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Hi, guys. Good morning, and thanks for joining us for our FY '24 results presentation. I'll keep it nice and easy. Keep it sweet. Joining me are Carol, John, and for the very first time, our good man, Stephen. This year, I don't know if you know what we -- it's our 10-year anniversary since we floated where we're taking just over GBP 100 million with our whole different ball game with our magnificent, magnificent business. Bigger and better than ever, okay, we've had some challenges, but as an everybody, but we're dealing with it. And there is light at the end of the tunnel, not is like the sunshine, the sunshine at the end of the tunnel, and it's marvelous. All is good, all is well and the future is bright. So that's it from me. Until next time, I'll leave you with the guys. Thanks.
Thanks, Mahmud. Good morning, everyone, and thank you for joining us for our financial year '24 results presentation. 2024 was a difficult year, impacted by a challenging macroeconomic environment that caused continued weakness in consumer demand and elevated costs. However, despite these challenges and the impact they have had on our financial performance during the year, there is also a lot for us to be proud of. We have taken the decision to focus the group on our 5 core brands. These core brands are much loved by our customers, enable us to address a diverse audience and best position the group for growth. The financial results will show you that this strategy is already proving effective. As despite the headline revenue decline of minus 17%, core brands performed much more strongly, showing an accelerated return towards growth. Part of this success is down to the strong progress in Debenhams marketplace. The growth of this capital-light, stockless, 100% margin model is great for the group and our ambition to provide sustainable, profitable growth in the future. Despite the ongoing headwinds, we were able to take actions that resulted in an increase in our EBITDA margin taking it to 4% as we focused on enhancing profitability on our journey back to growth. We delivered 2 significant CapEx projects in the year, and the benefits from the resulting increase in capacity, efficiency and automation are already delivering results. As well as this, we completed a rigorous assessment of our cost base during the year, enabling us to significantly reduce our operating costs with several more actions identified that will enable us to meet our target of GBP 125 million in annualized savings by financial year '25. While we are doing all we can to enhance and improve what is within our control, it is also encouraging to see that market dynamics began to show signs of improvement towards the end of the financial year which I will touch on in more detail later in my slides. In recent years, we have changed the structure of the group, where previously, we were talking about a portfolio of 13 brands. Today, we are focused on our 5 core brands: boohoo, boohooMAN, PrettyLittleThing, Karen Millen and Debenhams. This slide shows you a simple overview of the group today. boohoo Group is a fashion-first business, creating and popularizing new on-trend looks. The fundamental strengths of our test and repeat strategy coupled with our value credentials and our focus on costs remain aided by our investment in improved automation and international distribution which sees us now in an optimal position to drive growth going forward.
To highlight our customer proposition and the strengths of our brand, I will now play a short video. [Presentation]
Towards the end of the video, you'll have seen the mention of our 3 strategic pillars, which are again highlighted here. In financial year '24, we made great progress in many of these areas. We continue to prioritize the customer, delivering on our promise to provide the latest on-trend looks at great value prices. We made improvements to our technology to ensure customers always have a great experience when engaging with any of our brands, and we invested in our future growth. Sheffield automation was a hugely successful project delivered on time and on budget. In the U.S., we launched our new distribution center, again, on time and on budget with PrettyLittleThing and Nasty Gal both live. We have not progressed as quickly as initially planned, but we have learned a lot since our launch, learnings, which we have used to assess our approach and performance and make the necessary adjustments going forward. The U.S. is a very different market to the U.K., but we are very confident in our ability to drive growth in this huge market.
Lastly, on delivering sustainable ROI. We have maintained a strict focus on profitability as we return to growth, which you'll see coming through when Stephen runs through the financials shortly. As I mentioned at the start of the presentation, financial year '24 presented significant continued challenges with weakened consumer demand, higher costs and increased lead times all impacting our performance. Despite this, we remain focused on controlling the controllables. And as a result, we have improved efficiency and flexibility across the business which stands us in even better side, as market dynamics now begin to improve.
Going into financial year '25, we hope to benefit from improving levels of consumer demand as well as ongoing cost deflation. In financial year '24, we reinvested in price to benefit our customers. Going into financial year '25, that price investment is complete, and we should start to see the benefits of ongoing deflation in our margins. Towards the end of last year, we also saw freight return to normal, which will further help us manage inventory levels, speed and cost.
With that, I will hand over to Stephen to give you a more detailed overview of the financials. Over to you, Stephen.
Thank you, John, and good morning, all. I'm Stephen Morana, the Group CFO. I joined the business in February '24, just at the end of the financial year. Before I dive into the results, I'd like to give you a quick overview of my initial impression since joining. I obviously had a bit of knowledge of the business, having been a none-exec way back in 2014, but the group has changed enormously since then. I'm really pleased with what I found. We have some brilliant people, engaging brands that our customers love, robust infrastructure with 3 fully functioning warehouses, significantly benefiting from the recent investment in automation and a strong balance sheet with all major CapEx projects now complete. John and the team have taken the tough decisions around which brands to support and which labels to roll under Debenhams to enhance their profitability and we're seeing some very strong positive early signs as a result. They've also lent hard into cost management, again, making the tough decisions and the business I've joined is lean and fit for purpose. We have an engaged and loyal customer base and a diverse portfolio of brands that appeal to a broad set of customers. We believe -- I believe that the people, the infrastructure, the brands, and the opportunity for this group could make for a very exciting next few years, and I'm really pleased with my decision to join. Okay. On to the '24 results. Laid out here are the main KPIs we're focused on, and I'll go into each of these in more detail over the next few slides. For those of you who followed boohoo for a while now, the main difference you'll notice in these financial highlights is that for the first time, we're including GMV, the gross merchandise value of sales. This metric will become more relevant over time as more of the business moves to a marketplace model. Marketplace has a different revenue model. So GMV allows us to show a more consistent picture of consumer sales and growth across the entire group. I'll explain this in more detail on the next slide. You can see GMV fell less than net revenues as marketplace revenue start to grow. The net revenue decline of 17% is within our guided range and is a result of the ongoing impact of the market headwinds John discussed in his section. The number is inflated with the focus on profitable sales of our label brands with core brands year-on-year decline significantly better. We pulled GBP 134 million out of operating costs from FY '23, a huge amount of work was done in this area which meant we saw EBITDA margin grew to 4% despite the revenue challenges. You can see CapEx spend while still material, was reduced as we came to the end of our major investment programs in Sheffield in the U.S. and we expect this spend to reduce further going forward. Net debt is GBP 95 million at the end of the year, leaving lots of headroom. This has grown given the CapEx investment and deliberate increase in stock levels with the U.S. warehouse opening. Okay. On to GMV. What is it? And why does it become more important than net revenue as a KPI over time? GMV is the total value of all merchandise sold to customers. This excludes cancellations and returns but includes carriage receipts and any subscription income. Look at the two examples here. We sell a dress for GBP 30 on boohoo. GMV is GBP 30, net revenue after VAT is GBP 24, we've assumed the dress hasn't returned. The same example on Debenhams, where we sell a third-party brand's dress, GMV is still GBP 30, but net revenue would only be GBP 5 to GBP 6, the commission that we're generating on the sale, less part. We should be agnostic to which dress sells, hence the need to show GMV going forward. I've broken down GMV results over FY '24 to show the impact from core brands and from labels. GMV was down 13% in FY '24 to GBP 1.8 billion. From the chart on the right, you can see the overall year-on-year decline was only 10% in the second half of the year with the 5 core brands down only 4% in H2, a significant improvement on H1. This improved performance is driven both by the growth of Debenhams marketplace and by the uplift in consumer demand, we saw sentiment improved during the second half of the year, a trend we expect to continue into FY '25. The GMV and net revenue performance continues to be impacted by our labels. We've taken proactive steps to reduce marketing spend and amend our approach, transitioning some labels over to a marketplace to improve their profitability. This is helping to turn those businesses around from an EBITDA perspective and driving enhanced profitability and will remain a key focus into FY '25, so we're prepared to accept the GMV and revenue hits due to this. So turning then to net revenue, you'll see a similar picture with the 4% decline in H2 further illustrating the turnaround in our core brands. We've also broken out the marketplace effect during the year. To clarify, this is the negative impact on the net revenue we didn't book in FY '24 as we sold third-party booked goods on the marketplace. As I explained earlier, this resulted in us only recognizing revenue from the commission generated from those sales rather than the full value of sold goods.
Gross margin. Gross margin seen an overall 1.2% improvement. This is despite a 1.8% investment in price. This price reinvestment is now complete and with consumer demand growing, we expect this impact to unwind in the current financial year. We're buying better, getting the benefit from the marketplace model and seeing an improvement in return rates. There are some real positive signs here, which we take into FY '25.
The next slide shows how we've managed our cost base. Again, what I found is a business that has really lent into the challenges it's faced, and control the controllable, so to speak. This has been painful to do but it's worked, and the benefits will be seen over the next few years. Some of the savings have flowed from the completion of the Sheffield automation project that John will discuss in more detail later in the presentation but many of the savings have been found through managing our assets more aggressively, becoming a leaner and hungrier business and challenging all processes and procedures. On this slide, you can see the underlying factors, which have enabled us to achieve the uplift in our EBITDA margin. Gross margin improvements and cost initiatives I've already talked about and have split out the benefits of the Sheffield automation. You can see the impact of our U.S. investments on the EBITDA margin. Over time, this investment phase will unwind. Similarly with marketing, we've maintained brand investment levels. And as we return to growth, we will see the natural margin improvement from scale. I wanted to include this slide so you could understand the below-the-line adjustments to EBITDA, and I could be totally transparent as to why we've excluded them from our adjusted EBITDA number. As you know, this was a year of transition. We closed 2 distribution centers. We finished the automation of Sheffield and completed the U.S. facility. We also wrote off the book value of those brands we've transitioned to labels. Other exceptionals related to redundancy costs and other noncash items. The majority of these adjusting items were noncash, and we would obviously expect this number to be significantly lower in FY '25. Our balance sheet is robust. One of the great things to inherit as a CFO a property's owned outright without any mortgages or the other encumbered. We own outright 6 different properties and book value is GBP 124 million, and we will consider our options as regard the ownership of them going forward. And we also have our holding in Revolution Beauty, which is worth around GBP 29 million. We currently have GBP 325 million on a revolving credit facility, GBP 250 million of which runs to March '26. That summarizes 2024 and our performance during the year that included a significant amount of change. Looking ahead and from what I've seen, I'm confident there is a clear path towards our target EBITDA margin expansion over the next few years. A lot of this is within our control, and we're already seeing momentum coming through. Yes, we need to get back to GMV growth to unlock some of the economies of scale, but some of the benefits we're seeing already. And what does that mean for near-term outlook? I'm obviously new here, and we're still going through some changes in prioritizations. I don't feel in a position yet to set specific targets. However, later in the financial year, we'll be hosting a Capital Markets Day to really get under the skin of the different aspects of our business and our growth trajectory going forward. What we can say now is we'll be targeting a return to GMV growth during the year, with improvements to EBITDA margin and a return to positive free cash flow. With all that said, I'll now hand back to John to run through the strategic update. John?
Thanks, Stephen. Earlier on in the presentation, I'll give a quick summary of the group as it stands today. But given our focus on the 5 core brands, I thought it would be helpful to spend some time covering each of them in detail to show what they represent and the value they bring to the business. First, looking at boohoo, boohooMAN, and PrettyLittleThing. I would summarize these as your -- our young value brands. They are targeting fashion-conscious 16- to 24-year olds who are looking for on-trend looks at great value prices. These 3 brands provide the latest fashions to our customers at the best prices. The target audience here is highly engaged on social media. So our marketing efforts center on social media campaigns, heavily featuring influencers whose voices our audiences trust and follow as well as exclusive collaborations. Next, Karen Millen, which is a sophisticated brand with a strong reputation in workwear. With this brand, we are reaching an entirely different demographic, predominantly career-minded women in their 30s and 40s. Our customers here are seeking out luxury fashion, but still have affordability and value in mind. Maintaining a strong focus on design, the brand has begun expanding its range from mainly workwear, tailoring and occasion wear into a more broader mix further enhancing our proposition and making us more competitive in the market. Lastly, on to Debenhams. Acquired in 2021, we have taken significant steps to rebrand and market a bigger better and bolder Debenhams. This brand has significant history and heritage, which gives us strong credibility with customers and brands alike. But the new online-only marketplace model is the future. It is already proving effective with Debenhams starting to see rapid growth. Debenhams has the strategic advantage that the target customer is everyone. With a broader range across fashion, beauty and home, there truly is something for every customer. We've made great progress in onboarding new brands with 3,500 onboarded by the end of financial year '24, up from around 1,200 at the end of last financial year. You can see some of the big brand names, including Gucci, Calvin Klein, Mac, and Tom Ford highlighted on the slide, and we will continue to expand this going forward.
The Debenhams model also brings significant commercial advantages to the group, with its capital light, 100% margin stockless model, and we are really excited about the opportunity here. As I touched on earlier, the investment in Sheffield automation has already delivered significant efficiency improvements. As you can see from the headline stats here, we were able to drive cost per unit down almost 50%, pick rate up tenfold and reduced full-time headcount by over 80%. The cost savings generated as a result of these efficiencies have already begun to impact our financial performance, as shown in these results. However, the full impact from the project will become clear in our financial year '25 results once we receive a full 12-month benefit. We launched our U.S. distribution center in August with PrettyLittleThing and Nasty Gal for the autumn/winter season 2024. This has significantly improved the flexibility and speed we can offer our customers in the U.S. with next day and express delivery now available in 50 states. However, the project has not been without its challenges. It has taken us more time than expected to understand and learn about range, suppliers adopting to export into the U.S. directly and our launch marketing campaign in hindsight was not on target. We had initially planned to go live with boohoo, boohooMAN and Karen Millen later this year, but we have taken the decision to act cautiously and ensure PrettyLittleThing and Nasty Gal are performing optimally before introducing any other brands. Finally, to summarize from me, the key takeaway from this set of results is that whilst we are still on our journey back to growth, there are clear signs that we are approaching that turning point. The progress in our core brands are improving margin mix and our focus on cost reduction and sustainable profitable growth, coupled with our loyal customer base and strengthening consumer demand provide a lot to give us confidence as we continue in the current financial year. I think after a difficult few years post-COVID, we are now emerging the other side as a more streamlined and efficient business. Our brands are vibrant, engaging, and loved by consumers and I genuinely believe there are very exciting times ahead for the group. As Stephen mentioned earlier, we will be back with a Capital Markets Day in due course to provide a more in-depth update on our brands, our medium- to long-term strategy and growth ambitions as well as providing a more detailed financial outlook. So I look forward to providing you with more information then.
With that, I'd like to open up the call to any questions.
Our very first question is coming from John Stevenson of Peel Hunt.
A couple of questions to get us going, please. Just on the Debs platform. Can you talk a little bit more about how it's developing, the office developing, what proportion of GMV comes from third-party brands now? Maybe some commentary on beauty and how you think of the service proposition? And then can you talk a little more specifically about the performance in the U.S. since the warehouse opened and maybe what those learnings have been? And how that's starting to feed into performance as well, please?
Okay. So, morning John, John here. I'll start with the Debenhams first of all. So in terms of GMV, third party, we're taking over 50% of our sales now on this route. We still have our beauty brands, are essentially on a hotel model effectively. So we have them sitting in our warehouse for the majority of beauty. Beauty is developing really well. We hope this year to be back to the level that Debenhams pre-acquisition was in terms of beauty sales online. So developing really, really well, excited about that. But equally, from a GMV point of view, we're excited about the fashion opportunity and also excited about the home opportunity, which is coming through a little bit stronger actually than what we had initially thought.
In terms of from a service proposition, it's working really well. I would probably say it's probably similar to an Amazon, you might, on your order, depending on the number of products and the number of brands. But you may get a 2, 3 parcels from different providers. And again, that's working quite well. We've learned quite a bit from our customer service team in terms of how we need to handle that and how we need to work with the brands, but developing really well. So excited about everything. In terms of number of brands today, we talk about sort of 3,500 brands at the end of February this year going into this new financial year. We see the opportunity for many more thousands of brands coming on to the Debenhams site. And a great example, I think, of that, if you look at Amazon. Amazon have got 0.5 million brands on their site. So I don't think we'll be going for 0.5 million, but it just shows you the opportunity. If I go then to the U.S. warehouse in terms of what we've seen, we've definitely seen lessons learned, it's a little slower than what we had hoped for. We went for a slimmer range and deeper buy for the launch. And in hindsight, that hasn't worked as well as previously. So we're now for summer '24, we're building back up to have pretty much the same with of range as what we have in the U.K. warehouse. And I think we've also learned in terms of from our suppliers, whether it's in Asia or whether it's in Europe, they've just found it a little bit more complex in shipping directly to the U.S. with U.S. customs and just a little bit more difficult than coming into Europe. And finally, I mentioned in, in my presentation, I think really probably didn't quite get our marketing campaign for autumn/winter '24 where we needed to be. So we're still very excited about the U.S. We see a great opportunity there. we've paused on boohooWOMEN, boohooMAN and Karen Millen, just until we fine-tune PrettyLittleThing and Nasty Gal and then we'll bring the other 3 brands on board.
Actually just noticed you've got a new KPI as well in terms of premier participation, which has gone from 30% to 35%. What did that peak out last time around?
Sorry, John, could you just repeat that question?
Yes, sure. You put -- in the KPI, say you put in premier participation which is, I think, has gone from 30% to 35%. I'm just wondering what it sort of peaked at?
40% is what it would have peaked at previously, John.
We now move to Matthew McEachran of Singer Capital Markets.
Can we just kick off another question just in relation to the U.S. launch and the U.S. infrastructure in terms of DC there. I mean I think when the project started, the world was a slightly different place, and the scale of the businesses you're looking to put in were of a different size as well. Have you responded in terms of the investment in that infrastructure? I mean, i.e., was it scaled back? Or was it too late? And have you had to go back and make some, some changes subsequently in terms of either capacity or spend or any other aspects of the project?
So in terms of the plan, the plan was always to launch that warehouse from a manual point of view. So no automation as such, and that's still been the plan. In terms of from a KPI point of view of a manual warehouse, the warehouse is hitting all of its KPIs that we would expect. And obviously, we've got experience on that from our warehouses in the U.K. when they were manual. So we're quite happy with the KPIs that it has hit. Obviously, we're a little bit slower to push it out, and the warehouse is technically from a medium term, long term, the plan would be to put automation into that warehouse. We wouldn't be pushing that obviously at this point. We want to fine-tune PrettyLittleThing and Nasty Gal, then bring in the other 3 brands. And the warehouse has got a capability worth about $1 billion in net sales. So we still think that's an opportunity that we are capable of delivering in the U.S.
Yes. Okay. Thanks very much. And in terms of the local competition, I mean we're aware of who's operating in the market. But have you found that the changes to your pricing that you've delivered over the course of the year. Have they actually started to resonate with consumers beyond the delivery improvements you've got on next day and the same-day delivery?
Yes, we've definitely seen that. I mean, we talked about -- Stephen spoke about the -- in terms of margin investment and price in the last year, and we've definitely seen an upside in that. And again, if I look at the U.S. in terms of -- from a kind of peak trading over November and December, we saw good trade and strong trade coming in on the back of that.
Okay. Yes. Thanks. And the other question just in relation to Debenhams. I mean it's very clear that this is scaling up pretty nicely. It's hard for us to get a sense of that mix dynamic that you went through in relation to the GMV versus revenue and debt. Could you just give us a little bit of a flavor as to what the run rate is now in terms of either GMV or revenue through that marketplace now?
Yes, Matt, it's Stephen here. Look, we don't go into that much detail yet. I think as we say, look, I think we appreciate over time, we're going to have to get more around Debenhams. We've talked about doing the Capital Markets Day towards the end of the year. But for now, we're just focusing on growing it. But we've also got some internal stuff. We put some internal brands on. We have some marketplaces on, some of our own brands as well. So in terms of what the marketplace looks like. We're just kind of clarifying that internally. And then we'll be ready at some stage to go into detail about what that really is, but not yet.
Our next question will be coming from Wayne Brown of Liberum.
Just two questions for me. On Slide 9, you mentioned that freight costs and lead times had normalized. Just what do you mean by normal? Is that in reference to what level and what you just -- if you could just put that into context? And then lastly, on Debenhams. Clearly, a lot of categories are still in wholesale, as you mentioned, beauty, et cetera. Can you give us some sort of a timing or scale of moving categories into the marketplace model and how those discussions with the brands are going at the risk of front-running what you offer is going to do at the CMD later this year, but just give us some sort of sense as to the timing and the scale of that over time?
Okay. So if I start with the freight cost. So normalizing, I would say, is kind of back pre-global supply chain crisis. So if you think about from Southeast China, you're looking at a container rate of about $1,500. Obviously, in the peak, that went to $15,000, $16,000. And we saw that going back to sort of circa $1,500, $1,700 and obviously, with the Red Sea crisis, that now is sitting at about $4,500. But we're not a big user of that lane in terms of impact. But clearly, it's a hell of a lot lower than the $16,000 peak back in supply chain when we were back in that place. So we're, we think, kind of pretty normalized now in terms of sea freights. But about an extra 2 weeks for the small amount of freight we moved that way, and that's quite manageable.
From an air freight point of view, that's probably the one. There's quite a bit of demand on air freight around the world, and that's one that is, I would say, kind of not quite back to pre supply chain crisis. And that's more about supply and demand. It just is in the volume of aircraft for the volume of traffic and demand there. So we see that like slightly elevated, but that's more like a normalized price now, whether it's coming out of Asia, into Europe or the U.S.A. We think -- I think what we're seeing today is where normal is actually.
And then in terms of Debenhams, and I suppose, more brands moving into the kind of GMV marketplace, that's absolutely the case in terms of where the brands are going. So pretty much every brand we're signing up new. So about 3,500 brands today, as we onboard thousands more of brands, it's all going to be on the GMV basis. So it will be a marketplace. So marketplace will definitely be, by far, the majority of the Debenhams proposition.
[Operator Instructions] We do not appear to have any further audio questions at this time. Sorry about that. We just have one that came in. It is from Ben Hunt of Investec.
Just on the inventory in to support the U.S. warehouse, could you give us any more color or a picture of how much more investment there needs to be done for that going forward? Or at least the quantum of how much more inventory you need to put into it? And then secondly, you referenced that you believe that you were finished with the price investment this year. Could you give us an idea of how you think you are relative to your peers now?
So I can go with the pricing one first of all. So I think we, obviously, in our young fashion brands, we sit in the value sector. So in the value sector, the other competitors we look at would be obviously Primark, SHEIN, Forever 21 in the U.S. And we sit just above SHEIN in that place. But we sit below H&M as an example in terms of the other value players. So we monitor that. We've stayed in that position right through the last couple of years, the pricing that we invested in, in FY '24 kind of keeps us in that position and keeps us where we want to be. And again, we don't see much change in pricing for the year ahead. But obviously, we watch that on a day-by-day basis, week-by-week basis.
From an inventory perspective, we don't really see the need for the number to be higher than it is now. In fact, hopefully, it will slowly decline just as we get better understanding what we need to hold in the U.S. So I think we're kind of again at the top of the levels of an inventory investment needed.
We will now move to Andrew Wade of Jefferies.
A couple of questions from me. First one, just thinking about the core brands. You've obviously invested behind them this year. Marketing costs sort of flattish and despite the sales decline. But I just wanted to think about or get some color on how you're seeing those brands in terms of are you seeing some in stronger shape than others? I'm thinking from a brand sort of heat and a fashionability perspective, are they all the way you want them to be? Are some of them need a bit more work than others? So just a bit on the brand. If you want to take that one, I got another one.
Yes. Listen, I mean in terms of brand performance, I mean, we show quite clearly in Stephen's slide, and the core brands. If you look at Half 1, '24 versus Half 2 '24, and you can see really great progress in terms of where directionally and as we talk about kind of growth and getting back to growth, you'll see the progress from that slide, and they're definitely going in the right direction. In terms of any brand better than the other, there's always work to do, I would say, in this game, whether it's a brand or whether it's a section within a brand, whether it's spots on trend and what we're chasing. So I would never say and certainly in my history, you never say in any week that you're done, all your work is done. There's always something to do, whether it's brand or whether it's a particular trend or it's sourcing hub, et cetera. So always work to do. But I think that slide that Stephen showed really points to how strong the core brands are performing. So while the top line number is minus 17 the actual core brands beneath that are really going in the right direction.
Yes, that's helpful. And then it's sort of encouraging to hear, Mahmud positive take on life at the beginning there sunshine at the end of the tunnel. Just interested if you could give a bit more on sort of what's behind that level of positivity? Obviously, you've done some good work over the last year, sort of getting your cost base and so on in the right shape, but just interested in what else you can give us on that positivity?
I'll let you know when it's really shown in, right? You'll get to know. Stephen and John will let you know, and Carol.
I think what I would say is, look, you can definitely see the core brand performance really, really strong. We're talking about Debenhams and marketplace. That's something quite new versus what we've made before. We've got a growth in the EBITDA margin for the year to 4%. I think again, Stephen slide showed in terms of where the opportunity is for the next step on that getting to sort of 6% to 8%. We've landed our CapEx projects on time, on budget and performing efficiently, huge amount of work done on cost in terms of rigorous assessment of our cost base. And again, that's not going to stop in terms of what we need to do. And equally, we think from a market point of view, we are post-COVID now, we see inflation coming back under control. Hopefully, from an economy point of view, we see some interest rate cuts later on this year. And like every retailer. Thank God, at last, we've seen some sun coming out this week. So we know that's what everybody needs just to get those dresses going.
Next question will be from Paul Rossington of HSBC.
Two questions, please. Can you talk about -- can you put a bit of color around the significant reduction in CapEx? And can you just kind of outline what you think kind of the minimum kind of level of maintenance CapEx is in the business now? And when that may have to go up, I guess say, you'll be looking ahead at some point in time to automation in the U.S., what kind of time frame would you put on that? But also the main [indiscernible] of CapEx in the interim period. If you could answer that question first, please.
Yes, Paul, I'll take that one. So I think to me, a maintenance level is around GBP 20 million, GBP 25 million a year, so probably only 1/3 of what we've spent in '24 and significantly less than where we were in '23. And for that, that's all that's needed really to run and maintain the business that we've got. In terms of longer-term planning, as John said, there's nothing on the horizon for the moment for the next few years. So we'd expect CapEx to be very stable at that significantly lower level now for the foreseeable future.
Okay. And my second question, can you just talk a little bit about how the sourcing now works in terms of where you're sourcing from? I think with wages -- with waste costs going up in the U.K., that's obviously producing locally more expensive. Just wondering how you're now sourcing in terms of which territories can dominate the sourcing time, and also into the U.S.
Yes. I'd tell you, China is still #1 in terms of sourcing countries. So that's sitting at about 35%, 40%, fluctuates depending on the season, but about at that level. Pakistan, India, very important in Asia also in terms of sourcing countries. And then if you come sort of towards Europe, North Africa, particularly Morocco, is very important for that fast lead time. Turkey under a bit of pressure because of inflation in terms of the country there and impact. But I'd say we're kind of, again, usual suspects, I would say, in terms of where you would expect kind of fashion to be coming from. U.K. has become smaller, obviously, with the minimum wage going up again this year. A lot of that production, though, has gone to Morocco and also into Pakistan. But we still have a small -- which is really important to have that small production capacity in the U.K. And we do a lot of printing in the U.K. as well. So where we take blank T-shirts or hoodies in from countries like Bangladesh and Pakistan, and then we print them fast in the U.K. So probably what was very strong previously in the U.K. is a little bit less now, but equally almost as fast coming out of Morocco and then air freight coming out of Pakistan.
We'll now move to Anubhav Malhotra of Liberum.
A couple of questions from me, please. Firstly, on the U.K. and your performance there in the second half. I mean I know sales declined minus 12%, but clearly, there must have been a lot of impact from the 8 labels that you were deprioritizing there, which are a lot more U.K.-centric. So maybe if you could give us some color on the performance of the core brands in the U.K. in the second half of the year? And then a second question on -- can you remind us of the capacity available in the U.K. warehouses versus your current sales levels that are served from those warehouses? And I'm asking that in the context of the marketplace model because marketplace models in general often tend to offer the brand's option to use their distribution centers to make sure that consumers do not end up receiving multiple shipments for orders and often does cause the smaller brands a lot less should ship product recall from the marketplace's own distribution center. So maybe you could do that for some of your clothing brands, and I appreciate you have for home and other categories in the marketplace model in Debenhams for which you can't do the distribution, but maybe for the clothing brands in the future?
I'll take the first one. So obviously, we don't break out U.K. by core and noncore, but as you'd imagine, it was a better performance than overall. So as you say, the U.K. is much closer to year-on-year flat from a core brand perspective than the overall.
And then just in terms of marketplace, yes, we are offering some of the smaller partners an opportunity in terms of our distribution centers. And -- but we don't expect that to be a huge amount of the business, actually, where we think there's a bigger opportunity is clearly, we've got very good freight and distribution rates with our partners, and we think that's an opportunity in terms of our marketplace partners. And equally, it's a margin opportunity for us in the future. With regards to kind of capacity we have available, we've got good capacity, obviously, in Sheffield with the automation project complete. So phase 2 of that automation project was really around adding capacity to it. So we've got really good headroom there for the next in my view, 3 to 5 years. And Burnley, we've probably got headroom for about another 2 to 3 years. But obviously, we're continuously looking at how we can run the warehouses more efficiently in terms of our option with simple little things like units per carton can add a lot of capacity into a warehouse. So we'll continue to look at how we use that space as efficiently as possible.
Ladies and gentlemen, as we have no further audio questions at this time, I'll turn the call over to [ Owen ], who will take questions that were submitted by web. Thank you.
Our first question comes from Matthew Cunningham from HSBC. How does the company intend on taking profitable market share, noting strong competition from the likes of SHEIN?
I think we've shown with that focus on our 5 core brands. And again, I'll refer back to Stephen's slide, where the progress kind of Half 2 versus Half 1 is really, really good. So we're very confident in our brands. Our Debenhams brand, for example, is very different to SHEIN. Our Karen Millen brand is very different to SHEIN. Our PrettyLittleThing brand is very different to SHEIN. Our boohooMAN is very different to SHEIN. So there are other big competitors out there, Inditex, you've got H&M, you've got Primark. And nobody ever talks about Amazon apparel in the U.S. It's the #1 apparel seller at $70 billion and we compete with those guys. So obviously, we stand around fashion and fashion is the key for us in terms of right products at the right time. And clearly, our delivery proposition is ahead of that competitor you just mentioned. So 70% of our deliveries in the U.K. are next day, they can't do that. And similarly, in the U.S., at the moment, our warehouse is able to deliver to 50 states next day or express within 2 days. So we -- fashion is #1 was what we stand by. But clearly, we have a proposition where we're better at as well.
Our next question comes from Alison Lygo from Deutsche Numis. She has two questions. Can you help us with where your RCF covenants sit? And secondly, on the stock build into the U.S., given you have just gone live with PLT and Nasty Gal, should we expect more to come with boohoo, boohooMAN building? Or is there already stock built for those brands there?
Yes. Thanks, Alison. So we were at -- we were 2x covered with a covenant [ of 3 ]. So plenty of headroom. And as we pointed out in the presentation, I've inherited a really strong balance sheet over GBP 125 million of freehold property, a GBP 30 million investment in Revolution Beauty, all of which sit there as part of our asset base. In terms of the second one, again, I think we answered that before, our stock levels where they are at the moment. I'm comfortable that's kind of the maximum of what we need to hold. And over time, we'll hopefully see that level coming down despite the further investment in the U.S.
Our next question is from [ Roger Chesnel from Key Plus ] Of the GBP 125 million annualized savings, how much has been achieved to date?
Yes. We've executed on pretty much all of that. You won't see all of it flowing through in this financial year. But by the end of the year, all of that will be in place and we'll be getting the full effect of all of that. And there's a lot more to go for, we think, as a business. We're lean. We're definitely faster and leaner than we were. And we're looking at every area that we can continue to improve, become more efficient, become more effective.
Our next question is from Caroline Gulliver from Equity Development. Could you give some more detail of the drivers and timing of GMV growth through FY '25? You mentioned price investment and improving customer confidence. But can you also talk about the competitive environment and potential for market share gains for your young fashion brands?
So I think in terms of GMV, if you -- we talked about having 3,500 brands, for example, on Debenhams at the end of last financial year. We would look to onboard, I would say, some more thousands of brands this year. So obviously, growth from the organic brands that we currently have in the GMV part, but clearly, the new brands will bring growth there as well. With regards to kind of competition and our young fashion, Stephen talked about the U.K. market. And clearly, the performance of the core brands within that. And clearly, still the volume is really within our young fashion.
But if you think about the marketplace impact on our kind of minus 17%, and if you think about the management of the labels on that minus 17%. And if you think of those two categories are predominantly in the U.K., that -- if you work that out, that will give you a good idea in terms of kind of our young fashion performance in directing where that's going. So we're quite pleased. We've got some more work to do in the U.S., clearly, but really going in the right direction, particularly in the U.K. market, which is the majority of our business.
Our final question comes from Rachel Birkett from Zeus Capital. Given the well-invested cost base and growth in margin-accretive marketplace sales, is there any reason the group couldn't return to double-digit EBITDA margins over time?
Look, we think lots of things are possible. I think we're just not getting carried away at the moment. We'll deliver what we can over the next year or 2. But to Mahmud's point earlier and from what I've seen coming in, I'd be really impressed by lots of things that I've seen. We just don't want to get carried away at the moment. But I think there's huge potential here.
Brilliant. That's all our questions this morning. So I'll pass back to John for any closing remarks.
Yes. So I suppose just to kind of confirm the moods kind of opening words. Look, we're quietly confident at the moment in terms of directionally where we're going. We think our strategy is really beginning to show green shoots. We think the 5 core brand strategy, EBITDA margin, our focus on costs, consumer just confidence coming back versus where it's been for the last 18 months. So yes, thanks, everybody, for joining the call this morning. We look forward to seeing you all soon. Thank you.