Shoprite Hldgs Ltd S/Adr

did the 2022 financial results presentation of the ShopRite group. I think you've become familiar with the way that we do it. We're sticking to the same format. I will give a bit of an overview of the group in its totality, putting in context some of the things that has transpired during the year. Anton, our CFO, will give more color around the financials, make sure we all understand and interpret those numbers correctly. And then I'll just finish off to give you a glimpse of the things that we are busy with and doing to continue on our growth strategy. The first thing I want to do is just to highlight This 53, 52-week scenario we have this year, not everybody always remembers that around every six years, because retailers, a lot of retailers, uses the Julian calendar, that every six years you've got the 53rd week, which makes the numbers a little bit more difficult to compare. And I don't want throughout the presentation to constantly refer back to remember this is 52 weeks on 53 weeks. But if one looks at the impact of an extra week, which we had last year, in other words, that's in the base, on average the group does around 2.5 billion rand of revenue per week. And in an extra week year, of course, you've already covered a lot of the fixed costs, and it does have an impact on the numbers. So just wanted to, right at the beginning, make very clear that most of the numbers, unless indicated otherwise, would be 52 weeks on 53 weeks. Right, so all in all, was a record year for ShopRite Group. We are now heading to become a 200 billion rand revenue company, 150,000 employees. The sales growth of 9.6%, and in this case I'm going to say 11.9% on 52-52 weeks, was an excellent performance. But sometimes... You know, percentages can be misleading. So if one just looks at what it means in monetary value, is that this equates to 19.6 billion rand of additional revenue that the group have added during the last year to its total revenue. A very telling number of this year's result is the 8.1% like-for-like sales growth, also referred to as same-store sales growth, which is the highest we have achieved in the last decade. If we look at the gross profit, it's a big number, $45 billion. But what is important is that we've been able to maintain the gross margin percentage of 24.5%, similar to last year. Most critical year, without losing our price position. We are still the cheapest, most affordable supermarket chain on the continent. The growth was 9.3%, as you can see. And that all resulted in a 10% diluted headline earnings per share growth. And if you look at the adjusted number, that amounts actually to 22%. Now, Anton will unpack that later to show you exactly some of the ones, offs in that number. And another record for this year, the highest dividend ever declared, full year dividend of six rand this year. Customers voted with their wallets. We are acutely aware that they've got choices and that we all are trying our best to do the extra to attract those additional customers. So very pleasing for us. to report a 4.5% growth in customer visits in the last year. And probably more telling is, if we compare to the COVID period, when we all know that customers bought more items so that they have to frequent the stores less, still also managed to grow the basket size by 5.4%. Now, all of this resulted... in a positive volume growth of 2.3%. That's now 52 on 53 anyway. And what is important about this number, I always quote this, is that this is a critical number also for our partners in terms of our suppliers and manufacturers, because volume is what they need to also curb and control their cost growth. All of this amounted to the sale of an additional 154 million of products sold. And to just give it a bit of a more tangible example, that equates to 9,100 full truck extra deliveries for the year to get those products to our customers. The month end of June have ended... 40 months of uninterrupted market share gains for the group, amounting to another record, which is a R6.2 billion gain in market share in a single year, the highest ever in one year. It was an extraordinary year for the ShopRite group, and we're all aware of the challenges that we face and the environment that we trade in. but operationally, structurally, and financially, ShopRite is a much stronger business. I'm very pleased of the state of the business currently, and I'm not worried about the business and its ability to keep on growing. I'm extremely proud... of the people of ShopRite. I've said often before that it's ordinary people that delivers these absolutely extraordinary results for their dedication and I want to extend my sincere heartfelt thank you to Team ShopRite. for their superior level of execution. Shapra that day is reaping the rewards from a multi-year transformation journey. Not easy at all. Lots of difficult decisions and also investments. But even in hindsight, the additional focus on the home market as the lower double-digit sales growth, and at the 6.8% trading margin for a food retailer, even in a global context, I think is world class. Checkers is a micro example of our ecosystem where it's a very powerful combination where There's a combination between delivering a fresh, physical, food theater experience and then combine it with a digital offering of world class. I did refer already to market shares, but it is the largest market share gain in a group's history in a single year. And the pleasing part of it, for me, is that the bulk of it came from the ShopRite brand. Now, we at ShopRite, and I did reference to the margin that we managed to maintain at 24.5% earlier, we are affordability obsessed. And you will remember in previous presentations that how much time I've dedicated to our absolutely laser focus on our individual customer segments who we support and serve. We've shielded customers against rising inflation, ending the year with an internal price inflation of 3.9%, well below that of the RSA official inflation of 6.5%. Probably most important to our price-conscious customers and in the ShopRite brand in specific is the additional $856 million that we invested in in additional promotions on specific essential products, i.e. frozen chicken, maize, and rice. We, as a corporate, believe that we understand also our responsibility to the public at large. There is nobody else that can say that they've been selling a loaf of bread for the last six years at 5 Rand, i.e. zero inflation. That's it all. We still have more than 30 meal solutions at 5 Rand. We also still sell our sanitary packet at 5 Rand. Our responsibility to the public, not purely to selling more product to them, but making their lives better. On the right hand, there's an example of nine products, right brand products, still the number one brand, grocery brand, in the ShopRite banner. And we compared that to their branded equivalents, just as an example of what we believe we do as a responsible trader. So these key lines combined as a basket is 15% cheaper than the brand equivalent, at a 4.8% lower inflation than the brand equivalent, and at a 24% higher volume growth than its brand equivalent. Hence why... We claim that position of price leadership. How do we maintain this price leadership and still deliver a gross margin of 24.5%? I've told you before, we will not compromise on price leadership. And we will continue to invest in price leadership. Now, what a staggering number that is if one looks at the discounts that was given back to extra savings members amounting to $9.4 billion. That is what customers saved those members. Of course, there's other promotions as well for non-members also. We have also noticed that we are selling more items on promotion than before. In other words, the participation is higher. Customers are definitely looking around and looking for the value, which we all have to be conscious of. And to give you an illustration of how, and I mentioned that word earlier, obsessed. we are with price, we took 100 key value items and we indexed them at 100, and that's that red line, the ShopRite line, and compared that to our competitors across the 12 months the last year. Some of these prices are done externally by a third party. And then, of course, we look at price every single day because that is what our brand's primary position is, especially in the ShopRite banner. On the right hand there is just an example of what we also learned through the data that we now have on customers. their preferences in terms of brands and combinations to give them better value. So in that case, that 99-rand combo was put together with specific brands, and everybody wins here. The customer saves, supplier get their volume, and we keep our price perception. Just to illustrate what I mentioned earlier around the 40 consecutive months of market share gains, We've put on this graph for you the supermarket RSA percentage sales growth by half versus the rest of the market. And this includes liquor. It may be that you look to H2 2022 and it looks like there's a slowdown. You can clearly just see the base effect if you look at H2 2021. This is a very telling graph in terms of operating in the same environment with that superior sales growth. Now, recently, I got a lot of questions around whether the ShopRite group is also changing their strategy in terms of multi-brands and repositioning. And I can say to you, we have a very clearly defined multi-brand strategy, and it hasn't changed. A few years ago, I did mention to you, we even went further to separate the operational and execution teams of each of the customer brands to even improve the on our absolute precision analysis of what that specific customer needs, what pricing they can afford, and when they need it. And in here, probably apart from that, I said that the bulk of the 6.2 billion market share that we've gained came from the ShopRite brand. It's very easy for people, I've noticed, to look at the 32% market share, which happens to be the highest market share we've ever had, and then think about the growth potentials. That's not how we see it. If we look at the brands individually, you will see that ShopRite is at 18 and Checkers at 14, and I think it's very clear that we believe there is still a lot of headway for us, a lot of growth in the individual brands, and we will continue with our strategy to grow these brands and their market penetration. The supermarket non-RSA also referred to as the rest of Africa. So we gave you guidance before and said that In the medium term, we would like that segment to return back to the 400 to 500 million trading profit contribution. So I'm very pleased to say that they achieved a 439 million rand trading profit contribution for the year. Now, you may think this is not a great story. But it is a huge improvement from where we came. And if you look here at the right hand at the bottom, you can see how we built that over the last three years, continuously improving from where we came from. Non-RSA still remains a story of currencies. But this year, the other way around. We had Zambia and Angola where the local currency actually strengthened against the RAND. And what that means is, just on stock as an example, the moment you convert back into RAND, your stock value is higher. Hence, in Anton's reconciliation, you will see the effect of that. Overall, a very good performance from Zambia. It was the best performer. Our country was the best performance. Sales increased at 17%. And then we will continue our policy of strict capital allocation going forward as we see these markets either change or develop and if opportunities are opening up. Thank you. That then concludes the first part of my overview of the year that was. And I would like to hand you over now to our very capable CFO, Anton De Bruyne. So, Anton, thank you.

Thank you very much, Peter. The group delivered a strong financial result, which I will unpack as part of my presentation. As in the past, we have included various additional information that is in the annexures that will not form part of my presentation, but is there for your ease of reference. When analyzing the result for the year, we need to take three aspects into account. First, COVID-19 and the impact of that. We saw a much stronger performance from our liquor business, which we saw a 44.5% sales increase. From a cost point of view, we didn't really see additional costs coming through the business as the majority of the costs were already in the base. During our H1 results presentation, we spoke about the civil unrest and the devastating impact it had on our country and also on the business. We closed 231 stores during that period. of which the majority was impacted was ShopRite, where we had 75 stores being closed, of which nine were still closed at the end of the financial period. We had 51 USAFE stores being closed, with 11 still being closed, and then 54 stores in liquor shops closed. Of the USAF and liquor stores, we still had nine stores closed at the end of the period. Our OKFurniture business was also impacted with 35 stores being closed, and that was also part of why we saw that 6.5% decline of sales in the first half. The group was sufficiently insured and we had one and a half billion rand of cover through Sashrea. I'm very proud to say that the group have settled the full claim with Sashrea and my thank also to Sashrea and the management team there that put a lot of work and effort into settling all these claims and also the other claims within the South African environment. We also had additional cover through loss of profit that we are now engaging with our various insurers. And to date, we've already received 100 million rand from that point of view. But the rest of the claim will be settled in the 2023 financial year. 145 million were irrecoverable costs, which we didn't get covered through the insurance payouts. Then thirdly, we also saw in the second half of the financial year, we had quasi-lunatile floods, obviously devastating for our customers and the impact we saw there. From a business point of view, we had certain disruptions within our supply chain and stores, and the loss that we incurred for that period was around 26 million. That did form part of our results. Peter Half mentioned about the impact of the 53rd week. All the numbers that I quote includes the 53rd week as part of our results, unless I state differently. It's also important to note that these results are from continued operations. During the last two years, we've closed our operations in Nigeria and in Kenya, as well as Uganda and Madagascar during the current financial year, and that is all part of what we show as discontinued operations. If I then delve into the detail of the results, sales of merchandise increased by 9.6% to $184 billion, and I will unpack that a little bit later in the presentation. Our gross profit increased by 9.3% to $45.1 billion, a $4 billion increase on the prior year, and the significance around that is that we maintained our 24.5% gross margin. That we managed to derive through the 40% contribution from our higher margin checkers and checkers hyper business, our more effective price and promo optimization through our rewards program, our additional insights that we could give that enabled our buying community to unlock additional value through rebates and especially allowances through our supply chain. We also saw an improved stock holding, and then last but not least, additional synergies that we realized through our store operations, where we saw an improvement in also our shrinkage and wastage. During the last two or three presentations, we spoke a lot about additional revenue streams and also our adjacent businesses throughout our ecosystem. And that is evident through our other operating income line increasing by 19.2%. Some of the lines impacting that was our commissions received. That increased around 13.8%. And also our dividends from our insurance sale that we realized 144 million rand dividend from. And then also our checkers on demand 60-60 delivery where we saw more than 100% increase in recoveries. Interest revenue remained in line with prior year, and the interest revenue that we generate is from our investments in our Angolan bonds as well as our U.S. dollar-linked bonds and treasury bills in Angola, which was around $1.3 billion for the full year, the investment. It was a decline on the prior year in terms of the investment, but due to the currency strengthening, we realized the same amount in interest revenue. Total expenses increased by 10.7% to 37.7 billion. We saw that acceleration in the second half of 12.4%, and that was on the back of an increase in sales of 13.8%, which I will unpack later. We also saw in the second half the launch of the ShopRite employee scheme that gave rise to an additional 128 million rand of cost. If I therefore exclude the impact of the Once off civil unrest costs as well as the ESOP costs, expense growth for the year would have been 9.9%. If you then look at some of the detailed line items, depreciation and mortization increased by 1.3%. Employee benefits, 9.1% up from last year. Excluding the impact of the ESOP, cost growth was around 8.2%. We are very proud that as part of our store rollout plan and growth, we were able to employ another 4,316 people. And we also continued our contribution and support of the youth employment scheme where we spent another 95 million during the year. Some of the other operating expenses increased around 16.1%, of which our advertising spend increased by 12.7%. It is, to some extent, a lower base effect in the prior year as a result of the lockdown measures we had, especially on the liquor side, but also due to the additional spend on the store opening program. Electricity and water increased by 9%, and that was on the back of an increase of 36% in fuel costs, as well as the additional power outages that we experienced during the financial year where we had to make use of diesel in the generators. Fuel cost increases was 43.6% for the year, and then our security services are normally 1% of revenue, but this year we saw an increase of 11.2% on the back of an increase of criminal activity within the country. Trading profit increased by 6.8% to a record $11 billion, and I will unpack that later in the presentation. Exchange rate losses, we had a number of 260 million. We've had an investment of 740 million rand in our US dollar-linked government bonds, which we normally have as a hedge against weakening currencies. During the financial year, the Angolan currency strengthened by 43%, and hence the loss we realized. Items of capital nature, we had a loss of 29 million. The past two financial years, we've impaired quite a few of the assets in the non-RSA segment especially. The current year, we had additional impairments of around 169 million within the group, but we also realized a profit of 140 million as a result of the civil unrest, scrapping of the assets versus the insurance payout. Our EBITDA margin was still 9%, very much in line with last year, at a value of $16.6 billion. If I then turn to some of the indicators, our adjusted basic HEPs increased by 22.5% to 1086.5%. There is a detailed analysis on how we calculate adjusted HEPs in the annexure. Our diluted HEPs increased by 10% to 1048.1%. And the dividend increased in line with our diluted HEPs to a 600 cent dividend for the full year. Our effective tax rate reduced from 32.2% to 30.8%. Included in the base of the 2021 year was additional impairments of our deferred tax assets, which did not repeat in the current year, and hence the improved effective tax rate. If I look forward, that effective tax rate was in line with the guidance we've given between that 30% to 31%. We've received numerous questions from our investors and our shareholders on how management evaluates the performance, as well as what are the internal hurdle rates when we look and evaluate projects. We've decided to put this slide together to give you indication of the three measures that we look at. Obviously, the one is return on invested capital, return on equity, and our weighted average cost of capital. Return on invested capital is purely our trading profit net of tax, and invested capital is our net asset value, excluding borrowings, the lease liabilities, and also bank overdraft. Why we use return on invested capital, or ROIC, excluding IFRS 16? It's first from a comparable point of view, to make it more comparable against prior years. We also feel that the lease liability is a non-cash flow item. And also there is some form of judgment involved, especially when we look at the amount of renewal periods we have to include. Hence the fact that we use ROIC excluding IFRS 16. That percentage increased from 14.8% in the base year to 16.3% in the current year. And this measure also forms part of management's long-term incentive targets. The group uses the weighted average cost of capital to determine the internal hurdle rate for new projects. It's a combination of cost of equity and also cost of debt. The rate increased this year from 13.8% to 15.1% on the back of the increase in the risk-free rate as well as the interest rates. What is pleasing to management is that our ROIC, excluding IFRS 16, currently outperforms our WAC by 1.2%. Our return on equity also increased from 26.4% to 27.1%. We prepared this analysis to show the impact of the 53rd week on the results because one can very quickly come to the conclusion that we had a slowdown within the group in the second half of the financial year. What this analysis shows is that currently we show an increase of 9.6% on a 53rd week basis, but if we exclude the impact of the 53rd week, the sales growth would have been 11.9%. If I then break it down per segment, for the year we would have grown at 12.6%, with the first half growth of 11.3%, and accelerated growth in the second half of 13.8%. Likewise, in supermarkets non-RSA, we saw an acceleration in the second half of 17.9%. And in furniture, where we saw that slowdown in the first half of 6.5%, we actually had acceleration of sales of 10.4% in the second half. Other operating segments increased by 9.3%. That makes up that total 11.9%. If we then break the sales down per segment, total sales increased for the group by 9.6% with a like-for-like of 8.1%. Supermarkets RSA increased by 10.1% to 147.4 billion. We opened 117 stores and we plan to open an additional 220 stores in the new financial year. Our like-for-like sales growth was 8.5%, with internal food inflation of 3.9%, but we did see an acceleration in the second half to around 4.9%. Space growth was 3.3%, and then our contribution of our private label was at 18.8%. Checkers and Checkers Hyper increased sales by 9.1% to $58.7 billion, and this is on the back of a 10.9% growth in 2021 and a 13.5% growth in 2020. Our 60-60 on-demand offering forms part of our Checkers and Checkers Hyper result, and we are now trading out of 300 stores. ShopRite and USAFE increased sales by 7.2% to 77.9 billion, with ShopRite increasing sales at 6.7% and our USAFE increasing sales by 11.4%. The significance of this result is that you will recall from my earlier slide is that these two brands were most impacted by the civil unrest around July. Liquor shop and other increased sales by 45.4% to 10.8 billion, with our liquor shop operations increasing sales by 44.5%. Part of the effect was obviously the COVID-19 lockdown regulations, but we're also back to close to opening a store a week. What is more exciting is that we plan to open more than a store a week next year, where we plan to open 63 stores. We also managed to open 21 standalone pet science stores and one little me. If I turn to non-RSA supermarkets, increased sales by 10.4% for like of 8.4%. During our H1 results presentation, I spoke about the fact that it was the first time in 14 consecutive quarters that this segment achieved that positive sales growth, and we are very pleased. to say that we achieved another half of positive sales growth. It was always important for us to have currency stability, and we saw that strengthening of currencies within the Angolan and Zambian environment, as well as the whole affordability issue in the rest of the region. Furniture sales decreased by 1.4%. But if one look at the negative 6.5% where we started the full year, we had a 5.2% growth in the second half. Part of the key focus areas of management this year was to improve the credit participation of that segment, and we managed to grow that part of the business from a 12.6% credit participation to a 13.4%. Other operating segments increased by 8.5%, with our franchise business giving another strong performance of 7.5% growth, and then also our transformer mini-ride business increasing sales by 11.5%. For the return to trading profit, trading profit for the group increased by 6.8% to $11 billion, with a trading margin of 6%. Excluding the impact of that 53rd week where we reported in the past we made about 330 million rand, the growth would have been 10.3%. And if one also excludes the impact of the civil unrest once of cost together with the ESOP costs, growth would have been around 13%, very much in line with the sales growth we reported in the previous slide. If I then turn to the various segments, supermarkets, RSA, increased trading profit by 7% to 10 billion, with a trading margin of 6.8%, slightly lower than the 7% of the prior year, but one must take into account the impact of that ESOP cost as well. Supermarkets, non-RSA, increased trading margin by 43% to $439 million. Increase in trading margin from prior year's 2% to this year's 2.6%, with a strong contribution, again, from our Zambian operations. Furniture showed a decline in profitability of 44.8% to $211 million, and it was really due to a high base effect in the prior year, as well as the impact of the reversals that we've seen from an impairment of doubtful debt in terms of IFRS 9. We've seen a steady improvement in our debtors' book, and our current provision is sitting at around 44.7%. Other operating segments increased profitability by 24.7%, and this is on the back of that strong meteorite and transform performance. Net finance cost decreased by 3.5% to $2.7 billion, and if you recall, during the first half of our 2021 financial year, we settled that fixed interest loan that was that US dollar $250 million, which carried the breakage cost of $178 billion that we didn't have in this year. So if I exclude that impact, if you look at our net finance cost, it was around $83 million for the year, which just reflects again on the strong cash flows generated by the group. Our finance cost relating to our lease liability has increased by 7.1% and carries an average cost of 6.8%. For ease of reference, we have prepared this analysis again where we compare the asset with the matching liability. Our property and plant and equipment increase I will unpack in a later slide, which was part of our capital allocation model. If I look at intangible assets, increased by R600 million on the back of that R250 million trademark from the president, Hyper, as well as our investment in internal software development costs. Our cash and cash equivalents was at R13 billion, with cash of R10.6 billion, and then also the loans receivable from our structure with resilient of around R2 billion. Inventories increased by $3.5 billion, and I will pack that later. And then other assets was at $12.5 billion, of which the majority was relating to our trade and other receivables of $5 billion. And then also our investment in that retail logistics fund, which currently house our distribution centers of $2.2 billion. Our borrowings as a percentage of equity reduced from 24.9% to 21.5%, and is now well below our 25% to 30% target rate. If I then turn to capital expenditure, we spent $5.4 billion during our financial year, excluding the impact of that replacement capex as a result of the civil unrest of $460 million. Together with that investment in the trademark, we spent $4.6 billion, which was very much in line with the guidance we gave of $4.8 billion. If I turn to our expansion versus our maintenance capital, we spent 68% of our capital on expansion projects, which included the 117 new stores that we opened during this financial year, as well as various store refurbishments. And then also from an IT and digital acceleration point of view, we spent 24.9%, 3.3% of that IT spent related to maintenance capital. Our guidance for the next financial year is $5.9 billion. And again, if I have to look at the maintenance versus the expansion capital side, the majority of the capital will be spent on expanding the business and to fund that growth that I spoke about earlier. Inventory increased by $3.5 billion to $21.9 billion. $2.8 billion of that came through the supermarkets RSA business, and then $600 million through our supermarkets non-RSA business. The increase in our supermarkets non-RSA inventory levels is purely an exchange rate move. We spoke a little bit about the Angola increase of 43% or the strengthening of the currencies of that 43%, as well as Zambia, we saw a 34% increase or strengthening in currency. From a supermarket's RSA point of view, the majority or the total increase of that stockholding actually occurred in our distribution supply chain. Our supermarket's RSA, as you can see from the table, was in line with prior year with 7.9% inventory to sales ratio. The increase in our distribution centers, the inventory levels in our distribution center was as a result of the inflationary pressures that led us to do strategic buy-ins on various food categories. We also added an additional 55,000 square meter of supply chain network. to make provision for additional or safety stock levels, as well as the growth that we plan in the next financial year. And then lastly, we've also increased our general merchandise stock holding as a result of the supply chain constraints currently worldwide. We've also started to already buy in general merchandise for the foreseen takeover of the mass-mart stores. From a Treasury point of view, our R6 billion net cash is the difference between cash and bank versus less. Our overdraft decreased slightly from R6.7 billion to R6 billion, but one has to take into account the billion-rand share buyback that we did during the year. Our total share buyback is now sitting at 1.5 billion rand at an average share price of 179.32, which gives you a 28% return. Our borrowings were very much in line with the previous year. We have taken advantage of favorable market conditions to restructure our borrowings. And you will see from the notes that we now also have two ESG-linked loans that we secured during the financial year. Defines free cash flow as the cash generated after accounting for outflows to support the business and also to maintain the capital assets. And this year was no exception where the group generated $5.2 billion, well within the range of that $5 to $6 billion that we spoke about in the past. This was generated on the back of that strong EBITDA from our operations of $16.7 billion, which was negatively impacted by the changes in our working capital. And I've spoken about the increases in our inventory levels and the reasoning behind that, as well as then also the replacement capex where we had to spend due to the civil unrest. The group cash generation remains very strong, and I'm of the opinion that we will be able to deliver an improved result in the 2023 financial year to actually fund the envisaged growth that we see for 2023. Then just in summary, if I look at during my presentation, I made mention of various guidances. From a new store operation point of view, we plan to open 275 of which 220 is in supermarkets RSA. This does not include the proposed mass cash in Cambridge acquisition. From a capital allocation point of view, we are continuously looking at merchant acquisition opportunities. Hopefully we can complete the Cambridge transaction within the first half of the financial year. We have a mandate from the board to do a share buyback of a billion rand a year over the next four to five years. And then our dividend policy remained at 1.75 times diluted HEPS cover. I do believe that the tax rate, the effective tax rate, can be between 30% and 31% for the 2023 financial year. But then turn to CapEx, as I mentioned, around $5.9 billion, which the majority will be spent on expansion capital and then inventory at about 12% inventory to sales ratio. Thank you very much, Peter. That then brings me to the end of the financial presentation.

Thank you, Anton. That was very clear. I'm sure you've got much more clarity in the meaning of these numbers, and also thank you for that very good summary when you ended off, Anton. Thank you very much. We did show you this graph before, or this slide, just breaking down that we are coming from a multi-year transformation journey. It wasn't a once-off scenario. It's certainly also not over. But we just try to give you context of how these building blocks got us to where we are today. And we're now in the amplify stage. And what that means is we have to leverage our platform, can almost say platforms, that we've built today. to our advantage, to unlock the value in that ecosystem. And with a slide that I will end off, just to give you context again of how we think when we plan different investments. And we will continue to invest in our supply chain, digital, data customer to make sure that every day we drive harder to get a larger share of wallet. The nine drivers, I think you know this now for the last six years already, they don't change much individually. But what has stayed definitely the same are the three very distinct blocks that you see. Creating a smarter shop, right? I'll say something about that now. Closing the gap in segments where we under-index or not play at all. And then... How do we win in the long term? How do we invest to ensure that this business continues to grow and continues to be so impactful as it is today in the South African economy in particular, which is more than 80% of our revenue? So the smartest shop, right? Definitely. driven by digital and data science, even more customer-focused than what we have spoken up to now. The 24 million extra savings award members now swipe more than 1,800 times a minute. Gone are the days of guessing what to do, when to do, at what price to do. The data is driving the decision-making. And the first one, which is their number one, the optimized mass promotions and demand forecasting, that's specifically referring to the real demand. big, hard-to-plan, from logistic to execution promotions like Black Friday, XXX Savings. And every promotion, we have the ability now to analyze it to the point to see how much of the sales were brought forward, what was the cannibalization, what was the halo effect, ultimately come to a return on investment number to see what we've done wrong, can do better, and whether it works. Secondly, the real-time personalized experiences that we now can get from the data. I think you understand what that means. For those of you that do use digital and buy electronically, you've got something, you used to buy it every time, somebody reminds you that you might have forgotten your tea or your tomato sauce. On top of that, the fact that personalized offers has the ability to also reduce the spillage in general marketing. And thirdly, where we are now, is we're now going to share this very rich customer data We'll start to share that with our suppliers and partners, manufacturers. Also for them to understand their customer better, because that will also help us combine to do more effective promotions and price more accurately. I want to give you one example without naming, but one of our early adopters of the data learned that Well, firstly, they thought that they'd do most of their sales over a weekend. And then after the data analysis and all that, they learned that 90% of their sales are done during the week. But they're spending all their activity and marketing on a weekend. So they could adapt, could fish when the fish are there, and have a much higher return on investment. their promotional spend and investment with the ShopRite group. Private labels. I think it's five years ago when I said to you the first time, we were about 13% participation. We're now at 18.8% participation, inclusive of liquor. When you exclude liquor, it's much higher. We all know that liquor's got a very high brand loyalty. And we will continue... to invest and develop in here. But I would like to just clarify our approach to private labels, maybe different to our competitors, is that we develop product where we can innovate or where we are filling a gap in a category. Whether it's a type of product or whether it is a price point, We don't want just more of the same. We don't think the customer benefits by more of the same. So we don't just take a high-volume item and then we slap it under a private label. I'm very happy to report that we've got 30 private label brands currently that are in excess of 100 million in annual sales. And it ranges from entry-level product in the U brand in USAFE all the way up to the premium Forest and Feast Indulge private label. We will continue to develop more and more. And the innovation that is required sometimes is because of a lack of innovation in the industry as a whole. So we will be investing through this cycle for long-term growth. We are a growth company, and we're seeking areas for growth every day. Currently, there's a lot of pressure on everybody, inclusive of our consumer, low economic growth, high inflation, interest rates, unemployment. Easy like the tortoise to pull back into your shell and do nothing and wait. But that's not what we're going to do. We're going to invest right through the cycle. And so pleasing for me to say, at the minimum, we'll be opening 275 new stores this year. The highest number... that we've ever done in a single year. Maybe in square meters, they're not all that big. It also includes our smaller format stores. But it still takes the brands to the corners of the country. The Checkers Store Renewal Program, where we are leading in fresh food theater, combined with online, has really paid us well in terms of return on investment and the customer acceptance. You may recall that I said previously that never underestimate the in-store experience when you want to go into a digital omnichannel world. So 101% of the stores have been updated by now. And we are also seeking more opportunities in categories and areas where we're under index, where we see growth opportunity like pet and baby. And in both instances here, they come as an omnichannel offer to our consumers from the start. Just continuing on the whole investment case is, and Anton did refer in his section around stock holding, we had to look at our stock position because if you want to play really seriously in a digital and an omnichannel world, the unpredictability of demand requires some investment in stock. Secondly, the inflation has necessitated us to do some strategic buy-ins. Firstly, to secure product, and also secondly, for obvious reasons, for a retailer to get some stock in before the price increases. And then we have a bit of a challenge on hand currently that because of the sheer size of the Shopify group and the need and requirements on stock for especially large promotions, we are seeing a decline in our supplier service levels. Therefore, we need to compensate for that in terms of more stock in our distribution centers, not at store level. And then thirdly is the whole... can we call it disruption that was experienced globally with supply chains and limitations in container availability and pricing and that, we did make a conscious decision to bring our general merchandise in earlier this year. I'm very happy. The stock is here and it's good stock. We are not sitting in a scenario where that you should expect big stock write-downs from the ShopRite group. It is really good stock. And we are ready for the festive season to come. Stock availability is then just the other thing. And we're probably at close to or on the highest on-shelf stock availability that we've ever had And the importance of that point is I say that it is not fair for a customer to pay 100 rand for a taxi fare to come to us and then we can't deliver on their promise. We don't have their product. Similarly, somebody taking his car has to park, has to pay, and then we disappoint them. Hence that we will always be very conscious of of having the optimal stock levels to fulfill our customer promise first. We also now concluded our 10-year review of the supply chain requirements. So you will see us in the next two to three years at 200,000 square meter of distribution space, distribution center space, to our supply chain network. Maybe just a call out here is that the funding from this will come from the retail logistics fund. That's the fund that we created when we sold previously the three distribution centers which we owned. And then... As part of the supply chain also, we've completed the transaction with RTT on demand. It's now called Pingo. And for us, that was a crucial decision to make to make sure that we are in control of the last mile logistics in digital to make us the winner. There's a lot of IP in there. We would like to be in control of that final customer service delivery. So we made a conscious decision before COVID started. It was a pet project. You know, how can we do things differently? And The idea then was to come up with what nobody else have done or has done. It's a one-hour delivery service. Most people thought that this will, after COVID, just get slower and less demand, be less in demand. And we're just experiencing completely the opposite. So for the year... The sales growth was 150%. As you can see there at the bottom is a very, very steep graph of growth, accelerated growth. And as I said earlier, where everybody else thought that we're going to slow down, last week we've had our record week in terms of total number of orders. And then the other thing I like to point out always when we talk about new things is that innovation drives new opportunities, specifically job opportunities. So we are very pleased to say that since launch, the 60-60 on demand has created 6,299 new job opportunities. The investment hasn't stopped. The development hasn't stopped. We're continuously improving on this customer offering. If you think where it started, mission-driven, couple of items, 3,000, 4,000, 5,000, now 23,000 products with or same as in-store prices in a one-hour delivery slot. As easy as opening your cell phone. The second development, which was very, very well received by customers, was when the extra savings was integrated into the system. And since then, more than 5,000 deals in personalized offers have been offered to customers. And then there's the logic. So a lot of you may have seen on social media a little bit of this going around, but There's the calculation. It also makes economical sense to make use of this service. And yes, it's also profitable for us. So digital has become part of our lives. Pretty much three years ago, we really said we're now going to make a big difference to where we were and how we looked at it. We created ShopRiteX. where we can attract different talent, different ways of working, development of platform, testing new concepts, et cetera. Not limited to that only, we then spoke to you about the whole media market space where we never played before, and now Rainmaker has been established and is currently generating revenue. also offering the service to third parties. And then there's the money market, financial services, our money market wallet that's starting to get traction. Our partnership with our insurance is really starting to contribute handsomely to income. And then some more other value-added services in the form, as an example, Compute Ticket is now not an events-selling platform anymore. It also offers travel and accommodation booking, et cetera. And we will continue to add these alternate revenue streams to make sure that we work on what I said earlier, is to increase our share of wallet. Now, I'm very surprised... a lot of times, most of the time, when I speak to people and so few of them actually knows how much ShopRite as a group does beyond selling food. ShopRite truly, and I've mentioned it before, is a responsible corporate citizen. And we really stuck our neck out this year to add to our force for good, the planet. Our responsibility. Accepting our responsibility to the planet. The good for the planet. And I'll just call out here two things. Is that 928 of our refrigerated trailers runs on solar power. And a massive saving on a carbon footprint every year. And when it comes to packaging and plastic and waste, we're so serious about it that it's actually part of our short-term incentive criteria. And then there's the people. Our people, meaning our employees, our customers, and the public in general. I truly firmly believe that that the ShopRite company, ShopRite business, is a responsible corporate citizen. This year in particular, we were very pleased to be able, after legislation change, to form the 8.9 billion evergreen ShopRite employee trust that will benefit our employees. those that we depend on every single day, 24-7, that it will better their lives and in time to come will become a meaningful contribution to their improvement of their life experience. We've also created Next Capital to make sure we enhance and help and assist the entrepreneurs in this country to get access to capital and access to market. And then never do we forget those in need, our soup trucks, 5.6 million meals that we served last year. And whenever disaster strikes, we'll be there. This is our promise to the public of South Africa. And also... for the people in the African countries where we still trade. I did say in the beginning that I will end off with just showing you again how we view our world and how we make investment decisions to try and improve on our target that we've set out across all of our banners. increase our share of wallet by offering customers better service, alternative, cheaper products, choice. And that's how we look at it. We try to put it in this way to simplify it for you to see what it is that we do and where does it slot in. But the most important point I want to highlight for you is that center bullseye. core grocery retail, everything we do still settles around that business. That is what allows us to do all of these other things and to be able to invest in more digital and more clever ways of doing things and data and understanding the customer better. Hence why I said earlier the minimum cost Of 275 new stores, together with the investment in our central supply chain, that is what drives that core. We will continue to nourish it. We will continue to invest in it because that is what helped us to create all of that that you see around the core. Thank you very much for your attendance. We will be going over to questions now. And while we wait, I'll just run through a couple of points regarding our medium-term outlook for the group. Thank you. You're welcome now to send your questions, which Anton and I will then respond to. Thank you very much. So just quickly, just pre-empting basically, I think, things that you would want to know any event, is first, how has the year started, the new financial year? So July, sales growth has been ahead of the 10.1 that was reported for the full year. On the inflation... We did see, you will remember, for the year we ended 3.9%, and then it started to accelerate. So for July, the internal inflation was at 7.3%. You will ask, I know you're going to ask me, where do we see this going? So we think internal inflation can head around 10%, but we do not foresee a runaway inflation on food. And just for caution or to just remind you again, last year, the whole month of July, the liquor trade was closed and opened up again in August. So that's now in the base. And at that time, there was. It's a high base. So just remember that in terms of your own analysis. We currently, it started yesterday, the mass case tribunal appearance and arguments. So in the next couple of days, that will then be completed and we'll keep you updated what the outcome of that process is. I did already say, and that's how I ended, that we will continue to invest in that ecosystem of ours. We believe that is how we drive the business and how we get a better share of wallet. Very pleased about the 275 new stores that we're going to open this year. Anton also said that that excludes the Masco stores. So very positive news. front foot store opening program for the next year. The supply chain review was done for the next 10 years. That will include about 220,000 square meters over the next three years, roughly, that we will add to the distribution center space. We're starting in Gauteng with a 85,000 square meter facility separate to where our current facility is in Centurion. So different premise. Things that we've learned last year and through the social unrest to mitigate the risks. And then, yes, we're still pretty happy with the fact that we've had this additional focus on the RSA business has proven to be the correct decision and that we will continue to grow their core RSI business further. And we feel very optimistic that despite what's happening in the macro environment that influences everybody, that we will still be the primary choice for customers who are looking for value, that are looking for price, but also on our digital and on our checkers business for more affluent customers that will improve meeting even their needs better every day. So that is what we will be doing. That's in a nutshell just a few comments on what you can expect this year. So, Anton, if you have some questions.

Yeah. I think it's let's just build on this theme around inflation and how do you think what's the impact of the Ukraine war and how does it impact our supply chain on imports? Maybe just share some thoughts on that.

Okay. So the immediate impact was we had to reroute 76 containers immediately that was bound to be shipped through the Black Sea. We managed to replace that stock and move it to alternate sources of supply, especially on things like pasta. We had to find a different source of supply and I can say we successfully have done so and some of that stock already have landed. Same as it actually aggravated that whole shortage of containers and actually the mismatch of where the stock currently is, I mean container stock. So that had an inflationary effect on the transport cost a lot, but didn't affect the availability of product.

Okay, thank you. Then there's also quite a few questions around gross margin. I mean, obviously we maintain that 24.5%, but how do you look and how do you think about gross margin going forward?

Yeah, I... Anton, you know, I mean, we get this question probably every time. Can we increase it further? I think 24.5% gross profit margin is a very good number, and My standard answer is we think we can maintain that. We must not forget that something we now have that we didn't have before is this great wealth of data through the extra savings members, 24 million people, understanding much better what the correct pricing could or should be. And I did mention the reduction in spillage of a general campaign, the fact that we can personalize. So we must not underestimate, I think, the ability what we now have to be much more scientific and precise in terms of margin management. And then, of course, you know, we have sight of line item profitability. Yeah.

There was one or two questions around the debt restructuring. So in Note 14, we have told and we've basically disclosed with whom the new debt restructuring was and what we did there. So you can just go and look at the detail. Peter, there was also a question around grants and what do you think of the future of grants, especially with that SRD grant and the impact on our Shopify business from that point of view?

My view on that is that I don't think we can move away again from it. It's here to stay. And with the, I don't want to say the launch, but the additional functionality in the ShopRite money market bank account have created an additional vehicle for especially those customers who, to save money, to have less transaction costs. So I think our portion of that market will grow. It is not true that all of Grand Recipients come to shop, right? They've got choices. So definitely with the total value proposition, we hope to increase that contribution from those customers. Interesting what we've seen through the data, of course, is that a lot of those people have an additional income. It's not the only income that they have. And they actually spend with us twice a month. that value of a grant and not only on grant days.

Thank you. David, you had a question around what was our second half growth if we had to exclude some of the ones off. So if I look from a trading point of view, trading profit point of view, I spoke about that 13.8% growth if one has to exclude the impact of the 53rd week, also if we exclude the impact of the civil unrest and the ESOP. If we then also, if we just look half and half, I think one can compare a 14% growth to in excess of about a 10% growth. So that hopefully answers your question. Peter, there's a question around who manufactures our right brand. So maybe you can just talk a little bit about our SMEs and the programs we have there.

Yeah, but it's almost exclusively South African suppliers and manufacturers. So that's always our first choice is to assist our existing manufacturers and build their business together with ours. And over the last couple of years, we have moved a substantial amount of imported food product to local suppliers. And as I mentioned, with the next capital, the creation of that vehicle specifically is around South African entrepreneurs that wants to come to market where we can give them capital but also access to market.

Nandi, you had a question around the store breakdown and obviously where we're going to see the growth of the 275 stores we referred to. There is a full breakdown within the sense result on where you will see the growth from a checker's point of view, a shop right. And I also spoke about that 63 liquor stores. So I refer you to the sense. Yes. Then there was quite a few questions around cost growth and how we must think about cost growth. We saw that acceleration in the second half, and I broke it down to the ESOP, and there was also a question around the ESOP. So we'll see that cost now on a repeated basis. I refer you to the full sense we did around the ESOP and the benefits we will derive from the ESOP. I think our initial estimates were around a 2.7% dilution on EPS, that we shared as part of the scenes. So that was one part that was driving the cost, and then the second part we also referred to as the advertising and the growth that we saw in that advertising cost growth line. The way we look at costs, obviously, going forward is that we mentioned that it's not just for us about sales growth and gross margin anymore. We spoke about that alternative revenue streams as well. So if we look at the total business, we're more looking at from a trading margin point of view. So some of the cost growth... we're currently seeing is also to also grow that alternative revenue stream. So I think gone are the days that we can just look at expenses as a percentage of sales growth. One has to start taking into account the alternative revenue streams. And, I mean, Peter, you broke that down quite a lot as part of your presentation. So for us, the trading margin is at 5.8% from a group point of view, and then the strong growth or the trading margin in the South African environment So I think for future reference, I think rather work on a trading margin contribution and look at the growth that we will see coming through there. I also refer you to – we've also spoken about that revenue from our associate – profit line these days where we see that profitability coming through with our investment in our regional logistics fund that was over that 208 million we also see the Pingo revenue coming through there so those revenues are totally linked to the operations in the business and I think that is something that the market must also take into account when evaluating our trading margin I think what is important that you will also see in the notes is that we are in the process of also selling our Canaan's distribution center as well as our Wells Estate distribution center to that retail logistics fund and that we hope to conclude that in the first half of the financial year. Okay. Then there's also a question on the share buyback. In my slide, I did refer to that the board has given us a mandate of around a billion rand per year for the next four years. If we look at the value, we obviously have our own intrinsic valuation of our share. I think the success of our buyback program is that our average price is around 179 rand, as I mentioned. So on the current pricing, it's about a 28% return. So we're obviously very conscious of at what price we do the buyback. So that is that. I'm trying to find a question for you, Peter. Maybe you can just talk about the growth excluding the liquor sales that we saw in the first, well, you've mentioned excluding liquor, but maybe just talk a little bit about that for the first two months of the financial year.

Yeah, I did not say that July was ahead of 10.1%. Because we look at consolidated numbers, as you know, The August number is not finalized, but, I mean, certainly I can tell you that it is no lesser than the same momentum that we've seen during July. So there's nothing to be alarmed about. Very good start to the financial year.

Okay, and then I think there's one more question that I had from Achumile from 91 around the insurance proceeds that we still expect to receive, as well as you'll see now contingent assets. There is a $330 million that we've included there that refers to the additional insurance monies that we foresee to receive from our insurance from a loss-of-profit point of view. So you can just refer to that note. Peter, I think that is more or less covering all the questions that I have.

Okay. Thank you, Anton. Thanks again to everybody that you have endured us. I hope that we have clarified for you enough about what the detail around the numbers. Also, there's a little bit of insight in terms of, uh, where we see the growth is going to come from and how we think about the business and, and, uh, the fact that we also believe that we have other responsibilities than just making money. Um, and we are balancing those as best as we possibly can. So, uh, thanks again, uh, for your time and, uh, Yes, I hope you're going to have a lovely day. Thank you very much.