Earnings Call: H2 2021

Aug 27, 2021

I'll get us started. So I'll transfer you all across. You'll just hear the hold music just briefly. But I'll switch it off. I've got a short intro to cover. Handing over to yourself first, Rob, and then we can take it from there. Okay, just transferring everyone now in 3, 2, 1. Ladies and gentlemen, thank you for holding, and welcome to the Wesfarmers 20 21 full year results briefing. Your lines will be muted during the briefing. However, you will have an opportunity to questions immediately afterwards, and instructions will be provided on how to do this at that time. This call is also being webcast live on the Wesfarmers website and can be accessed from the homepage of westfarmers.com.au. But I'll now hand the call over to the Managing Director of Wesfarmers Limited, Mr. Rob Scott. Thank you. And please go ahead. Thanks very much and hello, everyone. Welcome to the Wesfarmers 2021 full year result briefing. I'm joined today on the call with our Divisional Managing Directors and our CFO, Anthony Giannotti. To begin, I'll provide an overview of the group's performance And then Anthony will provide commentary on the balance sheet and cash flows. The divisional managing directors will then provide an overview of performance and outlook for their businesses. And I'll then conclude with the outlook for the group and some comments on recent trading after which we'd be happy to take your questions. So starting off on Slide 4, the Wesfarmers corporate objective to deliver a satisfactory return to shareholders over the long term remains our primary Focus. And we recognize that we can only achieve this over the long term if we continue to anticipate the needs of our customers, look after our team, Treat supplies fairly and ethically, contribute positively to the communities in which we operate, take care of the environment and act With honesty and integrity. And this last year has provided us with many opportunities to demonstrate our commitment in these areas as set out On Slide 5. This year's result is testament to the dedication of 114,000 team members across Group who have continued to find new and valuable ways to meet customers' needs and support the community doing it during a time of great disruption. I just wanted to call out a few highlights. So we over the last year, we saw a 7.7% improvement in the group's Total recordable injury frequency rate. We saw a 57% increase in online sales as we strengthened our digital capabilities and responded Customer needs. We increased employment by more than 6,000 and of these jobs, over 1100 additional roles For Aboriginal and Torres Strait Islander team members, we saw an 8.9% reduction in scope 1 and 2 emissions as the business This progress towards their net zero ambitions. And the commitment to continue to pay permanent and many casual team members When they were required to isolate or where there was no meaningful work for them as a result of government mandated lockdowns. Now turning to the group's results on Slide 6. The group's net profit after tax from continuing operations excluding significant items increased 16.2 £2,400,000,000 a result that was underpinned by strong performances in the retail divisions, a solid operating performance in WesF And pleasing improvement in industrial and safety. Group revenue increased by 10%, reflecting strong sales growth in Bunnings, Kmart Group and Officeworks. Our directors have determined to pay a fully franked final dividend of $0.90 a share, reflecting the strong earnings result And Wesfarmers policy of distributing franking credits to shareholders. In addition to the final dividend, the directors are recommending A $2,300,000,000 return of capital at $2 per share to ensure a more efficient capital structure for the group, While maintaining balance sheet capacity to take advantage of opportunities that may arise in the future. The capital return is subject to shareholder approval at our AGM in October and together with the final dividend would bring the total distributions to shareholders for the year to $3.78 a share. Turning to Slide 7 and the sales performance of our divisions. As noted, there was strong sales growth in Bunnings, Kmart and Officeworks. In total, the group delivered online sales of $3,300,000,000 including the Catch marketplace, growing our position as one of the largest online retailers in Australia. We continue to see our digital operations as complementary to our in store offer with many customers enjoying this omnichannel Moving to Slide 8. Each of the divisional managing directors will cover their businesses in more detail, but I'd just like to make a few high level remarks. You'll see that each division delivered a strong performance for the year. The results of our retail divisions were particularly strong. It was also great to see the improved performance of industrial and safety. With these results, it was great to see the continued strength And improvement in return on capital. We're particularly proud of these strong performances, knowing that they were delivered in some very challenging circumstances. And importantly, without compromising our focus on the long term strategic priorities. Turning to Slide 9. In June, I outlined a set of renewed priorities for the group, which are consistent with our value adding strategies and will set us up for sustainable long term growth. Building on our significant group and divisional capabilities in data and digital, progress has now accelerated in the development Of a market leading data and digital ecosystem, which will provide more seamless and personal experiences across the West Pharma's retail businesses. To support this initiative, we expect an operating expenditure investment of around $100,000,000 over the next 12 months. And a new Managing Director, Nicole Sheffield, has been appointed to lead these efforts. You will note that this number is slightly higher Than we had anticipated and we mentioned back in June. That really just represents an acceleration of our progress in this area. Over recent years, we've taken some important steps to reposition the portfolio and we'll continue to take opportunities to invest in platforms For long term growth, particularly where we can direct capital to opportunities that leverage the group's unique capabilities And offer the potential to build businesses over time. And then finally, over the last 18 months, the group has demonstrated remarkable agility and resilience, Delivering on improvements at pace and we'll look to accelerate this going forward. Slide 10 covers the group Performance summary. I'll now hand over to Anthony, who can talk to the group's balance sheet and cash flows. Thanks, Rob, and hello, everyone. I'll start on Slide 12, where we've provided a summary of the other business performance. In total, our other businesses and corporate overheads reported a profit of $1,000,000 for the year, which compares to a profit of $76,000,000 in the prior period. As we noted at the half, the key change has been the reduction and Reclassification of the group's shareholding in Coles as an investment following our sale of around 10% of our interest in February March last year. Our interest in Coles is currently 4.9% and we now only report earnings associated with dividends paid by Coles, Which contributed a total of $40,000,000 to our result for 2021. Corporate overheads were broadly in line with the prior period With an increase in digital investment, including through the advanced analytics center, offsetting lower travel costs and other efficiencies achieved across the corporate office. Turning to working capital and cash flow on Slide 13. The group recorded operating cash flows Of $3,400,000,000 for the year with divisional cash generation of 90%. As foreshadowed at last year's full year results and again at the half, We expected to see a reversal of the significant working capital benefit that we saw at the start of COVID. During the year, this resulted in the group reporting a working capital out Flow of $695,000,000 which reduced operating cash flow despite the strong divisional earnings growth reported for the year. The working capital outflow also reflected targeted inventory investments to increase stock weights in some categories And mitigate potential availability issues as a result of ongoing disruptions to international supply chains. While COVID continues to impact the operating environment, we expect to see some volatility in working capital. However, as restrictions are lifted, Movements in working capital should normalize over time. At a group level, cash flows were also impacted by changes in the timing of tax installments, Which was significantly higher during the first half due to higher tax payments related to the 2020 financial year. As a result, the Group's cash realization ratio finished at 86% for the year. Turning now to capital expenditure on Slide 14. Gross capital expenditure increased 3.3 percent to $896,000,000 for the year. This reflected continued investment in Data and digital initiatives across the group, the conversion of 86 Target stores to Kmart stores and the purchase of long lead time items For the construction of the Mount Holland lithium project. Gross CapEx in Bunnings was down compared with the prior year due to lower new store and refurbishment expenditure, which was impacted by the timing of projects. For the 2022 financial year, we expect net capital For the group to be between $1,000,000,000 $1,250,000,000 The step up in expected CapEx This includes an estimated $350,000,000 to support the development of the Mount Holland lithium project as well as ongoing Store network and supply chain activity in the retail businesses and further investment in group wide data and digital initiatives, Including the investment in the group data and digital ecosystem that Rob spoke to earlier. Turning to balance sheet and debt management on Slide 15. The group's retained a strong balance sheet and recorded a net cash position of $109,000,000 At the end of the financial year. This strong position will allow us to support increased investment across the businesses, while also returning a portion of the group surplus capital to shareholders, which I'll discuss on the following slide. Despite increased CapEx expectations and the proposed capital return, The group will maintain considerable balance sheet flexibility, which we consider to be prudent in order to provide the capacity to manage a range of Of potential economic scenarios and to pursue value accretive transactions as they arise. During the year, We've continued to take opportunities to optimize the maturity profile of our debt and reduce our cost of borrowing. In June, we issued $1,000,000,000 in sustainability linked bonds, which were the first of their kind in the Australian market. The interest on these bonds is linked to the achievement of targets in relation to renewable electricity use in the retail businesses And the emissions intensity of our ammonium nitrate production at Wesif. The pricing of the recent sustainability linked bonds reflected the very Strong demand for the group's debt and with the maturity of our remaining euro bonds in October this year August next year, We anticipate further opportunities to reset our cost of debt and enhance our long term funding capacity. Turning now to dividends and capital return on Slide 16. As Rob mentioned, the Board has determined to pay a fully franked Final dividend of $0.90 per share, reflecting the strong profit result for the year. In addition to the final dividend, the Board has also proposed The proposed return of capital would represent a total distribution of almost $2,300,000,000 and reflects Westpharma's commitment to efficient capital management and focus on shareholder returns. Following the return of capital, the group to maintain its existing strong credit ratings with S and P and Moody's and will retain significant headroom against our target credit metrics. Subject to a final ruling from the ATO, it is expected that the distribution will be entirely capital in nature, which means that there will be no immediate tax consequences for most Instead, the return will represent a reduction in the cost base of Wesfarmers shares. The capital return is not eligible for the dividend investment plan, But the group will again provide shareholders with the option to participate in the plan in relation to the final dividend and we expect that any shares for the plan will be purchased And with that, I'll now hand over to Mike Schneider. Thanks, Anthony, and hi, everyone. I'd like to start by expressing my deep thanks to our team and suppliers for their incredible work over the past year. They've delivered for our customers each and every day in a challenging environment. Operating revenue increased 12.5 percent to $16,900,000,000 for the year with earnings before tax increasing 21.3 percent $2,200,000,000 excluding net property contribution. Disappointingly, our safety measure trip up went backwards to 11.3. This was driven predominantly by the hard lockdowns in Victoria and New Zealand where our store teams handled an unprecedented volume of online orders. In all other regions, TRIPR improved. We are doubling down on our systems and controls to ensure our safety performance resumes its long term trend downwards And team safety and well-being remain our number one priority. Turning to Slide 19. Total store sales grew 12 point 4% with store on store sales growth increasing 11.9%. All major trading regions performed strongly and all product categories grew, led by gardening and outdoor leading products, Tools and general hardware. The market was bolstered by customers spending extended periods at home throughout the year as well as various government stimulus initiatives. In the second half, total store sales increased 0.7% or 25.3% on a 2 year basis. Store on store sales declined 2.1%. Consumer sales moderated from mid March as the business began to cycle the elevated growth in the prior year. We saw continued strong demand from commercial In the second half, as our focus on our trade business continued to gain traction, online sales penetration settled at 1.5% in the second half, Reflecting fewer COVID-nineteen related trading restrictions relative to the first half. Return on capital increased from 58% to 82%, Reflecting earnings growth, disciplined capital management and a lower average inventory through the middle of the year due to elevated demand. Turning now to Slide 20. Despite the need to regularly adjust our operations to respond to an ever changing COVID environment, our team executed strongly against our long term We've continued to invest in our team, the customer experience and service, as well as digital innovation to drive growth. At a time when many businesses have faced pressure on the cost of goods, we worked hard to maintain our everyday low prices and provide our customers with the best value in the market. In response to elevated demand, we were pleased to welcome over 10,000 additional team members to the Bunnings family, which we also understand played an important role In supporting the wider economy in challenging times. We further improved the ease of shopping for our customers through display upgrades And installing new showroom experiences in our stores, including kitchen design, bathroom and Power Garden. This was complemented in the digital space With further improvements to the Product Finder app, including introducing interactive store maps to help customers speed up their shop. In April, we launched our new retail website in Australia and New Zealand, improving the look, feel and navigation for our customers. We also continue to strengthen our relationships with commercial customers through expanded product offerings, including a wider range of commercial paints And the supply and install of plasterboard and windows. Providing greater convenience for our commercial customers was a big focus. We rolled out 24 new trade service areas in the year with more than 100 introduced in the year ahead. A record 2,200,000 transactions were completed through the PowerPass app Over the last 12 months and engagement and usage continues to grow. Our commercial organizations business, which caters to education providers, Hospitality, services, government and the rural sector continue to win new customers. Adelaide Tools helped us cater to more of the products specialist trade customers need. The team opened its new 1st new format store in Parafield, South Australia, which has traded strongly. It's provided us with confidence in the evolution of the format We'll be taking into Western Australia in the next few months. Turning to Slide 21. Binance Trading performance in the 2022 financial year is expected moderate following extraordinary growth recorded in the 2021 financial year. The operating environment is challenging with state based lockdowns, Supply chain constraints and price inflation on some materials and products creating complexity and uncertainty. Recent and current government restrictions have impacted trading and sales 4.7 percent in the 1st 7 weeks of the 2022 financial year. Pleasingly, sales growth remains strong on a 2 year basis. In the long term, we remain confident in our strategy and the opportunities ahead for our team and business. We're focused on evolving our home and lifestyle offer in store and online, Deepening relationships with commercial customers, delivering an even better service experience across every customer touch point, while maintaining strong We'll continue to accelerate investment in our digital offer by providing retail customers with a more personalized digital experience And introducing a new fully transactable website for commercial customers. As always, we'll maintain our focus on delivering value and Removing unnecessary complexity in the business to support investment in low prices every day for our customers. We opened 1 new Bunnings Warehouse in July And 6 Bunnings warehouses, 3 smaller format stores and 2 trade centers are currently under construction with 5 due to complete in the first half of the twenty twenty two financial year. To finish, I'd again like to thank our team and suppliers who've done a phenomenal job in looking after our customers while keeping each other and the community safe. I'll now hand over to Ian Bailey. Thanks, Mike, and hi, everyone. This year has been a challenging one for many of our team in Australia, New Zealand, China, Hong Kong, India, Bangladesh and Indonesia. I'm exceptionally proud of how our teams have worked together across countries through various lockdowns and other restrictions At the start of the pandemic, we set ourselves 3 objectives, which continue to guide us: Being there for our customers, keeping our team members, customers and communities safe and making the right decisions to set our business up for future success. Overall, Kmart Group was a net beneficiary of strong demand during the year, performing well when stores were open to trade and seeing sales declines When stores were forced to close despite the acceleration in online sales in those times. Our businesses have demonstrated great agility Responding to rapid changes in customer behavior, while at the same time, we completed a significant restructuring of our portfolio to simplify the target business and accelerate the future growth of Kmart. Turning to Slide 23. Turning to Slide 23. Kmart Group has made good progress in safety with the total recordable injury frequency rate Decreasing 28% to 9.2% during the year. Revenue of almost $10,000,000,000 was up 765,000,000 Or 8.3% for the year, while online sales increased by $660,000,000 to $1,900,000,000 Earnings before interest sorry, earnings before significant items grew by over $280,000,000 or 69 percent to 6 $93,000,000 Turning now to Slide 24. Given the significant changes to the store portfolio Over the last year, we believe that looking at the combined performance of Kmart and Target remains the most helpful way to assess the performance of the business. Collectively, Kmart and Target increased revenue by approximately $600,000,000 a particularly good result given our ongoing efforts to optimize As more customers chose to shop online than ever Before Kmart and Targa reported record online penetration of 7.8% and 15.1% respectively. While this channel is profitable, we have a significant opportunity to optimize our online operations and we continue to invest in a number of initiatives, Including the replatforming of the Kmart website to improve the customer experience. Kmart and Target combined earnings before significant items grew 80.7 percent to $739,000,000 This was achieved through a combination of higher sales, lower clearance costs and an improvement in the cost of doing business following the optimization of the store network And simplification of the target operating model. Turning now to Slide 25. The strategic changes announced last year to grow Kmart and create a smaller and simpler target are delivering good results. The conversion of selected Target stores to Kmart It's largely complete, and the much larger Kmart store network is expected to unlock additional scale efficiencies to underpin future growth. Kmart remains focused on delivering a great place to shop that is simple to run and better products at even lower prices. It has progressed key strategic initiatives to enhance its customer offer, including digital in store technology to enable a more efficient operating model And greater stock visibility, initiatives to increase transparency and flexibility in the supply chain and continued development of data and digital assets and capabilities. Target prioritized online growth and continued to improve its product offer. Turning now to Slide 26. Katz's gross transaction value increased 41% on the prior period. In the second half, gross transaction value moderated as Katz cycled a significant shift To online channels that occurred through the prior corresponding period. As growth moderated, the business focused on proactively managing inventory levels, whilst continuing to focus on transforming and automating the manual processes required to scale the business. This resulted in a higher level of markdowns And a continuation of investments in technology and marketing. Capital investments in fulfillment continued with additional automation implemented in Melbourne and the announcement of a New South Wales fulfillment center due to open in calendar 2022. Catch also continued to leverage the broader group with a growing number of Kmart and Target products available on its platform And the extension of Click and Collect across 430 Kmart and Target stores. During the year, we also introduced free shipping to our Club Catch customers And joined the Flybuys programs. Turning now to Slide 27. Kmart Group is well positioned to deliver In Kmart, the focus will be on leveraging our scale and product development capabilities and delivering on our digital initiatives. In Target, we will embed and stabilize the simplified operating model, while accelerating online and continuing to differentiate our product offer. In Katz, we will continue to invest in the future potential of the business. Across the Kmart Group, We use our combined assets to deliver incremental value, particularly through developing and enhanced understanding of our customers. In the near term though, the trading environment is expected to remain volatile as reflected by the ongoing lockdowns and associated store closures across multiple states. This is reflected in the year to date sales performance of Kmart and Target, with sales declining 14.3% on the prior corresponding period. When stores cannot trade, revenue declines and much of our store costs remain in place, especially as we have made the decision To support our store teams through these difficult times. Once restrictions ease, we anticipate a strong Christmas trading period On the assumption, all of our stores can trade without restrictions. We also expect to experience ongoing disruption in global supply chains. In line with the adjustments made last year, we will carry elevated levels of inventory for core lines to mitigate the risk of potential supply disruptions And you're sure our stores are well positioned to trade when they do reopen to customers. We'll remain focused, of course, on being there for our customers, keeping our customers and our team members safe And retaining our focus on building a strong business for the future. Thank you. And I'll now hand over to Sarah. Thanks, Ian. I'm pleased to report that Officeworks has continued to deliver strong growth and positive progress against our strategic agenda over the past 12 months, Despite the extraordinary operating environment. I would like to take this opportunity to recognize and thank the Officeworks team for rising to the many challenges this Yeah, with amazing spirit and energy. They continue to inspire me with their resilience, passion, innovation And commitment to keeping Australia working and learning safely and keeping each other safe. Thank you. Turning to Slide 29. Our continued focus on providing a safe workplace for all of our team members was reflected in our throughput improving From 7.9 to 6.1. Officeworks delivered revenue of $3,000,000,000 for the year, an increase of 8.7% on the prior year. Earnings increased 7.6 percent to $212,000,000 and return on capital increased by 210 basis points to 22.3%. Moving to Slide 30. Officeworks delivered strong sales growth for the year of 8.6% with ongoing investment in our every channel model Enabling us to adapt and scale quickly to shifts in customer behavior. Online sales penetration, including click and collect sales was approximately 35%. Despite a strong back to school period, sales in the second half declined 3.2% on the previous year, As the business cycled, strong sales in the prior period when customers were establishing spaces to work and learn from home. On a 2 year basis, growth in the second half remained strong at 24.4%. We delivered earnings growth of 7.6%, which was driven by the strong sales growth, partially offset by some margin pressure from continued investment in price, Changes in sales mix and higher supply chain costs due to increased online sales. Turning to Slide 31, which sets out Some of our positive progress against our strategic agenda. The well-being of our team members remains a priority And we've also made important progress to better represent the communities in which we live and work, with indigenous representation increasing to 3.8% of team members And now well exceeding national parity. We leveraged our data, digital and analytics capabilities And improve the experience for our customers by providing more personalized communication and adapting our ranges to better meet their changing needs. Our back to school office saw us deliver more than 700,000 school lists across the country, and we trialed a new bulk school list service, Classroom Essentials. We're continuing to grow our relationships with schools as we look to scale this proposition. We invested in a new Victorian customer fulfillment center, which is now operational and will be officially opened in the coming weeks. Geeks 2U continued to play an important role in complementing the Officeworks technology offer. Geek Cover, the newly launched subscription service, Showed very pleasing growth and the introduction of contactless and remote options have also been popular with customers. And during the year, we invested in a new online digital platform for Print and Create, creating a platform for partnerships and future growth. For example, last month, we launched an exciting integrated digital design partnership with CAMSA. Turning to the outlook on Slide 32. Notwithstanding the solid momentum built throughout the 2021 financial year, The near term trading outlook remains uncertain. Sales through the 1st 7 weeks of FY 'twenty two declined 1.5%, driven largely by Performance in Victoria, where growth has been impacted by recent trading restrictions and elevated demand in the prior year when customers were establishing They're working and learning spaces at the start of Stage 4 restrictions. Pleasingly, our growth rate on a 2 year basis remained Strong at 31.1%. Ongoing global supply shortages for some products and international shipping disruptions Impacting stock availability in some areas, and we will continue to work in partnership with our suppliers to mitigate the impact to customers. Officeworks will remain agile and adaptable, recognizing the changing operating environment and changing customer expectations. We're focused on investing in team member health and well-being, data and digital capabilities, and the modernization of our supply chain. We'll drive growth through investment in our every channel model and by executing our strategy. And we'll continue to expand our presence in the education sector And seek new ways to support Australians working from home or positioning their small business for growth. There are many in front of us as we accelerate our strategy in the year ahead. We remain committed to helping make bigger things happen for our team, our customers and our local communities in order to deliver a satisfactory return to shareholders over the long term. I'll now hand over to Ian. Thanks, Sarah. I'd like to start by acknowledging and thanking all the West Seff team for their hard work over the last 12 months. Westaff has achieved a lot throughout the year and I'm very proud of the team. Importantly, through trying circumstances, We've continued to deliver on customer expectations. Turning to Slide 34. The division achieved a 2.9 Increase in revenue over the period. Strong growth in fertilizers revenue driven by increased sales volumes was a key driver of this result. Earnings for the year were $384,000,000 which excluding $18,000,000 of one off insurance proceeds received in FY 'twenty Was up 2.1% on the previous year. The result includes the investment associated with West Pharma's 50% interest in covalent lithium And the ongoing management of tenements and exploration activities. Turning to Slide 35. Our continued focus on safety has delivered yet another strong performance in this area, as shown in the chart on the left of the slide. During the year, our total recordable injury frequency rate declined to 3. As shown in the chart on the right, The average plant operating performance remains strong and availability was in line with the prior year. This has been a key focus and is the result of recent investments in both reliability and operability as well as utilizing data and digital capabilities To drive efficiencies. Turning to Slide 36 to comment on business units. Earnings were down in the ammonia business due to higher ammonia import costs resulting from the rising global ammonia price in the second half And the lag effect on pricing pass through embedded in customer contracts. The ammonium nitrate business Experience lower spot sales to the West Australian mining sector as well as higher logistics and precious metal catalyst costs. Sodium cyanide earnings were marginally down due to the subdued export demand as a result of ongoing disruption in international gold mines Caused by COVID-nineteen. Energy earnings were up on the prior period. This was driven by higher energy prices, in particular the Saudi Contract price, which is the key international benchmark indicator for LPG and that was up 7.4% on the prior period. The business also experienced a part year benefit from increased domestic LPG sales volumes following the closure of BP's Kwinana Refinery In February 2021. In Fertilizers, earnings were significantly up on the prior period With increased sales volumes reflecting favorable growing conditions. Recent investment in storage infrastructure demonstrated the business' strong operational And enabled the business to meet increased market demand. I'll now comment on the outlook. So please turn to Slide 37. The Chemicals business is likely to benefit from a higher global ammonia price As the benchmark price flows through to customer contracts. The ammonia plant will undergo a 5 yearly maintenance shut demand from the Western Australian Mining Sector is expected to remain robust. Sodium cyanide earnings continue to be impacted by reduced demand following Ongoing COVID disruptions to international gold mines and modest feedstock pressures. The Energy business is expected to be adversely impacted by higher Western Australian contracted domestic gas pricing, which will be partially offset By the annualized increase of domestic LPG volumes following the closure of the BP refinery. The strong 2021 growing season is expected to support positive grower sentiment, But fertilizer earnings remain dependent upon the seasonal conditions in Western Australia during the second half of the financial year And the impact of increasing competitive pressures. Final critical regulatory approvals for the Mount Holland lithium project were received In July 2021. Covalent has commenced construction works at Mount Holland. Items such as The village water pipeline and aerodrome are well underway. We have secured long lead items for the concentrator And refinery are working closely with engineering and contractor partners for upcoming tender packages. Preliminary work to evaluate expansion options for the project will commence in parallel with the construction of the first phase of the project. Westaff's earnings will continue to be influenced by international commodity prices, currency exchange rates, competitive factors, seasonal weather and harvest outcomes. Thank you. And I'll now hand over to Tim Bolt. Thanks, Ian. Before I begin, I would like to commend the hard work by all of the teams on safety over the past year. We faced some challenging times with the continued disruptive impact that COVID had and is still having On our supply chains, our team members have responded to this challenge and we continue to deliver the reliable supply of products to our customers despite these challenges. This is due entirely to the tremendous efforts of our team members. Turning to the annual results on Slide 39, Industrial and Safety's revenues grew by 6.3% and earnings grew from $54,000,000 before payroll remediation costs And significant items that were in the 2020 financial year result to CAD70 1,000,000 in the 2021 year, A growth of 29.6%. Positively, all of our businesses in Industrial and Safety grew earnings in the year. Safety remains a key priority for us and pleasingly our TRIFTA declined to 4.3 over the period and I congratulate our teams on achieving this. Turning to Slide 40 and in relation to the specific performances of businesses within Industrial and Safety, Starting with Blackwood's, its revenue increased due to growth from strategic customers and more broadly in Western Australia and New Zealand. We saw the continued strong demand for critical products in the Q1 of the year, such as for respiratory cleaning and hygiene products. Revenues were partly offset by weaknesses in the coal mining and oil and gas sectors. Also demand for critical products subsided From mid March 2021 relative to the elevated demand in the prior year period, which was driven by the initial outbreak of COVID-nineteen. Blackwood's earnings growth was supported by the increased operating efficiencies through scale across the cost base. The business continued to invest in customer service and digital capabilities, including the ERP system. Turning to Workwear Group, its revenue and earnings increased on the prior year, primarily driven by strong growth across the industrial workwear brands of King G and Hard Yacker. This was partially offset by the sale of Workwear Group's UK business in corporate wear And the impact of COVID-nineteen on the Uniforms business, where some customer segments, including airlines, retail and hospitality were adversely impacted. The business continued to invest in strengthening brand desirability, simplifying its operating model and improving operational efficiency. In Corgas, its earnings increased on the prior year due to higher demand from industrial customers, particularly in the Trade and Go and Specialty Gas Offers And from healthcare customers. This reflects investment in these product offerings in recent years. Corgas also benefited from its involvement in the Hydrogen Energy Supply Chain Project, a world first pilot project to ship liquefied hydrogen to Japan. Earnings were partly offset by higher material and delivery costs in the year. Greencap's earnings increased on the prior year due to the improved performance of the Solding Services business and growth in the Online Solutions business. This was partially offset by higher investment in digital capability. Turning to Slide 41 and the outlook for industrial and safety. Market conditions are expected to remain uncertain for the 'twenty two financial year. We will continue to manage COVID related global supply chain disruptions while maintaining our focus Continued improvements in performance and profitability. Recent lockdowns have restricted activity for some customers, Affecting demand from sectors such as construction and it clearly relates to New South Wales, Victoria and New Zealand currently. Separately, we continue to see cycling of elevated demand of those critical products in respiratory cleaning and hygiene in 2021 into the current financial year. Blackwood's will continue to focus on improving its customer value proposition, Strengthening its core operational capabilities, including data and digital and completing the implementation of the ERP system. Workwear Group remains focused on driving growth from its industrial brands and uniform business, improving operational excellence and strengthening its digital offering. Customer demand in core gas is expected to remain stable with continued strength in Healthcare and Industrial segments offset to some extent By ongoing competitive pressures. Thank you. I'll now pass back to Rob. Thanks a lot, Tim. Moving to Slide 43, and I'll provide an update on trading. Now we wouldn't normally provide such short term trading updates, but we appreciate in the current COVID environment, There is a desire from analysts and investors for more information. As you'd expect, the lockdowns in major cities impacting over half of the Australian population and all of New Zealand are impacting current trading. So on this slide, you'll see that we've shared details of Our sales in our retail businesses for the 1st 7 to 8 weeks of this financial year. Sales growth remains pleasing on a 2 year basis, As is trading in regions that are not subject to lockdowns. The near term trading conditions remain uncertain and will ultimately depend on Government policy on lockdowns and the effectiveness of community vaccination. We recognize this is a very tough time for many people And we're therefore extending our commitment to pay all permanent and many casual team members impacted by lockdowns who are required to isolate or Certainty to team members, their families and our businesses in the lead up to Christmas. This investment in our team is To require higher payroll costs of around $2,000,000 to $4,000,000 per week, which will obviously impact near term earnings. We expect the next month to be even tougher for those households and businesses in lockdown. The impact on many small businesses is significant. Fortunately, there is a clear path out of this as vaccination rates increase and there is light at the end of the tunnel to progressively restore freedoms And reopen the economy in line with the national plan towards the end of this calendar year. Moving to the outlook on Slide 44. The Group's balance strong balance sheet and portfolio of market leading businesses make it well positioned to withstand a range of economic conditions And to invest in new opportunities for the future. Notwithstanding the near term uncertainty, we remain focused on our key strategic Priorities that will deliver long term value. The retail businesses will maintain their focus on meeting the changing needs of customers And deliver even greater value, quality and convenience. Given the impact of lockdowns in recent months and the prospect of continued trading restrictions, Earnings in the group's retail businesses during the first half of the twenty twenty two financial year may be below the prior corresponding period. Disruptions to global supply chains are escalating and transport costs are increasing. This may impact stock availability in some categories. However, our businesses are well positioned to manage these risks. The group will continue to consider climate change risk in the context of Key business decisions and we expect to continue to see the benefits of managing our portfolio with a deep carbon awareness. And our first question today comes from the line of Sean from UBS. Just a question on regards to Kmart. Can you just talk a little bit about maybe for Ian, maybe is Kmart out of winter apparel now and perishable inventory levels Clean or do you need to clear that product now? And maybe could you also advise, during lockdowns when stores are closed, How much of those sales you're able to transfer to online would be on 50% be possible? Or just any sort of color on that Transfer would be much appreciated. Yes. Hi, Sean, and good afternoon. On Winter Power, I'd say we've returned probably to a more traditional level of clearance, if I can put it that way. Last year, we had extremely good sell through this period. So of course, we had less clearance in the mix, and I think we called that out in the April result. So this year, we've gone back to a more traditional level. To be honest, across the states, If you look at WA and Queensland, where there'd been less restrictions, we were exiting very cleanly indeed. And of course, we'd have to take a bit more action in New South Wales and Victoria, But not to a good extent, I'd say, is concerning and very much at historical levels. So I feel from that perspective, we're in pretty good shape from a seasonal And as we called out, we continue to carry higher levels of 365 inventory in the businesses to really make sure we've got good availability as demand Ebs and flows. With regards to online, when our stores are closed, it really depends on the environment. So we have very different setups. At the moment, we've got 3. So if you look at ACT, there is no online and there is no click and collect from our stores there. So of course, We end up with very little coming back through the online channel. If you look at New Zealand, New Zealand allows us to Service online through home delivery for essential items only, so it's a subset of our range. So of course, that means, again, relatively small recovery. And then when you get into the states of New South Wales and Victoria, we can do Click and Collect And we can also do home delivery. And what we see there is the neighborhood stores can do quite well from a Click and Collect perspective, and we're getting almost 50% of our online sales are coming through Click and Collect. We can get to higher penetrations across the K-1 target. We can see between 30% or 50% The sales recovered through those stores, but they still leave us with a bigger focus. Great. And maybe if I could ask a second question, maybe just on cash. The GTV was down in the second half 'twenty one on the PCP and had also down the start in the first half 'twenty two. I guess given the support, if think about online and as structural growth driver in marketplaces to grow faster than that, and there's a lot of investment that you're doing. What are the factors that are maybe holding back the Catch GTD growth? I mean is it your range and offer? Is it more competition? Or maybe Is that industry growth possibly just not quite as strong to handle all the increased participants in that marketplace area, please? Yes. I think there's a number of factors. I mean part of it is we're still growing massively on a 2 year base. So whilst I think you That is correct. On the second half, if you look at the 1st 2 year period, the growth is significant. And the business is roughly twice the size it was when we acquired it. So I think part of this is looking through the last half to look at the longer time horizon. But equally, we would say there's lots of opportunities for us to make improvements in the Yes. And we're migrating from a deals placed business with a marketplace to a true marketplace business. And so we have opportunities around our product software, which we We have opportunities in our user experience and we have opportunities in our delivery times. And as we called out, we're looking to invest in the year ahead in New fulfillment center in New South Wales, so we can help improve that delivery time aspects in the biggest market in Australia. Fantastic. Thank you very much. Your next question comes from the line of David Errington from the Bank of America. So please ask your question, David. Good morning to you guys in person. Good afternoon to the rest. Dan, can I follow-up with you On Kmart, I think I don't think anyone would mind me saying that you're the star of the show today with the performance that you've delivered? Can you give a bit more color with respects to the buckets of improvement Because it certainly exceeded my expectations. And on your slide, I think Slide 24, you said sales were up 6 £103,000,000 for Kmartin target. And your EBITDA is up £330,000,000 Now you basically said that there's a number of buckets: 1, lower clearance costs 2, lower cost of doing business 3, the increase in sales. But can you give us a little bit more color, please? Because it's Such a good result. I think you need to give it a bit more justice as to just what you and your team have been able to achieve this year And being able to deliver such a significantly improved result. So can you give us a little bit more detail of each bucket, the contribution that you've been able to deliver? And then, of course, for us to assess the sustainability of Boeing going forward of the continued improvement that we can expect. Yes. No, I'll give it a go, David. Thanks for the comments and compliments, by the way. The team will be delighted to hear that. So thank you. Well, we've been pretty hard on you And I think you've caught your fair whack of criticism. So I think a bit of praise today is well and truly deserved. There you go, back down to worse than a bump. I guess a few things. It's worth remembering last year And particularly the second half last year, where we had a pretty tough time with COVID entering the market. And then of course, we had the inventory, inventory shortages that we experienced in Kmart, which impacted us in the last month of the year in particular. And we also had a difficult time with Target through that year. So the base was not necessarily a strong one. So that's part of the contributing factors. We then undertook the work with Restructuring target and Kmart to make a bigger Kmart and a smaller target, and that worked well. So we saw the conversions Performed really well during the year, so we were very happy with that contribution. Equally, Target as an underlying business continued to improve. And what we saw there is that we did a really good job on the clearance as we exited those stores. And the stores we continue to trade progressed well. And you can see through the online penetration That was strong. In both businesses, we saw strong margin in the year due to that reduced clearance. I think some of that is a feature of the So if you're saying, well, what if this is sustainable, what isn't? I think for many retailers, you'll see that margins have been particularly high in the last 12 months. And of course, they'll return to traditional levels as time passes. But I think the structural changes that we've made to the business will remain. And so that's the bigger Kmart, which we can leverage that. So those economies of scale, I think will help. And we have dramatically simplified Target, which means a lower cost of doing business and a business more focused on online and its physical stores, which sets that business up well to be a profit contributor As we go into the future. So I think there's a number of factors in there. Hopefully, that gives you a little bit more color As to the performance on the way through? The improvement in EBITDA, is it evenly split across those factors? Or is there one factor more important than the other? It's pretty evenly split across. I wouldn't say there's one. And there's so many dynamics going on within all the retailers' results at the moment. Yes. I believe even in last year, of course, there's still a lot of lockdowns we had in there that were embedded in there. We've got incremental costs that we're incurring through international freight. So yes, we've still got strong margin. So there's so many dynamics going on. It's I think for all of us, which want to unpack our business bank for the future. And as you look forward for the moment, of course, the most dominant feature is our ability to trade sports. And that really is dominating the short term. But in the medium to long term, I think we've got Okay. And thanks for that. And Rob, can I my second question, if I could turn it over to you? I've been caught out a little bit with on Slide 9, the renewed priorities to support sustainable long term growth and particularly your digital investment. I didn't understand that it's going to be a $100,000,000 investment at the group level. I could understand it at the divisional level, but I didn't understand it at Group level. So is this going to increase your corporate costs? Or is this CapEx? And I suppose why isn't it being done in Digital division level wise, it is separate division being broken out. So could you elaborate a little bit on that? Because my understanding, I must say, I acknowledge I'm not quite up to speed on what you're doing there. Yes, sure, David. And look, I appreciate we haven't gone into a lot of detail, but we will Provide more details on this at the half year, by which time Nicole would have been on board and we would have Made a bit more progress and we'll have more that we can talk about there. But you'll recall back in June, we talked about 100,000,000 Over the next couple of years and that would be there'd be a bit of CapEx and a bit of OpEx. The reason why we're calling out a higher number this year And most of it likely to be OpEx is really because we are looking to accelerate the work that we're doing. A lot of this we see is more capability build and systems investment that will enable What we want to do, so you shouldn't think of it as a recurring cost. Some of this spend will occur at a divisional level. So as we Do some of the technology work on our systems, build the interfaces that are acquired. Some of that work will Occur within the operating divisions. Now we haven't kind of split out exactly what that will be. One thing I'm really Keen to do, David, is I think one of the strengths of Wesfarmers is our corporate office is a lean it's a very lean corporate office. We try and keep costs under A lot of control. We don't like the corporate office growing. And the work we're doing around the data ecosystem, It needs to be deeply connected and engaged with our retail businesses working alongside there. So that's why Nicole And her team will be viewed internally more as another division working collaboratively with our retail Divisions rather than being part of the corporate center. So look, there's no certainty we're going to spend all this money this year. Some of it will flow through into the divisional P and Ls. Some of it will flow through corporately. But we just wanted to what we didn't want to do is we didn't want to give you a big surprise at the half. We wanted to give you a heads up This is the direction we're going and we'll be able to talk about more specifics in February. Okay. Your next question comes from Michael Simontas from Jefferies. Sir, please ask The first one for me, if I could just follow on a little bit more from David's Just so I understand, are you just accelerating the plans For the spend that you already had with the digital and data ecosystem? Or is there likely to be more spend and We might see this $100,000,000 this year and there might be a little bit more over the medium term. Michael, The reason why we've specifically called out the 100 is that there's certain things that we want to do from a technology point of view, from a team point of view, From a setup point of view to build capabilities for the future. And we distinguish that from ongoing Investment that is required in the ordinary course of business. The reality is that all of our divisions are spending a lot more money in the data and digital space and that will Continue. And as time goes on, it becomes harder to try and decouple that because it's just very much a cost of doing business. But we just wanted to separately call out the setup costs, these initial costs. As I said earlier, we'll have like I appreciate we haven't Provided any detail on what exactly what these costs will be investing into. We also haven't provided any details of exactly what we mean by the offer that we're looking to develop, But you'd appreciate that that's also quite commercially sensitive. But we'll provide more detail of that at the first half results. No, that does help actually. The second question I've got is on Bunnings. And through the second half, you would have had some periods in some markets where it was a reasonably Clear trading environment from a COVID perspective. Can you give us any color on what that sort of looked like? Were you starting to see any Saturation in any categories. And look, I'm not talking about year on year declines because that will be obvious in some cases. But Just relative to the underlying trend on a 2 year basis, were there any categories that were starting to look saturated? Or was demand pretty consistently strong? Hi, Michael. Thanks for the question. No, I think the one thing that probably we've been pretty consistent in calling out From a sort of a headwind point of view, it's really been access to timber. And inside that, it's really structural and engineered timber. And that's had Effects on commercial customers and it's been an industry wide challenge, which there's many root causes. But Anything else beyond that at a category level? No, I'm not seeing anything at all. Okay. Your next question comes from the line of Grant Saligari from Credit Suisse. So please ask your question, Grant. Rob, I was intrigued by the comment In the release, you manage the portfolio with deep carbon awareness. And I think where it's hard to just to be applauded for its Sustainability commitment. I was just trying to sort of understand if you could put some flesh on the bones on that, any examples or Any more detail as to how that objective has sort of influenced portfolio decisions in the recent past or Any of the current decision making, please? Yes. Well, Sean, there are various and this has been developing over the years. It's not something that has just changed overnight. For many years, we've had we've adopted approaches such as adopting a shadow carbon price that we factored into investment decisions. We've been doing that for many years. We also are aware that The more positive our work is in lowering energy usage, More effective management of lighting and air conditioning and things like that. There's a real commercial benefit that flows In addition to an emissions reduction benefit. And then increasingly on the portfolio side, Yes, we're also aware that there is a fundamental change going on in the world around decarbonization. And there are some areas where You can invest in new growth opportunities where we have some capabilities and where we think we can generate good returns. And I'm not shying away for a sec from our primary focus is to deliver satisfactory returns to shareholders. But if you think about Some of the portfolio moves we've made, we exited our coal divisions a number of years ago. We're making a significant investment In a lithium project, we're not doing that just because it sounds good from a decarbonization point of view. We're doing it because we think it's really good for shareholders. There's further work that's going on, certainly, WESF Business as we are looking at opportunities to further reduce carbon emissions To position ourselves more favorably with our end customers. The fact that we did a sustainability linked bond and we're one of the only groups in the world to really Take a real accountability and put emissions intensity out there is a pretty strong signal of our credentials in this space. We also see further opportunities to invest in areas in Westaff. So I guess all we're saying, Sean, is that It's just such an important part of doing business and it's so important, we think, in order for us to keep delivering good returns to our shareholders. Thank you. Could I ask just a second question just to Ian Hansen. Ian, just on the ammonia Rise and fall. Could you just clarify whether that applies to both your AN Contracts as well as the merchant ammonia contracts. And just given that ammonia prices sort of peaked, We're still peaking around July. Is that likely to be more of a second half than a first half benefit for WESET, please? Yes. Thanks for the question. The ammonia price is still peaking. I think the last quarter of last financial year, we saw a 75 Percent increase in the global indicator price relative to the average price in the 1st 3 quarters. So that's how much Prices move and it's still staying high. In terms of your question about whether it is incorporated in our ammonium nitrate Contracts, it depends upon the contract. Some contracts are back to gas and some are back to ammonia. So some have the rise and fall from ammonia and some are aligned with our gas contracts. And I'm not prepared to split out The proportion there, but all of our merchant ammonia sales are based upon import parity pricing. Okay. And given your comments on obviously on the trajectory of ammonia prices is likely to be more second half, I guess before that rise and fall has effect? Well, it depends how soon they come off. We've generally got a 3 to 4 month lag on pricing. So at this stage, Certainly not going to be the Q1. It might be the Q2, but most likely looking more at the second half. Yes. Okay. All right. Thank you. Your next question comes from the line of Kegan Busan from Jarden. Sir, please ask your questions. Kegan. Good afternoon, team. Can you just get some more color on the Bunnings trading updates? Just in particular, how you're seeing performance by retail And also trade to the Power Pass program. And if you could give us a bit of color, a bit of sense of what the state based performance is and the impact of sort of Victorian and New South Wales lockdowns, please? Yes. Look, thanks, Tegan, for the question. I think if you sort of look at the second half of the year just ended first, We certainly saw strong commercial performance throughout. And we did sort of call out the moderation in consumer sales. I think the Second half of the F 'twenty, you're sort of growing mid-twenty percent. And obviously, we were comping some pretty big numbers in the second half of F 'twenty one, but commercials remain strong. We've got quite a significant sort of impact right across the Bunnings network at the moment in terms of stores that have got different trading restrictions. We just got about 45% of our network is currently trading on online only, which is it was 169 stores this morning, but Five more in ACT have moved across to that in the course of the morning. We've got all of our Victorian stores trading for trade, open The trade closed for retail and online, about 45% are New South Wales stores, 100% are New Zealand stores. So you can sort of imagine that There are going to be some significant impacts here. New Zealand is virtually closed. We've got probably Maybe 100 lines that we can provide around essential and emergency repair products for customers in the home and trade can go into our hub stores Keep those up. We're processing something like about 40,000 to 45,000 online orders a day across Sydney and Melbourne, which is a real testament to The work that the team in store is doing and digital team have done and the success of the replatforming that I talked about in our notes. But yes, it's certainly a challenging Period of time across all those jurisdictions at the moment. That's great. And then just second one for me as well. You mentioned in the outlook You may see first half retail EBIT down on the first half 'twenty one. Given you don't provide EBIT guidance for, do you think this could be materially down or that just maybe consensus might be too high? Okay. Sorry, Tegan. I think at this stage, it's way too early to say. As Rob said, we'll just need to sort of watch really closely how The half evolves because each jurisdiction that we're operating in has got a different setting. And some of those are going to ease up and some of them may tighten Over a period of time. So it's just I'd love to have a crystal ball that didn't look cloudy at the moment, but it is really cloudy from where we're sitting. Yes. Kegan, Rob here. The comment we made in the outlook was very much around the broader retail or the whole retail, All the retail businesses and as Mike said, it's too hard to make any forecasts or predictions at the moment. But the obvious Probably stating the obvious, but the longer that harsh lockdowns continue, the more challenging it will be from a Short term earnings performance. But we're quite when we look forward beyond that, we believe our businesses are well positioned. That's great. Thanks Rob and team. Your next question comes from Craig Woolford from MST. So please ask your questions, Craig. Good morning, Rob and team. First question, just on the I'd like to understand the company's online infrastructure and how Ready it is for growth. I guess where my question is going, you've got this OpEx that you've called out to accelerate. But what about the IT infrastructure you might need back in the retail store network or retail head office, any distribution center infrastructure to make online Both a good experience for customers as well as being profitable for Wesfarmers. Craig, I might just make some high level remarks and then The retail MDs can talk to it. So each of our retail businesses have their own E commerce systems and each have gone through a fairly significant investment. There have been some pretty significant re platformings. Look, obviously, a business like Officeworks has been on this journey for a very long time. All the work that's going on in the supply chain side also has a view on how do we keep optimizing outcomes for E commerce as well as the store network. So all of that is progressing and it's progressing really well from my perspective. The broader investment around ecosystem particularly relates The customer data interfaces and flows, some of the additional functionality and enhancements that we're thinking are going to be important for the future. But ultimately, the core e commerce capabilities Delivered within the divisions. It might be maybe I think on Officeworks capabilities are well known. I think Ian and Mike might want to just make some Brief comments on some of the replatforming work that's been going on in the last year or so. Yes. Thanks, Rob. It's Mike here. On the Bunnings Replatform, as I said, new retail platform went live earlier this year in Australia and New Zealand and has done a great job improving Feel and navigation for customers, that's been really well complemented in the mobile arena with things like the product line wrap with the interactive The interactive map loaded and for jurisdictions where we want people in and out, we've activated an ability for a timer so customers get alert when they've been in store for a certain period of time. So really Strongly customer focused. And obviously behind that the architecture and infrastructure is being well and truly overhauled. We're well advanced On our trade website, fully transactional trade website, and as we've talked about for a while, both our team members and our trade customers Can transact on their mobile devices. We had 2,000,000 transactions in the F21 year on the Power Pass app, which is a really good sort of growth trajectory there. So The technology infrastructure is there. We're in test and learn phase from a fulfillment and distribution point of view. We've got a site going live in North Lamberton here in Melbourne to do Testing on sort of fulfilling from a dispatch center, so really understanding what fulfillment looks like once we get past certain thresholds Of online sales penetration within the Bunnings network. And I think when you reflect that if you went back to 2018, we couldn't sell anything online. And where we are today, I think we've made enormous steps not only in terms of technology Technology and infrastructure, but also the quality of the technology and the quality of the team that are driving that. My hand over to you, Ian. Thanks, Mike. Hi, Craig. Yes, I'd start off where Mike finished. We've come a long way already. This is a core part of our organization Across, yes, obviously Kmart and Target, including Kanchukosa as an online player. And we've made a lot of improvements. We're seeing in Kmart and Target Back Friday levels of sales at the moment, and we're handling it well across both businesses, which I think gives a sense of how far we've come. Investments will continue. So we're Halfway is already replatforming that came up, website and the back end system. So that's quite a big Investment that we're making there, which will give us a better user experience over time and certainly help our ability to continue to scale that online business what came up. And from a picking side of the equation, we're getting increasingly good at picking from stores as well as from fulfillment centers. So we see both of those being important to us as we go forward and we're applying lots of energy from our teams as well as technology to help Improve the productivity of those processes. And we called out in the case of Catch another fulfillment center in New South Wales, which we plan to open next year as part of the Ongoing deployment of fulfillment centers where we think we can generate adequate returns from them. Great. That's been really helpful. Second question, just on Bunnings, trying to step back from lockdowns. I know it's hard to do given How impactful it is for all your businesses. But it looks to me like earnings margins, if we could compare pre The figures would be about 140 basis points higher than FY 'nineteen levels. How do you think about margin normalization on an EBIT margin basis? Will margins come down with commercial? Do we expect margins to revert as sales come down the track once economies reopen? Yes. It's a good question. We certainly give it a lot of thought. I think I've said it times before that we're constantly modeling gross margins going down because we're constantly wanting to invest Price and value for customer, that puts healthy pressure on the P and L around cost and cost disciplines in the business. I think for an ADLP retailer, that's incredibly important. Yes. And we're really clear that we want to see commercial sales grow. But we're not chasing commercial sales at the skinny end of the margin. And for those that have sort of Yes. Talk with Man of the Year, you sort of understand that the sort of commercial customers we're going after are the smaller commercial businesses, And they really have characteristics that are more akin to consumer from a product mix point of view. So I think the sort of way we think about it going forward is that Yes. We'll probably see some sort of gross margin compression, but that's really a choice rather than a market force as the outcome. Although in saying that, To be fair, it's a pretty challenging time out there. You're right, it's hard to see past some of the COVID challenges. But shipping is expensive. Domestic freight is expensive. The airfreight is really impacted because it's just not the aircraft coming into the country. So we're in a really competitive market. And at a point in time, that will inevitably, I think, have an impact Your next question comes from Brian Raymond from JPMorgan. Thanks, guys. Mine is also on Bunningsen Online. Just interested in your ability to flex That channel up a lot given particularly in Sydney where you've got where restrictions may be a little bit easier than in Melbourne and also You've got your major competitor still open. How are you going in terms of executing on turnaround times on click and collect? I've heard a bit of anecdotal feedback. There's some delays coming through, which would be expected given it's new for you guys. But I'd just be interested to hear how you're going on that and where you Flex that online channel up to given your current infrastructure? Yes, it's great. It's a great question. Look, I think what we've done in terms of contactless Drive and Collect, Click and Deliver, both really, really strong and certainly well received. On Drive and Collect, we're at a day to day and a half Which is well inside the sort of 48 hour time frame. There's always going to be exceptions, absolutely. And I absolutely understand on click and deliver. There are challenges because delivery for all retailers is under some degree of pressure, partly because of demand, partly because drivers get Stood down because of restrictions and those sorts of things. So that's definitely on our mind. Our ability to convert our business is unbelievable. Regional Victoria last week, we had 2 hours notice to go from fully open to 100% online for retail. And the team did an incredible job. So I think the model has been well established. It's well understood. As I said, the investment in the new site has been really, really positive. And our ability to continue to And the range of products that we can provide customers through to sort of plants and paint and some of the more complex Product categories, when you sort of think about variety and choice, has been really, really good. So yes, very comfortable with where it's at. Just on Sydney, for We actually made the choice to go all of our Greater Sydney Metropolitan stores to 100% online for retail and stay open The trade not just in the affected LGAs. And we did that understanding that it was helping to reduce movement. We're really confident in the online model. And it takes away any temptation for anyone to do the wrong thing and drive from a part of Sydney they shouldn't be driving from into a part where a store might be open. So we've done that To support the government, make it very confusing from a customer and team communication point of view. Okay. And then just my second question just around the step up in CapEx ex Mt Holland and how much of that is related to Online CapEx? You talked a lot about the online investment or digital investment, I should say, from an OpEx perspective. But I've got your CapEx stepping up on a net basis from circa $600,000,000 over the past few years on average to between $650,000,000 $900,000,000 ex Mt Holland next year. How much of that is driven by CapEx relating to digital and how much of that is other investment? Yes. Spine, happy to answer that question. I think there's no doubt we've called out the increases and not only on data and Julie, there's no doubt there's been further investment in data and digital over the last couple of years, and that will accelerate again, as Rob talked about, into next year. So that will account For some of the increase. I think we've also called out there'll be further investment in both the store network as well as supply chain. So I think it's a combination of those things. I think there's no doubt as a percentage increase, data, digital and e commerce investments is increasing in that number. Yes, okay. And should we think of that as like a new level for you guys, if you say in the midpoint of that range, so $750,000,000 or so It's a very lumpy investment around Mount Holland. Is that or should we expect that to come back down Over the coming years back to where it's been in recent. So I'm thinking back towards that 600 mill that we've seen in the last couple of years. Yes. Look, I think it's hard to say. I think what I would say is on data and digital, there is a component that is build. So that will There's a component that will come off to some extent as we build that capability and go into more BAU. But There will be other categories, no doubt. I think supply chain is something that we're continuing to invest in over the next few years. So I think it's a bit hard to read beyond next year around what CapEx will be. And of course, as we've called out, ALM and our investment in Covalent will continue Over the next 2 to 3 years as well. Okay, great. Thanks a lot. And your final question comes from the line of Ross Curran from Macquarie Group. So please ask your question, Ross. Thanks. Actually, I want to just ask about what's not in the release. There's no sort of commentary around the API bid or health care, which you talked about briefly as being A new area that you might look to grow into. In light of the capital return, how are you thinking about sort of Ambitions to move the business into the healthcare space. Ross, on the So on API, we did make a note in our update that there was essentially nothing to update From the previous market update. So, yes, there's nothing to update. We have had some engagement with the company. There's nothing further we have to say on it. There's no certainty that it's going to go ahead, but there is dialogue ongoing. And as we mentioned before, we did note that we have an interest in a number of opportunities in the health, well-being Sector, API is one of those opportunities. But as we've always said, we don't Wesfarmers, we're very although we have an interest in a sector, we will only pursue an investment or an acquisition if we feel it's In the interest of shareholders. So we don't create a strategy and then go out and make acquisitions for the sake of it. We're very guided by What acquisitions do we think are going to be good for shareholders? So we continue to look at a range of opportunities, not just in the healthcare sector, In other sectors as well. And as we've said, we continue to see opportunities to Further invest in our businesses as Anthony was noting with respect to our CapEx. Thanks. I might leave it there. Okay. We've got another question from Tom Keirith from Barrene Joey. So Please ask your question, Tom. Thanks very much. Sorry, guys. To extend, can I just ask on the $170,000,000 increase in receivables? I think it relates to Bunnings rebates. Is that usual? It's going to be seen that being called out. And do the rebates On a fall as obviously sales come off? Yes. Tom, it's Anthony. It's not only rebates. Obviously, rebates were Given the volume of sales through the year, but it's a combination of things. As Mike also called out, sorry, commercial sales were higher Through the year as well. And so that's a component in the receivables as well as fertilizer sales. So fertilizer sales were Significantly up at the end of the year and that also resulted in higher receivables. So there was a combination of factors that resulted in that number being higher. Thanks, Anthony. No worries. Okay. With that, there's no further questions. I might Hand the call back to Rob for any concluding remarks. Thanks very much, everyone. I appreciate it's a really busy time, particularly on a Friday. So thanks for taking the time with us. And we'll finish up now. If any other questions, please call Simon or the team. Ladies and gentlemen, that does conclude today's conference call. Once again, thank you all for participating today. But you may now all disconnect.