements to our business. There's products that we buy and resell, and then, of course, there are products that we make based on raw material. If we look at the increase in the inventory that we've seen over the year, it's just over 30%. In percentage terms, the biggest increase was in raw materials, but in absolute terms, it wasn't as big as the increase in finished goods because of the bought-in value of those goods. As we said in the presentation, you know, the motivation behind this is to secure our supply chain and to continue to supply our customers over the volatile times that we have experienced. We would anticipate the inventory levels to begin to decline obviously as volatility passes through, as seasonality obviously sort of works through the year. Also as we get to work on some of the more inefficient aspects of our inventory holding, the slower lines that we potentially have. In respect of sort of what we see as exposures, we don't anticipate any material exposure in terms of sort of inventory impairment. That's an exercise we went through at the year-end, and we're satisfied that we're appropriately covered for any exposure. Thank you. Would it be possible to get an indication of your expected gross margin percentage for the current year? We haven't given guidance on gross margin. What we have said is that we anticipate a slight improvement in our operating margin. The challenge for us is obviously to continue to keep a control over our overheads as we have done over recent years. If we're looking at an improvement in the operating profit margin, we should expect to see a small improvement in our gross operating profit margin as well. Thank you. Can you expand on your ability to secure price rises? Are you bound by long-term contracts? Will you have to drop customers who resist price rises? What percentage of customers have accepted price rises required to restore margins? The majority of partners that we work with, bearing in mind, you know, 65% of our revenues plus are with 20 retailers, have been very proactive in supporting us. To give you an idea, on Roll Wrap, for instance, with leading U.K. retailers, they've accepted, like for like, price increases in excess of 40%. That's progressive. That's the simple answer to the question. We have jettisoned or declined certain parcels of business where we believe it's no longer sensible to do that. We've also been working, as I said in the presentation, with customers who are more progressive in terms of their category architecture and actually want to build value back into those categories. In many regards, that's worked to our favor. Thank you. What proportion of raw material costs, excluding freight, are you able to hedge? To what extent are you hedged for full year 2023? Well, yeah, the answer is we don't and can't. The majority of our materials, I mean, paper is a good example. It's a market where there's been significant imbalance in supply to demand. I mentioned earlier that paper prices are up 100% year-over-year and exacerbated by some of you may be aware that in the U.K., one of the major paper manufacturers actually was on strike for four months in Finland. It's been a very difficult market, and there's no way we can hedge against that. What we have been able to do is secure full availability to meet our obligations, and we factored that into our pricing strategies, as I mentioned earlier with leading U.K. retailers. We successfully passed that on. Just to provide again a financial lens on this. If we were to look at our cost of goods as an overall bill of materials, the raw material component, bearing in mind what I said earlier about our inputs being raw materials and bought-in costs, raw material costs are around 20%, nearly 20% of our sort of total bill of materials. Just to give some context to the level of risk then. Yes. Tremendous. Thank you. To what extent can further cost savings be made across the group, either as a $1 million sum or as a percentage? Well, I cited some examples in the presentation. I mean, we're looking at it through all lenses. In terms of overhead control that Paul mentioned, particularly in the States, we've taken some radical approach to restructuring, which is the right solution anyway, but it's yielding significant savings. The first tranche of headcount reductions has saved $5.8 million for this year alone. We'll be having the second review of the structures going into quarter two. In terms of variable cost savings, the most important thing in our business, whether it's direct imports or manufacturing, is the appropriate programming of the business. This year, all businesses are in a far better position. From a manufacturing point of view, for example, if we program the factories better, we can actually manufacture on time in full, and that means we get better yields, better productivity and efficiencies. That's starting to come through the P&L as well. There's a whole range of initiatives across the business. I mentioned also with one I very much bought into the next year. By reviewing category architecture and simplifying our offering, we're able to significantly reduce the upfront investment, such as our design and product development, and that's where we anticipate further savings in the years ahead. We have sort of communicated an aspiration over the coming years to get back to an operating profit margin in the U.S. business of between 5%-6%. This year we saw dilution in the operating profit margin of our international business as well, and we're keen to recoup that as well. It's clear on that journey there's a number of levers that we can pull. As Lance has said, some of those are our direct costs, some of those will be efficiencies, and some of it will obviously be some degree of sort of normalization on cost base as well. Thank you very much. For every day, could you give us an idea about what kind of demand weakness you're expecting or seeing? Down at low single or high single or low double digit year-on-year. Volumetrically, we would say it's high single-digit percentage, and that seems to be consistent across all territories on everyday replenishment. From a revenue point of view, it's less acute because obviously we're passing the price increases through to recover the input inflation. From a revenue point of view in the USA, for example, this we expect to be parity, having with the price increases fully compensating for volume reduction. Thank you. Is there any significant customer with which the FOB or other cost adjustment agreements have yet not been finalized? Do you see that there's a risk yet to be mitigated in the current full year? In short, no. I mean, all order books are sealed. All manufacturing is nearing conclusion, certainly in the Far East. We're well advanced with domestic manufacturing because of the reprogramming, advanced programming of our manufacturing facilities. In that regard, we see the risks as diminishing year to go. I think the only risk that we're, you know, we can't countenance is if there's any further disruptions out of the Far East, particularly if there's a further COVID outbreak, because we've all seen how the PRC government responds to that, and that's why Shanghai was closed for two months. To give you some assurances, the fact that will be on water by late August, early September, so not long to go. Thank you very much. Is the U.S. a more competitive margin market than Europe? What would the 2022 result look like if Design Group didn't have the U.S. business? Well, I can assure you, my experience has operates in all territories, that the most competitive market remains the U.K.. The retailers here are significantly adept at controlling their costs. My experience right now in the States is that it's not as acute. Paul Bal, would you like to comment on the- Uh -additional? I mean, obviously the shape of the organization would be very, very different. It would be a far smaller organization. Mm-hmm Without the U.S. operations that, you know, have obviously grown through the recent acquisitions. You know, obviously, the disappointments that we've experienced in the performance last year was largely driven by what we experienced in the U.S. Mm-hmm. You know, that is potentially a consequence of hitting these headwinds at a point where we were sort of integrating and securing the business that had been built. We think that the business has got a good future. We've certainly got aspirations that we sort of set in the operating margin improvement back by fiscal 2025 to bring that business back to closer to its potential. Thank you. You paint a picture of a multi-year recovery story. However, price increases are being secured, efficiencies realized, so what's the impediment to a more rapid recovery if commodity prices ease? Will they retain the benefit? Well, I mean, our business is cyclical and, you know, half of it, or just under, is still with regard to Christmas, so we see it as a step approach. I mean, certainly the pricing architecture that we are embarking on now, regarding next year means that we do expect a meaningful recovery FY 2024 over FY 2023. You know, I think our approach at the minute is cautious because we do not yet know what for instance, the ongoing impact of the Ukraine situation is gonna have. Energy prices is fueling inflation through many supply chains. The paper industry I referred to earlier, they continue to consolidate their manufacturing base. They're responding to, you know, their environments, and therefore, supply and demand we think will still remain imbalanced. We need to factor all these things in, and it's only when we all get to a stable state will this thoroughly flush through. To the point, if there is then deflation, then that is an opportunity for us to continue to retain some of that, which would be part of that journey of full margin restoration. It's not reasonable to say that we see this over a further two-year cycle rather than just a rebound next year. I think that would be irresponsible of us to communicate that. No, absolutely. I mean, taking into account the cash flow cycle, the working capital cycle that we had. Mm-hmm Any recovery isn't a one-year cycle. Yeah. That's exactly what we are building into the forward-looking position. Thank you very much. What proportion of your order book has further cost escalation clauses that are quick to implement versus fixed price contracts that could see margin pressures? Well, that's a really interesting question. One of our key strategies with all of our key retail partners has been to construct new contracts that actually insulate us against these main inflation drivers. You know, if we're talking about, say, sea freight, we're quoting against specific assumptions on sea freight with mechanisms to pass on any unforeseen further inflation. On paper, for instance, we've got mechanics now in place that is indexed to well-established indices in the public domain, such as [paper pulp] pricing. If that moves up beyond 5% or the other way around, then we'll adjust our pricing accordingly. What I think I alluded to earlier, what's really reassuring is that some of our leading partners now have entered into multi-year contracts on the basis of those type of formulas. That indicates to me that they're working progressively with us regarding pricing, but also that they're increasingly focused on availability. Many retailers last year suffered empty shelves because product didn't arrive on time in full. They had significant inventory overhang, and that is now an equal focus and I think that's good in terms of our partnership and the balance. Yeah. Well, I think we talked about the need to build a more resilient business model, and this is one aspect of the business model that we will need to look at, which is the sort of the terms and conditions by which we work and support our customers. The ability to be able to, as Lance says, index or the ability to look at our existing contract structures to move to a mechanism which is able to sort of weather some of the volatility that we have experienced, whether in raw materials, whether in supply chain, is definitely something we'll be looking at. Many thanks for answering all questions so comprehensively. That's the end of questions. Stewart, do you have any closing remarks? No, I just think, you know, as I said, it's been a very challenging time, but I think we feel we're extremely well set now to start moving forward. I think as you highlighted, we are somewhat cautious because we're not out of the woods yet. You know, there are many things that we're dealing with. Mm-hmm. I think as I said in the presentation, both myself and Paul joined this business because we can see the core strength of it. You know, the things that I really value in this business is that absolute customer focus, and that real great design capability we actually have, and I think it puts us in great shape going forward. Our customers, you know, have been very, very loyal, and they are the winning customers. If you look across the globe, the people who are operating are the leading customers. Yeah, I think we're cautiously, you know, confident that we can start to move this business forward. Many- Thank you for taking the time today, you know, for the presentation. Many thanks, Stewart, Lance Burn and Paul Bal, and to you all for joining. To all listeners, you'll now be taken to a webpage to give feedback on today's presentation. If you're unable to complete it now, you'll receive a follow-up email. We'd be really grateful if you could take a few minutes.