Shoprite Holdings Ltd

Good morning, welcome to everybody and thank you for joining us for our interim results presentation for the six months ending December 2022. We will keep to our normal format where I will give a bit of an overview of the company in its totality and then Anton will give colour to some of the financial numbers to understand those and unpack them better. And then I will end off again with a bit of a strategic view and what we set ourselves to do in the next six months. So firstly is that we have now surpassed for the six months the $100 billion in revenue. I mentioned earlier in the previous presentation that the group is now clearly set on to become a $200 billion revenue company for the full 12 months. 16.8% double-digit growth, very high double-digit growth, on top of last year's double-digit growth is a remarkable achievement. But one easily can get lost with percentages, so I'd like to call out that the absolute value of additional sales amounts to over $15 billion. That is what the group had to add new revenue to achieve the 16.8%. The gross profit of the increase is slightly less than what the sales have because we decided to invest in price and for our consumers I will mention some of those numbers later, because our consumers are currently really in distress, and we do what we can, as always. ShopRite, we find solutions and ways how to support our price perception and assist our customers. Also pleasing to be able to increase the dividend payment to 248 cents. For me, an absolutely astounding number is the fact that our customer visits to our stores have increased by 12.9%. And we all know that customers have got a choice. And for us, it's really pleasing that they, in such numbers, have elected to choose us as their shopping destination. That resulted in almost 5% volume growth, over 166 million additional products sold during the year. And you will see, naturally, those kind of numbers will require from us to invest further in our supply chain. And all of this, the growth of the revenue in customers and in volume, have resulted in a 3.9 billion rand gain in market share marking now 46 months of uninterrupted market share gains it's been a busy six months for the 152 000 shop right employees who at this point i would really extend my greatest sincerest thank you for a job incredibly well done I remain with the saying that nobody executes like the ShopRite people, and that is clear in this very fantastic set of results. So, from the left, we can see the period started with us reopening that very well-publicized burning of the Peter Marisburg hyperstore. We have started the expansion in the distribution centers. We are leveraging our capacity in terms of different market segments, categories, adjacent categories where we're on the index like new formats in outdoor, little me, baby, pet, et cetera. We have doubled down on the digital with our Shoplite X. We have got by far the largest loyalty program in the extra savings reward program. We have extended our platforms and customer data to our suppliers who now, in collaboration with us, can improve the return on the investment of their promotions. Of course, I would be remiss not to mention that we had 144 out of 182 days, what we call these days rolling blackouts or load shedding, interruption in trade. That comes with quite an additional extra cost. We had a fantastic Black Friday. It's worth a mention just because it's so big. Once again, the ShopRite group have been able to create new job opportunities, almost 4,000 of them. The alternate sources of revenue are starting to become more and more meaningful. We did tell you last time about Rainmaker, our media business, specifically in the digital space, starting to become really meaningful. The 6060 on-demand service is continuing its growth, still very well accepted by the market. We've opened 187 stores in the last six months, basically a store a day. And while most have enjoyed the festive holidays, Team ShopRite have transformed 94 of the mass-market stores that we acquired into the ShopRite brand. And if it sounds like we are doing a lot, we are. But there are 152,000 of us doing it together every day, making these things happen. The consumer, I did mention, the consumer is under this distress, and we do what we can. At ShopRite, we don't make excuses. So in the six months past, we gave back customers over $7 billion in extra savings. At TillPoint, instant cash rewards. We're still selling our five-rand loaf of bread since 2016. helping people to survive, and as always, ShopRite never compromises on price, and it is very clear that we have remained the price leader, and ShopRite is still the cheapest supermarket in the South African space. I'm going to unpack just four points just very quickly. Growth, our investment, some costs and our customer portfolio. First is our industry leading growth. We have a combination which we believe is the value that we create between fresh, our in-store experience as well as digital. And one must never underestimate the in-store experience to the consumer if you want to go digital in an omnichannel. That's why it remains very important for us what we deliver in the physical space and then we enhance it with digital. A really outstanding performance from the South African supermarket division, growing at 17.5%. And as we call it, like for like, I know international people refer to it more like same store sales of double digits. The only retailer, to my recollection, that have managed to do that, 11.1%. Very, very significant number. Liquor continued to do exceptionally well, gained a lot of market share over the last six months. And the 60-60, which I mentioned earlier, are continuing to grow. 87% on top of last is 250%. Yet our in-store visits have also managed to grow by 12.9%, which I mentioned earlier. In the combination of all of this has had the banners, all of our banners, achieving the 1.4% additional market share gain. And if you look at the graph, you will see that, pleasing to say, that the contribution almost equal from the ShopRite brand, customer brand, and the Checkers customer brand. As you can see, they're 2 and 1.9 billion, respectively. It's not a question of a once-off. I did mention our 46 consecutive months of market share gains. That's four years, roughly. So, on there is the last three years' halves. And you can clearly see the gap is actually significant, the red line being that of the ShopRite group in terms of revenue growth compared to the rest of the market. We believe this is not by luck, but by design. We have invested in price. We elected to invest in price. Inflation is now, I think it's the highest that I can remember in 13 years. And it especially hits hard at your most vulnerable and price-sensitive customers. The inflation at a YouSafe store would be higher than what it would be at a checker store, just because of the high propensity and penetration of commodities. And we all know those are priced internationally. But clearly, again, on the graph, you can see that the ShopRite internal inflation lags that of official food inflation by quite a margin. But there is... For the smart shopper, there is a way to contain your inflation. So we put on there, we've got this R99 combo, and if you take those items in that combo, the inflation of that basket was 1.8%. So it is possible by being selective in your choice to contain your own inflation. It will be a miss from my side, not to mention the additional costs that is brought by the load shedding, the additional diesel that we have to spend $465 million for the six months, additional, the 144 days that we had interrupted trade. Now, of course, we're not alone in this, but I think what a lot of people miss is that the entire value chain is bearing the brunt of this cost. It's not only the diesel cost, that's one component of it, but it actually starts from farm to fork because there's times when farmers can't irrigate because they don't have power. Then there's the actual cost of the generators, etc. The capex cost of it as well as the maintenance cost of it. The interruption in the production line, I mean, when you're busy with producing food and you are interrupted midway all of that has to get wasted which easily disappears because everybody sees the big picture and the price of the diesel but all the waste and food also goes into our cost base and the additional maintenance and eventually it all spills over to the extra security that we have to take because it's dark and it's unsafe and one has to spend extra money on that, and it all goes into our cost base. So it's not only the diesel when we refer to the effect of load shedding. Our balanced customer portfolio between the ShopRite brand and the Checkers brand has really been performing well for us. As I mentioned earlier, the contribution from both these consumer brands are almost equal. Checkers now contributing for the six months almost $34 billion and ShopRite $44 billion. Although the footprint of ShopRite is much bigger than that of Checkers, you also have noticed that the market share gains were almost equal from both of the consumer brands. Checkers growing at 16.9%. We now have got the balance with the 60-60 on demand in 394 outlets. And the private label contribution in checkers now increased to 19.7%. And especially in checkers environment, it helps us to stay with the global trends, closest movements in global trends in terms of food, hence why we have Simply Truth and The Forest and Feast addressing two very different market segments. 255 checker stores in the portfolio and 38 of the hyper stores. And a significant number, checkers alone, the brand, having 9.6 million extra savings members. As I mentioned, ShopRite contributing $44 billion in the last six months, also growing 15.1 percent, double-digit, high double-digit, and the contribution also to the gain in market share almost equally between ShopRite and Chequers. Private labor participation in ShopRite is higher than that of Chequers just purely because of the penetration of the commodities in the lower income segment of the market. The astounding number is 16.4 million extra savings members for the ShopRite brand. The split between The two brands in ShopRite banner is 550 stores under ShopRite, branded as ShopRite, and 429 branded as Yusuf stores. The supermarkets non-RSA division, also referred to as the rest of Africa, have had a very good performance in the last six months, growing in rands by 17.5%, but in constant currencies by 6.9%. Most telling here is we remain on target, our medium-term target in terms of the profitability, where we have indicated that we would like this segment to contribute about half a billion to total profitability. That summarizes just a bit of the overview of the total group, as quick as I could. And I would like to hand you over now to the Chief Financial Officer, the very capable Anton De Bruyne, to take you through some more detail on the financial numbers.

Thank you very much, Peter, for that introduction and giving us some insights into what we've seen is the main drivers for our sales growth during the first half. My part of the presentation will deal more with what we've seen our growth in our total income line and also some of the anomalies included in our total expenses. As in the past, we have included additional information that I will not deal with as part of my presentation. You can ask us questions later about it. That deals with what we see as our adjusted HEPS number. And the difference this year around adjusted HEPS is that we've also excluded the ESOP results from that adjusted HEPS number. What is also important to note is that our results deal with continued operations, which means, and you will see that we've exited the DRC region during the first half of the financial year. We had two remaining stores within that region. It was an asset transaction, which means that we sold our assets, our property and equipment, as well as our stock. The total loss from the discontinued operation for the period was 137 million, of which 84 million related to the remaining lease liability of those two sites. If I then turn to the financial highlights, Peter spoke a lot about the 16.8% growth for revenue of $106.3 billion. Our total income increased by 15.6%, excluding the impact of our loss of profit claim, which I will deal with later. Our core income increased by 14.6%. Our total expenses increased by 17.8%. And excluding various anomalies, our expense growth was around 14%. What is extremely important for management and as part of our decision making as well is that our income growth exceeds obviously our expense growth. And if we therefore look at the core growth, we had a 14.6% income growth versus a 14% expense growth. Trading profit increased by 8.6% to $6 billion. And the testimony of the cash flow generation within the group, our EBITDA increased by 17.9% to $9.3 billion for the first half. Our earnings per share increased by 20.9%. And one would ask yourself what is the gap between the trading profit growth of 8.6% and the earnings per share growth of 20.9%. There's basically two reasons. The one is during the first half we did manage to realize a foreign exchange rate profit on the back of currency strength within our Zambian and Golan operations where we had a loss in the previous financial period. We also had an increase in our items of capital nature through the realisation of a profit on properties sold as well as a reversal of various impairments we had in the previous financial periods. Our return on invested capital excluding IFR is sitting at 16.2% and As part of the additional information in the back of our slides, we're also given a reconciliation of that. What is imperative is that our return on invested capital is at a higher rate than our weighted average cost of capital of between 14% and 14.5%. Our interim dividend increased by 6.4% to $0.248 and our return on equity is currently at 26.4%. If we then turn to sales highlights, the real purpose of this slide is to give indication of the base effects on which we actually increased our sales. Total sales for the group increased by 16.8%. with like-for-like sales of 11.3%. And that was really on the back of a store opening program in the past financial year where we had 225 stores opening. If we then go to our various segments, supermarkets RSA increased sales by 17.5% with like-for-like sales of 11.1% and on the back of a very strong first half performance on the previous year of 11.3%. We are planning to open 195 stores in the second half of the financial year, which is partly driven by the 94 stores that we acquired as part of the mass smart transaction. I will deal with that in the next slide. Our supermarkets, non-RSA, very strong performance, 7.5% growth with a like-for-like of 16.6%. I think what is very positive for management is that that sales growth also converted into profitability growth, which I will deal with as part of our trading profit. The constant currency growth was 6.9% on the back of that strengthening currency within Zambia and Angola. Our furniture business increased sales by 8.6% against a negative 6.5% in the prior period. One has to see this in context with regards to the 2021 result where we went into lockdown and we had COVID where the business actually grew at more than 21%. We did see positive growth in the prior year in the second half, and we expect to obviously grow and increase our profitability and sales on that. Other segments, that includes our Medirite transform and also our franchise business, increased by a very good 12.5% against a like-for-like of 9.6% and a base of 8.9%. If I then spend a little more time on the growth within our supermarkets RSA environment, Peter spoke about and unpacked a lot about what we've seen within the shop right in Yusef and what's driving the sales within that brand, as well as what we saw in the Checkers and Checkers Hyper. I think what's imperative, what's important also is to look at the growth that we saw within the liquor business, where we saw a 35.6% growth. On the back of some base effects in terms of where we had 48 days of closures in the prior financial period as a result of that social unrest and COVID, where we traded a full period in this current financial year. If we then turn to some of our brands, I don't think we've ever given this view. And in the strategy piece, Peter just referred to some of the new brands and the new store formats we've launched. In the second half, we aim to launch around 68 shop rights and also 72 liquor shops. 94 of those stores is as a result of the mass smart transaction. Very positive for us is that we are actually opening more than one store, one liquor store a week, again, as we had prior to the COVID period. We've also opened 20 pet shop signs, standalone stores during the period. We see it's a very nice opportunity for the group to also increase our footprint there. And there's another nine stores that we will open during the second half of the financial year. People will deal with Little Me's and Outdoors and what we're trying to achieve with those format stores. We currently have five each in Little Me's and Outdoors, and we plan to open another three stores within those formats. Turning to total income, We've seen a 15.6% increase to R27.5 billion and a trading margin or sales margin of 25.9%. Excluding the impact of the insurance claim, our core total income increased by 14.6%. just maybe to give some clarity around the insurance claim. With the civil unrest in July 2021, we had an asset claim as well as a loss of profit claim. The asset claim was settled already in the previous financial year where we had cover of around one and a half billion rand. The remaining part of the claim pertains to the loss of profit piece and that was concluded during the first half of the financial year. So there is no more outstanding that is on the balance sheet pertaining to that civil unrest and that full claim is now settled. As part of the other income, you will see a loss of profit claim of 244 million. You would ask, what's the difference? The 232 million is purely the movement year on year. Within our first half of last year, we've already included a portion of the loss of profit pertaining to the furniture business that was settled. If we then go into more detail, Our gross profit increased by 13.7% to $24.9 billion, a slight decrease from the 24.1% that we achieved during the previous financial period. There are three or four main reasons why we saw that decline in gross margin. Firstly, it was that price investment for our customers where we spoke about that seven billion rand to shield our customers against a high inflationary environment. Secondly, we saw a 15 basis point move as a result of the inflatory of more than 50% increase in diesel price. And then we also experienced additional waste as a result of the load shedding in the first six months. However, our efficiencies around our managing of shrinkage remained intact and we still have world-class shrinkage results. Other operating income increased by 43.8% to 2 billion rand. We've spoken a lot in the past about around the impact of what we are trying to achieve through our alternative revenue streams through our ecosystem. First line is the commissions received where we saw a 18.6% increase. The money market business through our ShopRite and Checkers business increased saw a lot of innovation through our value-added services, which drove an increase in our footfall. And we also play an extremely important part in paying out social grants, which again led to an increase in footfall and increase in our commissions received. Our delivery recoveries increased by 43.6% to $286 million, which was mainly driven by our increase of more than 86% in our on-demand 60-60 app and deliveries, as well as also supported by our increase in our furniture business. Marketing and media had an income of 225 million, and that was mainly driven through our Rainmaker digital media operations, which was the majority of that income. I spoke about the loss of profit claim. Operating leases delivered a income stream of $241 million, and that's generated through our own buildings, and then the remainder of the $535 million is a combination of that strong growth we saw in the franchise business of more than 16%, and then also we spoke in the past around our insurance sale and the dividends we received through that entity. Our interest revenue increased by 16.3% to 314 million, partly as a result of the increase in interest rates, but secondly also through our investments that we have in our Angolan bonds and US dollar link bonds. We now have 1.8 billion rand. Also a new initiative that we launched during the first half of the financial year was our CreditX business, which we are very excited about, and I will deal with that as part of our trade receivables. Something that I'm very excited about is our share in profit of equity investments, and there we talk about especially our retail logistics fund. During the last two financial years, we've moved or sold some of our distribution centers on the properties into this retail logistics fund. first partly to unlock value within our business, and secondly also to help us fund our future expansion that Peter will touch on as part of the strategic outlook. Secondly, we also invested together with RTT in our last mile distribution for our 6060 business, which already delivered in the first half a profit of $22 million. So in total, our total income increased by 15.6%, $27.5 billion. If I then turn to expenses, our expense growth was 17.8% to $21.5 billion. We have listed a few of the anomalies which I will deal with now. Depreciation and amortization increased by 14.9% to $2.9 billion. That was mainly driven by our 225 store expansion that we saw in the last financial year. Our depreciation on property, plant and equipment increased by 19.1% and then our depreciation on our right of use asset increased by around 13%. What is very positive for me is that our depreciation as a percentage to sales remained at 2.8%, which was the guidance we also gave to the market in the past. Employee benefits increased by 15.1% to 8.3 billion, and there's two aspects one has to take into account when analyzing the growth. The first was during the second half of the previous financial year, we launched our ShopRite Employee Trust, which gave rise to 121 million rand of expense in the current period. That payment is linked to the dividend stream that's generated by the group. Second aspect one has to take into account is the employee tax incentive that we received in the prior year that equates to $193 million. Excluding these two aspects, the growth for the employee benefits were around 10.4%. During the current period, we added 3,881 new staff members, and one has to take into account for the second half of the financial year, we will also be adding 4,480 employees relating to the mass smart transaction. Electricity and water increased by 30.3% to $2.3 billion on the back of diesel expenditure of $465 million. In our trading update, we did speak about the $560 million of diesel spent. The $465 million is additional spent in the current period. Excluding the impact of the additional diesel spent, electricity and water increased by 4.2%. Other operating expenses increased by 18.4% to $7.9 billion and included there is our additional spend as a result of, from an insurance point of view, on covering ourselves for riot insurance. In the prior years, we always relied on SASHRAE to give us full cover in terms of riot insurance. Our cover that we could get this year from SASHRAE was limited. Hence, we had to go out to the London market at a cost of around 180 million rand additional insurance cost to get the same cover. The 90 million therefore refers to the first half cost relating to that cover. We also saw a 16% increase in advertising spend, which is very much in line with the sales growth that we achieved. And then thirdly, what also gave rise to this expense growth was our cost to maintain our assets. We've seen a spike of around 20% in maintenance costs, and that was really driven by also the additional load shedding that we saw within the first half. In summary, total expenses up by 17.8%, excluding the anomalies around 14%. In summary then, if we look at the trading profit per segment, supermarkets RSA increased trading profit by 7.7% to 5.4 billion, very healthy trading margin of 6.3%. Supermarkets non-RSA, strong performance backed up by the strong sales growth. of 58.8% to 360 million, very much in line with that full year target, medium target that we set ourselves between 500 to 600 million in the medium term. Our furniture business showed a decline of 34.2% to 127 million as a result of first cost pressures coming through and also margin pressures to increase our sales within that segment. is encouraging is that we have seen a steady decline in our bad debts provisions that we carry for our furniture business. If we go back to December 2021 and 2020, we were still sitting at 44%. Our provision at the end of December 2022 was sitting at 40.1%. Other operating segments increased profitability by 26.1%. We spoke about the franchise business that had a very good performance, also our menu ride business. And then what is also encouraging is that we saw a strong profitability growth within our compute ticket business. where we've seen a return of travel in South Africa and internationally, as well as shows being hosted. From total continuing operations, we saw 8.7% increase to six billion, with a trading margin of 5.7%. If we had to exclude the impact of the additional diesel spend, our trading margin would be 6.1%, which is exactly in line with where we were in the previous financial period. We then turn to net finance cost, a very positive picture in terms of cash flow generation within the group. Yes, we did get a benefit from interest received as rising interest rates, but if I look at the difference between interest received from our bank accounts as well as our finance cost on borrowings, it's a 38 million rand net for the size of our business, extremely strong performance, which you will also see through our free cash flow slide. Our finance cost relating to our borrowings is at an average rate of about 6.9% and our finance cost relating to our lease liabilities is 9.3%. Further in turn to the balance sheet, our total net cash was 8.7 billion at the end of December, an increase of 59.1%. Part of that increase was driven by the positive changes in our working capital. We have seen an increase in our borrowings of 1.1 billion, and that was twofold. Firstly, from a liquidity risk point of view, if we look at the volatility within the South African environment, and secondly, we also are using longer-term funding to fund our capital growth or our capital investment. What is encouraging is that we have reduced our reliance on U.S. dollar borrowings from $59 million to $35 million. I will speak about network changes in working capital in the next slide and unpack what is the driving force behind that. Then our borrowings to equity ratio is still below our targeted range of 25% to 30%. If we then turn to capital spend, increase of 25.3% to $3.3 billion, excluding the impact of the replacement capital with regards to the social unrest and also the assets that we already had to acquire in terms of our proposed investment. takeover of the mass-market stores on the 9th of January. Our capex to sales ratio was around 3% which is very much in line with the guidance that we've given and also in line with prior year. What is extremely important for management is how we actually look at and the returns that we do get from our capital expenditure and that's why that split between expanding the business and maintaining the business for us is extremely important. The majority of our capital expenditure is spent on expanding the business, which is evident from the aggressive store opening program we saw in the last 12 months. Nearly two billion rand of our capital was spent on increasing our sales growth and expanding on our footprint. Our margin expansion was 77 million and there we looked at initiatives within our supply chain as well as power saving initiatives. And then digital acceleration, I mean, we talk a lot about that within our ecosystem as well. We spend 232 million rand. It's also very important for us to maintain our existing store footprint, to remain relevant, and also to keep track of what we're currently doing within our new formats, especially within Checkers and ShopRite. We spend another billion rand to also ensure that our stores are maintained, and then we spend an additional 55 million rand on IT infrastructure. If we then turn to working capital inventory, we saw an increase of $3.6 billion and I will deal with that in more detail in the next slide. Then we also saw trade and other receivables increased by $1.3 billion. The reason why I have put this slide together is that one has to take cognizance of the fact that how we look at working capital is going to change in the future. Our investment in inventory was the right decision to take and that was partly the reason why we saw this increase in our sales that we achieved. And obviously trade and other payables will follow our investment in inventory. The third part to working capital is our trade and other receivables. And during the first half of the financial year, we launched our CredX business. Very excited about what that business will deliver for us in the future. And what CredX stands for is our investment in our suppliers. We give them crucial working capital funding as well as normal capital funding. That credit comes for us at a very low risk, because we are currently also the holding of the inventory that they are supplying. So in the current period, we have already advanced 476 million rand of funding, which we will definitely increase during the second half. And it's also our way of supporting our SMEs going forward. If I then turn to inventory, Our inventory increased to 25.4 billion. The majority of that inventory is within our supermarket's RSA operations where we saw an increase of 16.5 billion to 20.2 billion. We also saw that the supermarket's non-RSA operations' inventory remained in line with the prior period, but we saw a massive improvement from inventory to sales. within that segment from 14.9% to 12.1%. The reason for that was purely exchange rate driven. Inventory as a percentage of sales within our supermarkets RSA business increased from 11.9% to 12.6%, but it was extremely important to note is that within our store operations, we actually achieved an improvement from last year from 9% to 8.8%, which means that the majority of the stock holding is within our distribution centers. There are a few reasons why we saw this increase within our distribution centers. The first one relates to the additional capacity that we built within our supply chain. We've added 55,000 squares of additional supply chain space during the current period. We also saw double digit inflationary growth within our inventory during the past period and then that capacity also supported our additional safety stock levels that we had to carry as a result of the deterioration of the service levels of the suppliers. Another reason for the increase in our stock holding was also as a result of the increase in our general merchandise as a response to the global supply chain constraints. If we then turn to our free cash flow, very strong result in terms of cash flow generation. In the past, we spoke about annualized cash flow generation of between five to six billion. If I look at the first half, cash flow generation, EBITDA of 9.1 billion rand, free cash flow of 7.1 billion, which was assisted by positive changes in working capital. What is important to note is that In our June year end, that position will normalize as our cutoff regarding our trade payables will be part of our financial period. If I look at the various ratios pertaining to our cash flow, all extremely strong, and then that normalized free cash flow sitting at 7.6 billion rand. If we then lastly look at the outlook for the second half of the financial year, there are a few items that will have an impact, especially the trading profit performance for the group. First is the diesel impact. We saw an accelerated diesel expenditure since September of the first half, which means that we can expect an additional cost coming through in the second half. Secondly, we also had the expected increase in our maintenance expenditure coming through as a result of the load shedding. Thirdly, what is important to note is also our additional costs with regards to our Satria cover that I mentioned prior around that 90 million Rand. And then fourth is also the impact of that ESOP costs coming through the second half. The South Africa tax rate reduced from 28% to 27%. Our effective tax rate in the first half was around 31%, and there's no reason why I can see that our effective tax rate will change for the full year. In terms of our capital allocation model, definitely aligned with our shop-out strategy, as well as delivering improved shell returns. We continue to assess adjacent M&A opportunities within the RSA supermarkets environment. And then our full-year dividend policy hasn't changed, and it's just a reminder that it's 1.75 times our diluted EPS cover from continuing operations. We plan to open 238 new stores during the second half of the financial year. I've referred to that 94 mass-market stores opening. And then we are also very excited about the rolling out of our clothing stores during April 2023. I think to estimate inventory as a percentage of sales is extremely difficult at this stage as a result of the impact on our suppliers. We normally see a reduced inventory to sales ratio from December to June as a result of the buy-ins of our station already in the first half of the financial year. that we are already in position or ready for our launch of our back to school promotions in early January. And that's why we normally see that decline from where we are in June, where we are in December, to where we are in June. The 12 to 12.5% inventory to sales ratio does not include any of the mass smart inventory. From a capital point of view, I've given the guidance of 6.3 billion rand that we feel is around 3% of our revenue. The business has invested in generators in the prior financial years. The generators were never meant to run at the number of hours that we expect them to run now, and our expectancy is that we will have to reinvest and start replacing some of those generators that we've implemented in the prior periods. Peter, that then concludes the financial piece, and I hand over to you to deal with the strategy.

I think that has clarified quite a number of items on the income statement and balance sheet. If we just quickly look at our strategic priorities, we strayed through to the course over the last six years, uplifting lives every day by pioneering access to the most affordable goods and services. for our customers. We definitely have a data powering customer first culture and these days so much is personalized and driven by artificial intelligence and data. For us it's almost having personalization in your pocket. We have now been able to also share this information with our suppliers, making sure that they can also improve their return on investment in terms of promotions and the activities that they do in association with us. The Smarter ShopRite that we're working on every day, we're doing smarter promotions. We are able to measure them much more scientific and in detail than before. Artificial intelligence is being used to improve our on-shelf availability through forecasting and replenishment. And also same being used to improve or get to a smarter supply chain and logistics. And as you can see, some live data monitoring showing us outliers and being able to intervene immediately. Almost similar to the first point I made is embracing digital. The very well-known 60-60 by now, and we can see clearly on that graph has been on an exceptional growth trajectory. We're now in 394 locations nationally. And the growth of 87% for this year is on top of 250% of last year. What is also meaningful is the fact that since inception, almost 8,000 new job opportunities have been created. And once again, for us, the whole omnichannel is also integrated with our rewards program, making it a very compelling offer to our customers. every day, hence the $7 billion in savings that we were able to give them back in the last six months. We've grown our, what we would like to say, trusted and profitable private labels. If we exclude the liquor, private label contribution has now increased to 20.7%. And in our world, it equates to that 93% of all customers in the last six months bought at least one private label product. The point that is easily missed when one talks about private labels is the additional loyalty. In other words, private label customers or people that buy private labels generally are more loyal than non-private label customers. And on the graph you can see, just pointing out some of the private label brands, that the basket size of those customers or people that buy into that are significantly higher than what the average basket size is. Like before, and like we do every day, we will be investing to win in the long term. I did mention the extra 166 million products that were sold over the last six months. Therefore, we have to invest in additional supply chain space. We have commenced the first of the projects of adding over 200,000 square meter additional space over the next two to three years. In our continuation of investing to win in the long term, we are expanding our store network to leverage our proximity advantage. Our two main consumer brands, Shoprock and Checkers, enjoys a very high footfall, therefore gives us the opportunity to also invest in adjacent categories where we're under index. Hence our development of new formats for the long term, an outdoor pet shop, MediRite Plus, Little Me, Checkers food stores, where we can now provide a convenience offer where we previously did not. compete in. We will deliver 425 new stores this financial year. I'm extremely proud of Team ShopRite. As a continuation further of investing to win in the long term, we will amplify our digital flywheel. We will double down on our digital investment to maximize the share of wallet and unlock alternate income, which we have spoken of a number of times in the past with reference to Rainmaker and the things that we do with ShopRiteX, the personalization and the data that we now have that we can share with our suppliers. It's very important for me to mention that ShopRite is and remains a responsible corporate citizen. We call it a force for good, for people and for the planet. In people, we refer to our own people, our colleagues, our customers, our investors, our partners that help us to deliver in other this fantastic set of results over the last six months. By now you would be very familiar with this flywheel slide that we use to illustrate how we are thinking and placing building blocks around our core retail supermarket business. It remains at the heart of our decision making to make sure that we continue to enhance the customer experience, and to make sure that we keep on growing. Thank you very much. That then concludes our presentation. And while we're waiting for your questions, I will just cover a few points in anticipation of what I expect you will ask me in any event. Thank you again. Just one correction from my side. That combo that I referred to with the, I said 1.8% inflation, it's actually a 1.8% deflation for the clever shopper to be able to reduce your own inflation. So very quickly, very, very strong performance from the back to school ShopRite commands quite a very high market share in back to school, so very pleased with that result. The inflation, you all, I know it's on everybody's agenda, how far, how big, but the best I can give you is that January was pretty much in line with what we saw ending the year, so I'm still at that position that I don't expect a complete runaway inflation, but in mid-teens, it's definitely on the cards. It is so that, unfortunately, it is people really that can less afford it that are experiencing the higher inflation just because of the commodities in that basket. I did mention that that USAID would have, or does have, substantially higher inflation than what the checklist brand has got, just because of the opportunity of the customer to make different choices. The costs we can't ignore. Anton mentioned the $465 million additional cost of the diesel alone. I did try to just explain that it's not the only cost that one has to cover with. But we tend to not to stick to the negative and all the challenges that faces all of us. It's not only ShopRite. And we are daily making plans in terms of how to circumvent and improve on that. Of course, I mentioned something like food waste. Of course, we are aware of it and we are taking remedy actions to keep that as low as possible. The mass-market stores, that question has come up a couple of times, so we are aiming to break that even in financial 23, and in the next year, hoping to get to about a 5 billion rand revenue contribution. You will remember that we didn't get all the stores that we tried to acquire. That's why the total value of the revenue that we intended to get is a bit lower than what the initial indications are. The price is not finalized yet. There's still some outstanding items that has to be reconciled, but it will be, of course, less than what we indicated originally, just because there are less stores in the final 94 number than there was originally. And then, yeah, ShopRite will continue to be the price champion for customers. That is what we do every day. It's like thinking of somebody quickly now. It's in the ShopRite DNA that price is what we are about. That's why you can also understand from a cost point of view, for us to still be able to sell a loaf of bread at five rand since 2016, what we have to subsidize that with at the current pricing of wheat, et cetera. And for me, an important differentiator currently is the high on-shelf availability that the company enjoys, again, by design. a specific decision made that we cannot disappoint customers that have elected us as their destination. They just can't afford to just take another trip or go to another place. And that also has a bearing on the overall stock level. And, yeah, and we will continue. I mean, this flywheel that we have here behind us That is what drives our investment. We will continue to do so. We will continue to invest for the long run to make sure that we remain the growth company that you have now become accustomed to. So Anton, I think if we can go to the questions.