Pick n Pay Stores Limited

Thank you and good morning and welcome to everybody those present here in the room today and those of you joining us online good morning on this beautiful Monday morning and the opportunity to share with you our results and the progress to date again I can say that when you have a look at where we find ourselves currently at the moment and we all understand that the marketplace that we're in currently in South Africa is a severely constrained marketplace so we have a consumer that is under extraordinary pressure extraordinary pressure and the outcome of all of the uncertainties in the Middle East we all talk about a black swan event none of us anticipated an orange swan event that has had a profound effect on the world and the outcomes and it really has played out in the most unfortunate way for those people in our communities who can afford it least. But having said that, it's played out right across the marketplace. So it's against that background that we have to have a look at where we are in terms of our journey that we're on. Not quite sure what that feedback is in terms of the journey that we're on and the progress that we are making. I'm very pleased with the fact that we've continued to narrow the gap in the losses and Tina will get into the numbers in a lot more detail later but you know I think as a perspective maybe one of the things that I should perhaps have called out a little earlier in my time back here is that it stands to good logic if you think of it that life is sequential at the end of the day and for most of the people in this room here today and those watching the podcast the focus is very much on the outcomes and the return to profitability and that is uppermost in all of our minds obviously but the truth is we have to solve for our customers first we have to solve for the company and the people first and as once that gets its momentum and starts to rebuild that momentum again then the outcomes flow then the profits will flow and I'm quite I'm never comfortable but I am confident that where we find ourselves now is predictable as to where we are currently and when we have a look at the journey going forward now and all of the plans that we put in place I have absolutely all of the confidence in the world that we are going to get to where we need to get to in Pick and Pay and that is to ensure that Pick and Pay does become a beautiful, sustainable, profitable enterprise that can play its role in society and the broader society in South Africa and look after its customers and look after its people. Our customers are choosing us more and more at the moment. I'll get into a bit of the detail later. But if you just have a look at where Pick and Pay is positioned today compared to where it was two years ago, we are showing up. If this is not the case, we would not be showing the positive growth that we are showing currently at the moment. And if the market would be a little bit more kind to us and we could get some stability in the Middle East, it would obviously help us even more. Our fantastic boxer business continues to perform just amazingly. It's 600th store opened. and Marek and his team continue to perform, and again, in a market that's had its share of realities it's had to deal with, along with some deflationary pressures in a lot of the major categories in which it trades, but a strong, strong performance in Boxer. And then if we just have a look at where we are in pick and pay, we have a strong balance sheet at the moment, we've got an excess of 10 billion of cash in our balance sheet, and it's cash that we look after very, very carefully. We know that we still have some cash to burn in terms of the turnaround and getting to where we need to get to, but that's all part of our plan going forward from here. So without any further ado, I will hand over to my new Chief Financial Officer, Tina. Tina Rutledge. Tina, welcome. So this is Tina's First Radio, as they say in the classics in Texas. So I'm going to sit in the front here and mark it. Over to you.

Thank you, Sean. And it's quite interesting that when I joined Pick and Pay, well, I've been here for 82 days now. Sean, I said, I came from a ballet, but now I'm in a cowboy in Western. So I must make sure I'm ready for this ride. But good morning to everybody that's joined us here in person today, as well as those on the website. As I said, it's been 82 days in this role. But what has struck me the most about in these 82 days is the commitment and dedication of Team Pick and Pay. It's a real determination to turn this business around. You know, the energy and focus that people arrive with at work every day is something that really stood out to me. But we are all under no illusion that there's still a lot of work that still needs to be done. But we're encouraged by the progress that we are making each and every day. But with that, let me get on to the financial performance for the half. So at a group level, we've increased turnover by 2.4% to 60.5 billion rand, with like-for-like growth of 1.8%. Boxer delivered sales growth of 6.3%, while pick-and-pay sales growth was broadly flat. We continued to make good progress on our gross margin, which increased by 70 basis points to 18.8%, with both Pick and Pay and Boxer contributing to this improvement. The stronger gross margin flowed through to profitability. Group trading profits increased around 180 million to 500 million with 105 million rand of that coming from Pick and Pay and the remaining 75 million rand from Boxer. Importantly for us, this improvement was at an operating level. a loss before tax and capital items reduced by 56.2% to $139 million, while net finance costs remained fairly constant year on year. This flowed through to the bottom line, with the headline loss reducing by 31.9% to $299 million. This is after taking into account the non-controlling interest in boxes. It's worth noting that the box and non-controlling interest increased during the year, following a 12.5% sell down of our investment in Voxer. And finally, we've ended the period in a strong cash position with 10 billion rand on our balance sheet. This is up from 6.9 billion rand in March 2026. If I then move on to our turnover, the retail, as Sean said, the retail environment remains challenging. Consumers remain under pressure. and that pressure was compounded by the fuel increase in May. At the same time, food inflation is at a 16-year low. That's clearly good for consumers, but it does create more challenging top-line environment for us as retailers. Consumers remain highly focused on value and are increasingly prepared to shop around for the best prices. Against this backdrop, both Pick and Pay and Boxer delivered credible turnover growth during the period. If I just turn specifically to Pick and Pay, Pick and Pay turnover was broadly flat at $36.4 billion with like-for-like sales growth of 2%. In South Africa, sales were down 0.5% while like-for-like sales grew by 1.4%. The difference between these two metrics largely reflects our store estate. That store estate reset is now complete, although the closures over the past 12 months continue to create an effect in our reported sales growth. If we look forward to our company-owned supermarkets, like-for-like sales grew by 2.4%. It was very much a tale of two quarters for us, with a clear slowdown once the fuel price increased in May. But we are happy that we delivered positive like-for-like volume growth of 0.9%. This is a very important indicator to us, because it reflects the exceptional work our operational teams do to improve our customer offer. And we're doing this while we're remaining competitive on prices. Our internal selling price inflation was 1.5%, which is below current CPI food inflation of 2%, and this deflects our continued focus on value for our customers. Our franchise business also showed an improving trend. Sales grew by 1%, compared to a 0.2% decline in the second half of FY26. We continue to work closely with our franchise partners, to make sure that we strengthen our customer proposition to improve both sales and profitability. Omnichannel remains our strongest growth engine, with sales up 35.4%, and we continue to invest in differentiating our digital proposition. During the period, many of you will know, we launched Penny, our AI-powered conversational shopping assistant, which has already supported higher average order values. We also launched clothing on ASAP, as well as launched a new clothing website. For us, this is important because it brings both grocery and clothing together in the same digital ecosystem. If we just turn briefly to clothing, standalone stores delivered growth of 3.9%, with like-for-like sales declining by 0.7%. While like-for-like sales remain negative, the trend has improved on what we saw in the second half of H2 in FY26. Our focus in clothing is firmly to return this business to positive like-for-like sales growth. So while restoring stronger sales growth remains a key priority, we are encouraged by the underlying performance we're seeing in all areas of the business. This momentum has continued after period end, with the South African supermarket like-for-like growth sales for the first four weeks of H2 running slightly ahead of the levels achieved in H1. If I now move to trading profit, at a group level, we increased our trading profit by 58.1% to R490 million, an improvement of around R180 million on last year. Both businesses contributed, as I've said before, with Pick and Pay contributing R105 million and Boxer contributing R75 million. The Pick and Pay trading loss reduced by 16.9%, with trading margin improving from negative 1.7% to negative 1.4%. Boxer, meanwhile, continued to deliver strong profitability. Trading profit increased by 8.1% to around 1 billion rand, with the trading margin improving by 10 basis points to 4.2%. This is achieved in spite of a constrained consumer environment. If I just look at Boxer, I'm not going to really touch on the Boxer highlights. This was covered by Marik and the team last week in the presentation. What I do want to call out is that it continues to deliver profitable growth while investing behind its longer-term expansion plan. Focusing now more on the pick-and-pay segment, the key feature of this result is the continued improvement in the earnings trajectory. The pick-and-pay segment reported a trading loss after leases of R1.1 billion, and an improvement of R100 million when compared to the prior year. Yes, there's clearly still work to do, but at the same time, the strength of our balance sheet has improved. We ended the period with a healthy cash balance of R7.7 billion. This gives us the confidence and flexibility to continue investing in the turnaround initiatives and to make the right decisions for the long-term health of this business.

We are no longer financially constrained,