We're going to review the check ratios for our Burberry model and you can see here that we already have the check ratios calculated for us in the income statement tab of our model. So we simply need to review the outputs. And you can see that those outputs are split between performance metrics and leverage metrics. Let's start off with reviewing revenue growth first.

Now you can see that revenue growth in our first forecast year is well below the prior growth rate and although it normalizes in subsequent years. It never returns to the prior year level. Now the first thing to remember here is that we've predicted negative revenue growth for the licensing segment in the first forecast year and that's because of the expiry of the Japanese licenses. So that's the main driver for that very low revenue growth figure in fy1 in terms of the normalized growth rate in subsequent years. We need to remember that company growth over the longer term can't exceed the growth rate of the markets that the company operates in because that would mean that we're forecasting that the company will take over that market and eventually will take over the world. So the normalized growth rate around 3% by the last forecast year looks pretty sensible given that Burberry primarily operates in developed markets with similar expected normal growth rates. Now, let's have a look at the margin forecasts. Now our margin forecasts are also below historic levels. Some of that is because of management guidance at any improvements in margin as a result of product mix are going to be offset by other factors. One thing to remember in terms of ebit margin is that we did forecast a significant uptick in investment in intangibles. So that will erode some of the ebit margin as a depreciation amortization increases in response to this additional investment. However, the other major driver in the fall in margins in the first forecast year is again because of what's happening to the licensing segment where there is massive contraction in margins because of the fallen revenues and a high level of fixed costs. Now, let's have a look at the capital efficiency ratios. We have here capital turnover and return on invested capital these continue with the theme from the other metrics. The dab ratios are well below historic levels. One thing to highlight if we look at the end of our forecasts is that we have a stable level of capital turnover and return on invested capital for our last two forecast years and that's important in reassuring us that with forecasted out far enough. The other thing to remember is that we did forecast an uptick investment in our intangible assets and that will suppress capital turnover and return on invested capital in the short term because usually the impact on revenues and profits is lagged compared to when the investment takes place. Now, let's have a look at the payout ratio. Now the payout ratio does increase quite significantly during our forecasts as we have quite a punchy dividend per share growth rate of 10%. However, by the end of our forecast the payout ratio is still well below 100%. We do need to make sure that there is some reinvestment of profits each year, but it looks like this is still quite a conservative payout ratio by our final forecast year. Now, let's have a look at the leverage metrics. This is where things start to get interesting the company started off with net cash in the last historic year, but this net cash position really grows through the forecasts with the leverage metrics becoming more and more negative. The risk here is that the company will be accused of holding cash. And remember that the company won't earn much interest on this cash balance. So we really need to question our forecasts around cash. But how do we fix this in terms of our assumptions? Well, if the company doesn't have any other investment opportunities or investment needs then we really need to think about the company paying out more to its shareholders in terms of dividends. So we need to revisit our dividend growth rate assumption. So let's scroll up to that. So let's increase the dividend growth rate to 20% in each forecast year.

And now let's go back to our leverage metrics. That are leverage metrics are much more stable through the forecast now and therefore much more realistic. There's a small increase in cash, but they are no longer hoarding large amounts of it as they were before. However, we've introduced a new problem if we look back to our payout ratio by the end of our forecast. It's nearly 100% that's really too high for a company that still needs to grow. So we need to go back and amend our dividend growth assumptions in the final year. If we could tell that to 10% And now return to our ratios we can see that our payout ratio and our leverage metrics are now looking much more sensible. So you can see that this process is quite iterative. We look at the outputs for the check ratios. We amend our assumptions we review the check ratios again, and then make further tweaks if necessary.