Wesfarmers Limited (ASX:WES)

Strategy Day 2021

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Jun 3, 2021

Good morning, everyone, and welcome. Thanks for joining us for our Strategy Briefing Day. I'm Rob Scott, the Managing Director. Now today is the last day of National Reconciliation Week and it's the anniversary of the High Court's historic decision in Mabo 2. For us at Westpharmas, reconciliation is more than just a week and we're working hard all year round to progress this through all of our businesses. And in that spirit, I'd like to acknowledge that we're meeting here today in Sydney on the lands of the Gadigal people of the Eora Nation and I pay respect to their elders past and present. Now unfortunately, it hasn't been possible to get all of our executive team here in person today due to the lockdowns in Victoria. Therefore, some of our teams such as Mike from Bunning, Sarah from Officeworks, Pete from Catch and Richard from Target will join us online. The rest of us are here in Sydney. Now a lot has happened at Wesfarmers and around the world since our last briefing day 2 years ago. We're really excited to share with you the progress that we're making across the group and for you to hear directly from the divisional Managing Directors about their businesses. We're proud of the performance that our teams and our businesses have delivered in recent years and especially how well they have risen to the challenges presented by COVID. But today is very much about the future. I'm happy with the quality of our businesses in the portfolio, the capability of our managers, the strength of our balance sheet and the opportunities for future growth. So I will start by making a few opening remarks on group strategy. Then our CFO, Anthony Giannotti will talk to allocation and balance sheet and then you'll hear from the divisional managing directors and we'll make sure we allow plenty of time for questions. So moving on to a slide that should be very familiar with all of you. Since the listing of Wesfarmers in 1984, We've been guided by a consistent objective to provide satisfactory returns to shareholders. We define satisfactory as Top quartile TSR over the long term. And I emphasize the long term focus and hopefully this will resonate with you as we talk through our strategies today. If our objective was to maximize total shareholder returns over the next year or 2, then our strategies would look very different. Our experience is that we can only achieve our corporate objective if we do a number of things and this includes anticipating the needs of our customers And over the last year, that has meant evolving our offer and providing a safe environment, looking after our team members, giving them safe and fulfilling work, Engaging fairly with our suppliers and ensuring that we source our products from those suppliers operating ethically and sustainably, supporting the communities in which we operate, taking care of the environment and acting with honesty and integrity in all of our dealings. Now if I look at this chart on the next slide, you can see that the Westheimer's operating model has delivered good returns for shareholders over the long term. And importantly, if we look at our total shareholder returns on a 5 year and a 10 year basis, They have both been strong. Now there are a few factors that I think are somewhat unique to Wesfarmers relative to other conglomerates that have supported our returns to date and I think they are increasingly important in the future. Now these are our disciplined focus on long of Value Creation. Our divisional autonomy model that empowers and supports divisions to deliver outstanding performances in their businesses and active portfolio management to ensure that our capital is allocated to those businesses and industries that will deliver superior returns in the future. Now this last point is particularly important, especially given some of the disruptive changes we see across industries over time. Turning to the next slide. Building trust in the community is important, very important to us and requires a long term commitment and a focus on meaningful outcomes. Our efforts in the areas of decarbonization, ethical sourcing, workplace Safety, diversity and well-being helps us to build more resilient businesses. And as I noted, all of these things go to helping us deliver on our corporate objective. And we've made some good progress in these areas in recent years. The retail divisions have all made significant commitments to achieving netzerosco 1 and 2 emissions by 2,030 and our industrial businesses have the ambition to achieve net zero emissions in 2,050. Our commitment to reducing emissions continues to be shown with Scope 1 and 2 emissions 8% lower in the first half of this financial year. This is the 4th year we'll report using TCFD standards. Wesfarmers continues to undertake significant work across our businesses to identify and minimize the risks Climate Change and evaluate the associated business opportunities. Since 2015, we've used a shadow price of carbon in evaluating new investments, which informs our decisions. We take ethical sourcing responsibilities very seriously and we have over 3,000 factories covered in our audit program and we continue to work alongside global peers to improve standards for our supply chain. We're making further progress In our team's diversity with the proportion of Aboriginal and Torres Strait Islander team members increasing from 1.8 to 2.6% over the last year. So we're moving much closer to parity there. And we've also increased the representation of women in senior executive Positions from 28% to 34%. Now over the last year, we've seen team member engagement also improve across all of our businesses. And this is particularly pleasing given the challenges through COVID. Last year, we took the decision to start reporting our strategies, targets and comes in these areas in our annual report rather than separately in our sustainability report. And this reflects the fact that our sustainability Strategies are now fully integrated into our broader group and business strategies and aligned with our corporate objective. So turning to the next slide, our value creating strategies. As an active manager of a portfolio, our group strategies are very much focused on delivering shareholder value through operational excellence, securing growth opportunities, portfolio management and responsible long term management. These are high level strategies that guide our focus at a board level and for me as Managing Director of the group. And we expect the strategies of our creating divisions to be closely aligned with these value creating strategies. Now each of our divisions will have their own strategies that are relevant to their business and their industry. And these are developed by our divisional teams and presented to our divisional boards and then the group board for approval. And our divisional MDs will talk to these today. The West Pharma's model of divisional autonomy empowers and incentivizes our divisional teams to deliver best in class Performance with the support obviously of West Pharma's balance sheet and the corporate infrastructure and services we provide. Capital allocation is something that we control tightly at a group level. In Westpharmas, we don't ration capital and we generally take the perspective that capital is unlimited And what is limited is the number of investment opportunities that will deliver a superior return for shareholders. And when divisional Performance is not where it should be. We often say no to new capital investment unless we're confident of the capacity of the business to deliver a satisfactory return. Now the exception to this is when capital is required to support workplace safety or regulatory compliance. In other cases, we proactively encourage divisions to Schuh Investment to drive further business improvement and or new growth opportunities. And as Anthony will discuss in a moment, our group business development team works very closely with our divisions on all major investment opportunities. Now back in 2018, shortly after Anthony and I moved into our new roles. I shared some of the areas that we thought required a sharper focus across the portfolio in order to set us up for future success. And we referred to these as some immediate or key priorities back in FY 'eighteen. These areas involved Accelerating our data and digital capabilities, repositioning the portfolio for future growth and addressing some areas of underperformance. Now this slide which has a long list of points on it, really shows some of the progress we've made in these areas. It's been a particularly busy time at Wesfarmers in the last few years and this could not have been achieved without the drive and the determination of our group leadership team. Firstly, on data and digital. In the last few years, we've built on the initial investment that we made with a 20 person team of data scientists and engineers in our advanced Analytics Center to now have more than 400 data and digital experts across the group. We've also developed a group data that integrates and provides data insights across all of our retail businesses. We have rapidly developed our e commerce and digital capabilities and following the investment in CATCH, Wesfarmers is now the number 2 non food e commerce retailer in Australia by sales with over 100,000,000 Customer interactions across our digital platforms every month. We continue to build relationships with leaders in the digital Space both locally and offshore and a recent example of this is an investment and collaboration that we have with Square Peg. We've also repositioned our portfolio for growth. The successful demerger of coals, which has been a great outcome for shareholders, The exit of our investments in coal mining and investment in new growth opportunities in e commerce and lithium hydroxide. And then finally, we've addressed areas of underperformance which is critical in any portfolio. Facing into the issues with home base in the UK, the restructuring The Target network, the conversion of 81 Target stores to Kmart and K Hub stores in the last 12 months and also seeing improved performance in Blackwoods. Now whilst there is still more work to do, these areas are no longer a drain on our resources nor on shareholder value. Now it's important to note in talking to the progress we've made that this is not the end. It's really just The start of what we see as an exciting chapter in the future. It puts us in a position from which we can accelerate our progress and investment with an eye to long term value creation. So turning to the next slide, this has led us to develop a renewed set of priorities across the group that are Consistent with our value creating strategies and will help set us up for the decade ahead. And you'll see on this slide the general alignment between Our previous priorities and new priorities. Now I'll outline each of these in the coming slides, but you'll hear much more about them from our divisional managing directors. The first is to develop a market leading data and digital ecosystem, which will enhance customer experience and create new growth opportunities across the group. And this is a very natural evolution of the recent developments across the group. Now the word ecosystem is a bit of a buzzword at Present, most companies are talking about ecosystems nowadays. So I'll endeavor to explain what this means in Wesfarmers and why our approach will be different and why it has the potential to be truly market leading. However, I do apologize in advance that we're not going to be sharing all of our future plans. The second priority relates to increasing our investments in platforms for long term growth. And this follows from the repositioning of the portfolio that we've undertaken and also recent moves that enable us to scale up in areas with good growth prospects. And finally, we have an ambitious strategic agenda and our experience through COVID has showed us how quickly we can move when we have to. Our business model, the capability of our team and our culture has enabled us to deliver some quite exceptional outcomes in the last year. And we're therefore looking to accelerate the pace of continuous improvement across the group. So touching on the data and digital ecosystem. So as I said, we've already developed some quite deep capabilities in the data and digital space. And this includes a group customer data That provides us with the ability to undertake cross divisional analytics to better understand and serve our customers. And most of our customers understandably engaged with multiple brands in our group every week. Now we expect to invest an additional $100,000,000 to further build on these capabilities and also to invest in new growth platforms. And this will be spent, we expect, over the next 12 to 24 months. Now as I said, given commercial sensitivities, we're not going to be broadcasting in advance all of the specific initiatives that we'll be undertaking, But that will focus in a number of areas. So firstly, developing more personalized digital shopping experiences across our retail brands, Significantly enhancing our capabilities in analytics and digital technologies through talent acquisition and development, leveraging our store network to provide experiences across brands in conjunction with our digital offer in areas such as click and collect and returns. And then also evaluating to further develop our partnership with Coles in flybys. Now robust data governance and security will be managed by our advanced analytics center. Our approach to ecosystem development will ensure that our divisions retain their own customer data and digital capabilities that are critical for their success consistent with our divisional autonomy model. We will continue to promote our core retail brands and networks that deeply valued and trusted by customers. Now some of the differences I guess that we see around our ecosystem is that We currently have one of the largest digital and store networks in Australia with a local presence in virtually every community in Australia. We have deeply trusted brands with leading market positions and with lowest price offers and international experience shows that Price matters most when you consider e commerce at scale. And then we also have a marketplace platform that provides households with access to an extensive range of products and services that are not available in our core retail businesses. Now moving on to growth platforms. Now you'll recall in recent years, I've mentioned many Forms, now you'll recall in recent years, I've mentioned many times that some of the best opportunities we see for deploying Capital is investing in our existing businesses and in adjacencies to our businesses. Now since we've repositioned We have an opportunity to accelerate our investment in platforms that we've worked hard to develop in recent years. Now I've highlighted 4 of those areas on this slide. And in each of these areas, we believe we have points of competitive advantage and a high degree of confidence that we can create meaningful shareholder value over the next 5 to 10 years. There are other opportunities we have across the group at earlier stages of development and I'd hope to share more about these in the future. If you reflect the way that Wesfarmers has created value in the past, it's very much been through investing for the long term and building businesses. And this is evident through the expansion of activities in our WESF division and even the development of the Bunnings business over decades. Now I personally get more excited about these opportunities than I do some large scale and expensive M and A. Now there's been an enormous amount of work in recent years that's really set the foundation for investment in these areas. And I'll let our divisional managing directors talk more to them in their presentations. And then moving on to the 3rd Renewed priority, which is accelerating the pace of continuous improvement. As I said last year, we learned a lot about how quickly Wesfarmers can move when we have to. Now our business model, as I said, I think is a key source of competitive advantage. So when COVID hit, Our divisional leaders Mike, Ian Bailey, Sarah, Ian Hansen and Tim were able to focus all of their efforts on delivering the significant organizational change necessary to meet Changing needs of customers, their teams and suppliers. And I could not be more proud of their response and the speed at which they mobilized their fantastic teams. Meanwhile, the corporate office ensured they had the support they required, the capital, the specialist advice, coordination of engagement with government and regulators and additional personnel when required. Now the areas that are top of mind for us when we focus on driving change and Improvement really relate to these three areas of customer experience, operational excellence and sustainability. And once again, I won't go into detail on these because they'll be covered by our Managing Directors. But the point I'd like to make is that maintaining the pace of execution and focus on continuous improvement cannot happen without a couple of things. Firstly, providing support to our teams to deliver on this change. And this means giving them the tools and resources they need And respecting the safety, health and well-being of our team members that are at the front line of this change. And then secondly, respecting that not everything goes to plan when you try and innovate and change at pace. This means that mistakes will happen. This is where our key values at Wesfarmers of openness and accountability are so crucial. That is calling out and owning when things don't go to plan, learning and adjusting quickly. And to steal a quote, because there is no effort without error. Now I'm sure you'll appreciate that this message I'm giving is probably more directed to our 100,000 team members than Those of you sitting in the room here in Fullerton, but it is an important message. So then finally looking forward. So the Australian economic recovery and employment growth That we've seen continues to lead the world and I think there are a number of reasons to be positive about the outlook for household income and business activity. However, in the shorter term, there remains significant risks and uncertainties. The potential for future lockdowns, the speed of community vaccination, Further COVID mutations and also as we've seen the risk of punitive taxes and regulations that may dampen job creation and investment. But the group's portfolio of cash generative businesses remains well placed to deliver satisfactory returns over the long term under a range of future scenarios. Now while our future priorities signal the beginning of what we see as the next chapter of long term value creation in Wesfarmers, We will continue to deliver growth through further enhancing our digital capabilities and leveraging our valuable store networks, meeting the changing needs of customers and continually putting continually providing better in store experiences and expanding our addressable markets in ways that make sense for our customers. Also increasing the production and processing capabilities at our industrial businesses and importantly address attracting and retaining world class talent. So on that note, I'll now hand over to Anthony Gianotti. And after Anthony's presentation, we'll take some questions. Okay. Thanks, Rob, and good morning, everyone. It's great to be here in person. I want to take the opportunity today to give a brief overview of our Approach to capital allocation and in the context of some of our key areas of investment as well as give an update on the group's Cash flows and how we are thinking about our balance sheet position. Before I move on to this, I want to start on Slide 15 and provide a brief update On our recent trading performance. As Rob's emphasized throughout his session, Wesfarmers has always taken a long term perspective in managing our businesses. I think this has been particularly relevant as we've managed Through the volatility of the COVID period, it has allowed our teams to maintain their focus on providing safe and trusted shopping and working environments While taking advantage of opportunities to deliver even stronger value and convenience to our customers. As we begin to cycle the impacts of COVID-nineteen in the prior year, Recent monthly growth results across our retail businesses have been quite volatile. While not as significant as the interruptions in 2020, The restrictions over recent months including the current lockdown in Victoria are creating additional volatility to trading results. Customer demand has remained resilient, but year on year growth in some divisions has been negative in those Where we saw unusually elevated sales activity in the prior year. Pleasingly, on a 2 year basis, All of the retail businesses have continued to record strong sales growth. As expected, online sales have moderated as customer traffic Stores has increased and there has been fewer restrictions, during fewer restrictions, sorry, in store capacity, Which has caused significant shift to online channels during periods of peak COVID lockdown in the prior year. As a result, Online penetration rates have declined, from those that we reported at the half year, but they remain well above levels, at pre COVID levels. Finally, in our Industrial businesses, we've been pleased with the continuation of strong operating performances and good trading results across both businesses. Turning now to Slide 16. Talking a bit about our approach to delivering satisfactory returns, consistent with our primary objective, we remain focused on providing a satisfactory return to our Shareholders over the long term. From a financial perspective, the core elements to ensuring that we can continue to achieve our objective is through a focus on 2 core Principles. The first is to ensure that we continue to deliver long term earnings growth and strong cash flow generation from our existing businesses. And the second and importantly is by maintaining an appropriately strong and flexible balance sheet to continue to support the investment in these businesses. These points of focus have been consistent for some time and are supported by strong commercial capabilities across our operating divisions As well as through our corporate office functions, including our business development team that work very closely with our divisions On evaluating investment opportunities. Across the portfolio, we will continue to invest for long term growth in earnings And cash flows and apply an approach to investment decisions that is flexible, opportunistic and of course disciplined. The strong balance sheet allows us to support the long term growth of our businesses while also enabling the group to be flexible And opportunistic when value accretive opportunities arise. As we've said over the past 18 months, Maintaining a strong balance sheet has also provided the group with the capacity to manage the increased volatility and uncertainty associated with COVID-nineteen Whilst at the same time investing significantly to support the long term growth of our divisions. It's worth reiterating that despite the strength Of our balance sheet, our capital allocation decisions are independent of our financing decisions. This means that we are no more to pursue investment opportunities just because we have a strong balance sheet, nor is it, less likely to are we less likely to invest, When the opposite is true. Turning now to group cash flow generation. We're really pleased to maintain a portfolio of highly cash generative businesses that are delivering strong returns on our shareholders' capital. As Rob mentioned earlier, we've also taken a number of actions over the past few years to address some key areas of underperformance and taken steps To position the portfolio for growth. And we are confident that these steps combined with the strength of the current portfolio will support good long term earnings growth And cash generation for the group. The group's current businesses have delivered on average just over 100% cash generation over the past Few years. As illustrated on the chart on the right, divisional cash generation was amplified in 2020 Due to a favorable but temporary working capital inflow, reflecting the impact of COVID on the closing inventory and payables balances across our retail businesses. In the 2021 financial year, we've seen an ongoing normalization of this working capital position, which is To result in a lower level of divisional cash generation for the full year. Despite increased trading volatility due to COVID, Our businesses have continued to focus on maintaining good working capital disciplines. Having said that, our businesses have had to adapt their approach to inventory management By holding higher stock weights to accommodate demand fluctuations and prioritize stock availability. And you will have seen this through the targeted investment in Kmart to increase stock weights across everyday items to improve availability. Turning now to Slide 18. As we highlighted before, our approach to investment is focused on Our core businesses and driving long term returns. This includes all types of investments we make, whether that be CapEx or OpEx in nature. Our group maintains strong capital allocation disciplines, including the development of robust business cases to support each investment. As many of you will be aware, we also look at ESG considerations and risk when evaluating our investments We have invested over $2,800,000,000 of growth CapEx across the group, which includes the acquisitions of Kidman, CATCH, Geeks 2U and Adelaide Tools as well as significant investment directed at growing our retail store network, Particularly in Bunnings and Kmart, which have consistently rolled out new stores and executed store refurbishment programs. In addition to our more traditional investments in recent years, we've accelerated our investment in data and digital Across the group. In 2020 alone, we spent over $200,000,000 on data and digital initiatives, Including both the CapEx spend for projects such as the replatforming of our websites as well as wide range of other OpEx investments. This spend has increased in FY 'twenty one and we expect it to again grow in FY 'twenty two As all divisions continue to step up their digital investment. While recent years have included significant level of CapEx As we established digital infrastructure systems and platforms, it is worth noting that an increasing proportion of our investment We'll be OpEx rather than CapEx in nature. This includes the growth in subscription based software services As well as the OpEx investment in teams and capabilities as we continue to leverage the digital assets that we have built over the years. As Rob mentioned earlier, we also expect to invest around $100,000,000 of capital and operating expenditure to support our digital ecosystem initiatives. The spend on these initiatives is incremental to the investment across the group's other data and digital projects. For the 2021 financial year, we expect net capital expenditure for the group to be between $650,000,000 $700,000,000 Inclusive of store conversions in Kmart Group, our continued investment in data and digital projects As well as capital expenditure associated with the Mt Holland lithium project. Moving now to our balance sheet and debt management on Slide 19. As I've already mentioned, one of the key strengths of the West Pharma's approach to capital management is maintaining an appropriately strong balance sheet, Which gives us the group sorry, gives the group the flexibility to invest for long term growth in times of uncertainty. At the end of the half, The group recorded a net cash position of around $870,000,000 and we continue to maintain stable credit ratings with both S and P and Moody's. Over the years, we have accessed diverse funding markets and have well established issuance capacity across European, U. S. And domestic bond markets And we also manage our risk by limiting debt maturities in any given year. Our 2 current European bonds which will mature in October this year and in August 2022, representing a total of around $1,600,000,000 The maturity of these bonds will provide us with the opportunity to lower our borrowing costs given the higher cost nature of these long term bonds Relative to current market rates. Our finance costs excluding lease liabilities for this financial year are expected to fall further To between $115,000,000 $125,000,000 for the year, reflecting the lower average debt balances through the year. We continue to manage our lease portfolio to balance network flexibility with security of tenure and maintain our focus on lease adjusted return on capital as a key metric for making property decisions. Our average remaining lease tenure reduced to 4.7 years during the first half, Which was supported by the recent store closures and conversions within Target. Overall, we are pleased with the strength of our balance sheet, Which provides flexibility to respond to the uncertainty associated with COVID whilst at the same time allowing us to accelerate investment across the group including Our investment in data and digital and ecosystem initiatives. As we mentioned at the first half results, to the extent that we have capital that Surplus to these requirements, then we will continue to assess opportunities to return it to shareholders in a tax effective way. Finally to shareholder distributions. The group's ability to generate strong free cash flows has supported significant Shareholder distributions in recent years and in fact this has resulted in Wesfarmers distributing over $14,000,000,000 of fully franked cash distributions Since 2016. Our dividend policy remains unchanged with our approach to maximize the value of franking credits to our shareholders Whilst having regard to current year earnings, credit metrics and forecast cash flow requirements. And this has typically resulted in Wesfarmers Maintaining a payout ratio of between 85% to 90% historically. In summary, our strong balance And our approach to investment and capital management is deeply aligned with creating long term value for our shareholders and importantly Provides us with the flexibility to continue to invest during times of significant volatility and market disruption. We will continue to look for To lower our cost of funding and right size our balance sheet in a manner that maximizes long term returns to our shareholders. Thank you. And with that, Rob and I would be happy to take any of your questions. Thanks everyone. For Q and A, please just take a position behind 1 of the 2 microphones in the room, if you wish to ask a question and Rob and Anthony will just alternate between the left and the right. Rob, the first question comes online from Grant Saligari at Credit Suisse, Who says, could you please expand on your comment on Slide 13 where you say increasing production and processing capabilities in the Industrials business. Does this mean you will be indicating new products beyond lithium or does the comment refer to potential capacity expansions in one of the existing products? Thanks for the question, Grant. So the comment largely relates to the very significant investment we're In lithium hydroxide, which when you look at the size of the investment and what that does to the broader processing Production capabilities at Kwinana is a very significant step change investment for the division. There are also other opportunities that I'll let Ian talk to later that are more just incremental investment opportunities within the existing complex. I'm not signaling any kind of broader step out opportunities, albeit we're always Evaluating opportunities over time, but I wouldn't say that any broader step out production opportunities are imminent. Hi, Rob. Brian from Citi. Just on the $100,000,000 of incremental digital investment, You highlighted that's increasingly more OpEx, but I'm just interested which businesses you expect to see this really And is this something that we should expect to continue to step up year after? You talked about 2022, but even beyond that? Yes, Brian. So look a lot of that Cost is very much building out the capability. Now over time, we're quite confident that we'll get a good payback on that, But there is some foundational investment that is required. That foundational investment initially will relate to Team and personnel, it'll also relate to technology spend. A lot of that relates to the systems we're developing, the various to improve the digital experience for customers shopping across our various brands and some of the additional functionality we're looking to build in there. I would say that the expenditure and the reason why we're calling this out is that there's initially a degree of setup expenditure. Over time, we'd expect it to pay back for itself, but over the next year or so, I'd expect that a reasonable proportion of that will Hold centrally as part of our overhead costs and then, the rest of it will flow through within our divisions. So it Won't be material in terms of the impact on any one division, but it would flow through to the P and Ls of all of our divisions to some degree. Okay. And then maybe just a quick follow-up just on how you're feeling about flybys and the way that's being utilized at the moment in terms of data is such a battleground at the moment. Do you think The current structure as a JV and the investment coming from both parties is sort of adequate and how much is that $100,000,000 really talking about flybys as well? Well, look, we think that we've made some good progress with our partner Coles and Flybuys over the last year. If I think about what we've Done within Flybuys is the team have launched a number of new business opportunities, the Unpacked Digital Audiences initiative. There's been a number of other initiatives that the team have launched. But importantly for our businesses, we've introduced CATCH to the program. So it's a new partner for the program. We've also built a much stronger engagement with Kmart and Target in terms of how they utilize of the program. So I think the program is in much better shape than it was going back a year ago from our point of view. But as you rightly say, it's a very fast Moving area and we're keen to continue to work with Coles and Flybuys to look at ways in which we can continue to innovate and evolve the program to deliver more value to members and more value to our businesses. It's Michael Simotis from Jefferies. I just wanted to pick up on a couple of the points around capital allocation. The first one around maintaining a flexible balance sheet to deal with volatility as well as be opportunistic. If I look at the capital structure right now, you've really got enough capacity to pursue a very large company transforming Inorganic transaction, do you need to maintain that sort of flexibility or Is this something that if the opportunity doesn't arise, you'd look to return capital and then, to your point around capital not being rationed and effectively unlimited, you could always Access that capital again. Yes. Thanks, Michael. It's a good question. I think certainly leading into COVID, I guess none of us Knew what quite what to expect. And I think we were preparing for the worst, hoping for the best, but preparing for the worst. And so I think we Certainly strengthened our balance sheet through that period and I think it was the right thing to do. So I think we will continue to Some flexibility in our balance sheet. I think we've highlighted that we are looking to right size our balance sheet. I think the question is how do we actually do that and what's Best way if we are looking to get capital back to shareholders, what's the best way of doing that? And as I've said before, we want to do that in the most tax effective way we can. You're probably aware that we don't carry a lot of surplus franking credits. We tend to pay out franking credits to our shareholders, which is Obviously flowed through in our high payout ratio over the years, which we've maintained. So I think we continue to evaluate options For rightsizing the balance sheet and getting capital back to shareholders. Yes. Okay. Thank you. And then just the second one, When you look to allocate capital, do you think about diversification across various industry verticals? Obviously, after exiting Coles, you're less exposed to retail, but still heavily overweight retail. If you sort of look at the long term opportunities, Lithium is a good opportunity, but relatively small compared to the retail exposure that you've got. We don't necessarily Think of diversification for the sake of diversification in investment decisions. We're more focused on absolute returns, but We do have regard to the risk return characteristics of an asset that we look to invest in, and how that would or could impact the overall risk return characteristics of the Wesfarmers Group. We think that we've got a phenomenal mix of businesses that represent both quite a unique balance between defensiveness, high cash generation, but also good growth Perspectives, so when we think about capital allocation and particularly some of the larger capital allocation decisions, We do reflect on well what would that do to the overall risk return characteristics of the Wesfarmers Group. But we're primarily focused on absolute returns rather than setting up to diversify for the sake of diversifying. Thank you. That's clear. Good day, Robin Anthony. It's Ben from Jarden. You talked, Rob, about price being one of the most important things is online, but There's not really any mention I think through the presentation today with exception of something that came out about supply chain. And you've obviously got some pretty grand ambitions around pushing the marketplace. How are you thinking about supply chain and capabilities? And from a capital perspective, there's obviously some pretty significant costs that go with that. So should we be expecting to see step up in investment around supply chain across Bunnings and the group more broadly over the next few years? Ben, you're absolutely right. Supply chain is a critical element of not just the e commerce capability, but also to our broader growth aspirations across the retail businesses. I did call supply chain out as one of those areas of focus in terms of our desire to accelerate the pace of development. I deliberately didn't cover that because I know that our retail MDs will. So there's a we have signal that there's a lot of investment to build out the Catch supply chain capabilities. There's supply chain investment and evolution going on in all of our retail businesses, but it's I think an important point To note is that outside of Catch, which is obviously a pure online retailer, we still see our store networks as being a Key source of competitive advantage for, for e commerce. And if you look at trends around the world, you'll see that some of The strongest e commerce providers are really leveraging the fact that they have stores located very closely to customers and leveraging those stores for e commerce delivery. There will still always be some degree of centralized fulfillment that is required, particularly when you're trying to tap into a much broader range over and above what you can offer within store. So that doesn't necessarily require a lot of big CapEx to support, but it does put greater pressure on Availability on digitization of your supply chain and I know that Ian will talk a bit about that in the context of what they're doing in Kmart. Would you think about sharing that across the group? Because if you look at some of these big centralized sheds, you can be spending many 100 of 1,000,000, even 1,000,000,000 of dollars and you put land and everything into it. Is there a case to have some shared services around centralized distribution drop ship? You look at what funding service doing marketplace, you always got catch marketplace. Did you think about that or is that somewhere you wouldn't want to blur the lines I suppose? Look, there's potentially areas where there are opportunities, but I think it would be think it would be a mistake to try and operate too deeply in integrated supply chain. I think you lose a lot of flexibility. But for example, and as Ian will talk about if you think if you look at what we're doing within Catch at the moment, you can now buy all of most Virtually all of Target's product on Catch and you can also buy a number of exclusive ANCO Kmart products on Catch. So as we build out the catch capability, they can play a fulfillment role for some of our businesses on some of the Faster moving lines and then I guess there's the broader issue of extending range and dealing with slow moving items potential for synergies. But I wouldn't signal any deep integration of supply chain. I think the downsides would outweigh the benefits. And just following from me, following up from Mike's question just around M and A and how you're thinking about it. Just interested over the last sort of 6 to 12 months when you've been sitting around the boardroom, it's been focused on getting product Customers keeping staff safe, keeping customers safe. To what extent does that meant you sort of pushed out having these sort of robust discussions around M and A and you're starting to think about a lot more about that now because a lot of corporates are saying that they're actually starting to revisit now because they haven't had the chance over the last 6 to 12 months. From our point of view, it hasn't really our activity levels haven't changed at all over the last couple of years. We're Always very active in terms of evaluating opportunities. As I if I reflect back on the last 3 years and looking at what I just presented, I don't look back on the last 3 years with any sense of regret that we've missed out any major M and A transactions and in fact I'm really pleased We've been quite disciplined in terms of how we've gone about investing through acquisitions and through further Capital Investment and as I noted there, I think we've built out through a lot of hard work, some really interesting growth platforms that enable us to invest capital to build businesses over time. And the great thing about this is that we're not paying an enormous amount of goodwill. We're not paying someone else for the privilege where we're getting the returns on the capital that we're investing. Rob Anthony, I have a question from David Errington at Bank of America. He says, I understand West Pharma's focus on long term shareholder value, but it becomes clouded when there are The perceptions that short term shareholder value has to be lowered to achieve returns in the longer term. His question is, does there have to be an obvious conflict or trade off Between long term value and short term value in these times of disruption and fast changing markets, long term value focus can be considered more risky. Yes, I think David, I think that's a really good question. I'd answer it 2 ways. I think first of all, no, I don't think that You necessarily need to make a major sacrifice to your short term returns in order to Pursue long term returns and sometimes I guess if you're making really big bets for the long term, there can be a risk inherent there. I guess, the way I think about that is that what we're finding today is we are adopting a far more agile approach to development. So if I think about the work that we're doing within Catch, the incremental investment and the work we're doing within Catch, the work I talked about in the ecosystem, We are rapidly iterating adopting a highly agile approach there. But the reality is that The investment I think the size of the prize for us is over a 5 to 10 year period. So the return profile He's going to take time to flow those benefits through. I also think that you need to be careful about making really, really big bets Given the inherent risks of how much industries are changing and so forth. So if you go back to that slide where I was talking about investing for long term value creation over a 5 to 10 year horizon. You'll see that we're not betting the farm on any of these, right? The investment in lithium hydroxide I think is a very measured investment where we have some deep capabilities, a really strong partner. Clearly, clearly if our opportunity was to enhance returns over the next 2 years, we wouldn't do this investment because it'll take 2 to 3 years to build, but over a 5 to 10 year period it should pay back. The same with the work on catch. The same you could argue with Bunnings, the work that Bunnings is doing building out its commercial and trade capabilities. The initial steps with Adelaide Tools Beaumont Tiles, I think are really interesting opportunities. If we only sought to maximize returns over the next 2 years, we wouldn't worry about it. But when you think about what we could achieve over 5 to 10 years, then I think there are some interesting opportunities. Rob and Anthony, it's Andrew Glennon from Goldman Sachs, thanks for your time. Just wondering, obviously the divisional heads will speak to this type of question later. But just from a general perspective And notwithstanding, Anthony, what you've already said on working capital normalizing this financial year, but can you just talk about how supply constraints Have been a factor in how they're being managed and also how inflation, due to potentially that supply constraint Has been managed by the business and whether or not it's going to make an impact, in areas like your working capital. Thanks Andrew. And as you said, our MDs will talk more about it because when I guess when we talk about, any Inflationary factors or supply constraints, they do tend to be quite category specific very much I'd say COVID induced. When I look across our businesses, the obvious areas where we have seen some inflationary pressures has been ocean freight, particularly on the container side. Now that is just simply a function of the fact that we've seen enormous disruption to global shipping lines as a result of the wild swings of demand brought about by COVID. So I understand and there's also been various port disruptions and COVID disruptions. So I'd see those as more Short to medium term impacts rather than any overall structural change. We've seen some inflation flow through in categories such as timber, Some raw material increases in areas like cotton that Ian and Mike can both talk to, but these are more These are more category specific areas. They're not issues that are across the board. So what we're doing across our businesses is we have a lot of capacity to try and absorb those costs. To try and absorb those costs. I think what's been really pleasing across our businesses is that we have kept our prices down Notwithstanding some of these inflationary pressures, we may not have achieved the financial benefit from doing that in the last 6 to 12 months, but customers do remember that and customers do understand value very deeply. So I would hope over time That will start to benefit us. Thanks, Rob and Anthony. If there are no further questions in the We might just take a 5 minute break and wait for Mike Schneider to join us from Bunnings. Thanks very much everyone. All right. I think I can see from the camera that's set up that most people are sat down. So thanks, Rob, and thanks, Anthony. Good morning, everyone. I'm so sorry that I can't be with you in person today. But I am really looking forward to sharing our plans with you on continuing to grow and evolve the Bunnings business. And today I'm joined by our Director of Finance, Justin Williams, who is with you in Sydney and will also assist you with answering any questions at the end of this presentation. So we'll turn to Slide 23. The thing we've always been conscious of at Bunnings is the need and importance of focusing on long term sustainable growth and financial performance. This focus informs so much about the strategic choices we make. And as always, we are focused on disciplined execution of our strategies Around price, range and the experience our customers have with us. This ensures we're making the right strategic choices and investments for our team, our customers and shareholders. Turning to Slide 24. It's clear that the market in which we operate continues to evolve over time. Looking over the last 4 or so decades, The changes in the way our customers have lived in their homes or grown their businesses have changed significantly, and that's been reflected in the evolution of our business. However, the thing that's remained core at Bunnings is growing with our customers, making sure we're relevant, engaged and connected with them whenever they choose to shop, Supporting their lifestyles and improvement of their homes. And equally, it's been about supporting small businesses, trades and builders out in the field through our commercial business. With over 1,000,000 trades and small businesses in our trade account ecosystem, we understand the important role we play in the domestic economy supplying to these trades and organizations. And when you reflect on the last 15 or so months, at no time in recent memory have our homes been as important as they are today. Our customers have spent more time in their homes than ever before. For many, it's been their safest place to be, a place where they've worked, learned and lived. For many, it's also meant it's either started or rekindled a love of DIY and inspired them to take on new and varied projects or learn a whole new range of skills. Turning to Slide 25. As you can see, the market remains incredibly competitive. We've seen this intensify over the last few years With a variety of formats competing, everything from category specialists through to mass merchants, not to mention pure play online retailers. Beyond this, there's multiple drivers at play, including disposable income within the household, the housing and renovation markets and at times even the weather. The COVID-nineteen border closures and government housing incentives have seen Australians spending more in the domestic economy on home improvement, renovations and new housing. And while these elevated levels of demand won't last forever, we do believe that a lasting impact will be the importance of the home in the consciousness of Australians. And New Zealand customers have, of course, been very similar. Turning to Slide 26. Our strategic agenda is clear, disciplined and focused, Guiding how we're evolving and growing our business. Building the best team is all about strengthening our culture, Investing in the skills we need now and for the future, as well as looking after our team's safety and well-being. Our strategic pillars of price, range and experience Remain is important as ever, and we continually search for ways to drive an even stronger offer for both our consumer and commercial customers. Our focus on and investment in data and digital is designed to better enable customer engagement and business efficiency through the development and expansion of our technology platforms. Our commercial strategy is all about accelerating growth in this part of our business, providing greater value, service and convenience to builders, organizations and the trades, Which means we're working hard to earn the right to be chosen more often to service more of their business. Of course, underpinning everything we do is staying true to who we are And making a positive difference to our team, customers and suppliers, as well as to the communities where we live and work and to the environment itself. And despite the challenges of operating in a global pandemic, we've executed strongly against our agenda. And I'd now like to take you through how our strategic agenda comes to life in shaping our plans the next 12 months. We'll turn now to Slide 27. What's clear to us is we can only deliver for our customers if we have the best team. Central to this is that every one of our team members goes home safely every day. Safety data and insights, along with simplified reporting, Helping to further improve safety behaviors and we continue to pilot test and report on new measures to help our team understand and lead safety performance. Within our safety agenda, we have a significant and continuing focus on the physical and mental well-being of all our team We've increased resources to support them during what has from a well-being point of view been a very challenging period. Importantly, we recently completed the rollout of 470 new counterbalance forklifts to 3 55 sites in Australia and New Zealand, Representing a $30,000,000 investment in the safety of our team when they're moving products around in and around our sites. And of course, with COVID related issues continuing to occur, Our commitment to ensuring all COVID safe measures are in place remains top of mind to ensure the safety of our team and customers. Turning to Slide 28. Over the last year or so, we've been incredibly fortunate to have had thousands of talented people, many with incredible experience from across a broad range of industries Join the Bunnings business. We're continuing to recruit a diverse team with the right skills, capabilities and backgrounds. One of the reasons our team choose to stay and build great careers is our unique culture. Our permanent team member retention rate at close to 90% is industry leading And a significant cost of doing business benefit to us. We're focused on maintaining and further strengthening our team engagement and culture. Helping our team develop and grow really matters, and we're delivering more training that is relevant to our team's roles across multiple channels With a really good mix of hands on virtual and face to face learning. Of course, making it easy as possible for our team to do their jobs is a priority. We're delivering technology and systems to do this. And examples of this include providing more Zebra handheld units, push to talk communication devices And improved apps to help team members locate order locate an order inventory. Launching Workday, a one stop shop for all teams' HR needs has been well received And it's a good example of our broad focus on technology and enablement right across the business. Turning to Slide 29. We know delivering everyday low prices remains critical to earning trust and loyalty with our customers. Our team is constantly sourcing the lowest cost of goods possible, So we can reinvest in price. Behind the scenes, we have a relentless focus on removing unnecessary cost and complexity in the business, doing things more efficiently Which allows us to generate greater volumes and scale to support our focus on low cost and low prices. A good example of this Is our upcoming trial of a rapid fulfillment center in the Western suburbs of Melbourne to test and learn around more efficient online fulfillment for our customers. The site will also trial the central dispatch of items customers purchase in store, but decide to have home delivered, with expected benefits to include removing tasks from stores, Freeing up space and reducing manual handling for our team. Overall, our supply chain model, along with support from our suppliers, has served us really well during the pandemic, Handing unprecedented volumes and helping us to remain in stock for our customers. And as our business grows, we'll continue to invest to optimize efficiency for us And our suppliers. Turning to Slide 30. For all our customers, we continue to drive a relevant winning offer Looking at what our customers need to get the job done. We're developing our product ranges in line with evolving customer needs and the latest product innovations, Pretty much everything from the front gate to the back fence. Our focus is ensuring we have a true ranging diamond, entry good, better and best, Introducing products in line with customer aspirations and needs and we're upping our focus on stylish on trend products, recognizing our customers' desire not only to access essential products Home repair or maintenance, but also to be inspired to undertake more diverse projects from the traditional back deck or garden to room makers makeovers or upcycling furniture. It's so important that products are in stock and available for our customers. So ensuring our inventory counts are accurate and product flows through our supply chain efficiently is very important. To support this, we're continuing to invest in technology to optimize inventory and supply chain management, including order and delivery management systems As well as improved space planning technology. Our team is continuously reviewing how we display our products, so we can get the best out of our store space Enhance the shopping experience for our customers through a more intuitive set of department adjacencies. And you can see an example of this on this slide we've located all the products a customer needs to move their home or business in one aisle. This space optimization work is enabling us to introduce inspiring new store layouts, Installing new showroom experiences in stores to provide customers with greater DIY inspiration for both inside the home and around the garden And making it easy for our customers to visualize projects and shop across the range, challenging our own ways of laying out stores to enhance the experience for our customers, While retaining our unique warehouse look and feel. Turning to Slide 31. Today, our customers can experience our service through multiple platforms and channels Spanning our physical and digital environments. This can be in store, online, in home or on-site. And no matter which channel a customer chooses, we want to be the easiest to shop with. Of course, this all starts with the product. We want to have a winning offer that showcases the widest range and best assortment of products For our customers, we aim to select these relevant to our customer needs, be they DIYs and renters, tradies, builders or organizations And through a variety of touch points that offer customers choice in when and how they serve. So when they get it and where they want it is in line with their expectations. And of course, it needs a communications approach that includes communicating broadly and also individually in a personalized way. And when in store, we want our team members to spend more of their time with To help them with the advice and materials they need. Turning now to Slide 32. At our last Strategy Day in June 2019, I spoke about the growing role of digital in improving customer experience and giving us a richer set of customer insights. And since then, we've rapidly accelerated our digital agenda and capabilities. Capturing the data our customers share with us is helping us to gain a more complete picture of our customers' preferences and this remains a priority. To support this, we're increasing the ways that customer information is captured to personalize their experience, some of which you heard Rob speak about earlier. Beyond this, we continue to upgrade our core technology platforms. In April, we launched our new retail website in Australia and New Zealand, Improving the look, feel and navigation for customers with our new trade website platform to follow in the next financial year. Pleasingly, we're also bringing in a new enterprise data platform that They will help us analyze data and provide a new level of insight. Our technology, digital and analytics teams who've done such amazing work in a short period of time Continue to grow and we're using this talent and technology to understand areas where we can improve customer experience, drive operational efficiencies across all channels As well as make smarter business decisions. Turning to Slide 33. Our commercial business continues to be a significant growth opportunity. We take a segmented approach to the market with our 3 primary commercial customer groups and regardless of the segment, we ensure we use a mix of leading brands and channels to serve our customers. Our builders are generally engaged in substantial private or residential construction. They have multiple employees and contractors and we're working to better support them from the moments they receive their building This means we're looking at much more of the whole of build, helping our build with planned projects, making it easy to select the materials they need for the job And getting them to site at exactly the time that they need it. For organizations, it's about creating a partnership to help deliver a service or source relevant products. When we talk about organizations, we meet education providers, hospitality, government services and the rural sector. And this is a huge part of the economy. In this space, we're expanding our expertise to help these organizations carry out services like home modifications for older people or those with a disability. It means we can also offer organizations with multiple sites, for example, schools, access to specially curated ranges of products. At the core of our commercial customer base are the trades, who are such an important customer group. The evolution of our trade business, as evidenced by growth in Power Pass account holders, Has shown we have become more and more engaged with them over time. Beyond this, our store locations and extended trading hours make us a very convenient choice. We're doing even more to make it really easy for tradies to choose us, and I'll provide more detail on that shortly. We'll turn now to Slide 34. We know our commercial customers are busy. They're managing complex projects, often with tight timeframes. And while each of our customer segments are unique, They share core needs that we're acting to meet. We're working to be the easiest to deal with in our stores, online or out on-site, turning products and services into solutions That help businesses grow and run better, and we're working harder than ever to be more consistent and reliable, ensuring we're a partner that our customers can count on to service more of their business. Turning to Slide 35. For our trade customers, it starts by driving the basics hard. That means creating more convenience in store Throughout the experiences that our trade customers have, examples of this include the rollout of the new trade desk design, self checkouts and the load and go program, Stocking more of the brands and products trade customers need and having specialists in every store available to help them get the materials they need in store or delivered at the time they need it. As with many parts of the business, investments in technology are underpinning our program here. We're making improvements to our trade website, it's fully transactable and integrated with our Power Pass app. The app itself will continue to evolve, so it's even easier to use and provide those using it with a more personalized experience. Behind the scenes, we're in the process of rolling out a new customer relationship management platform through Salesforce, which will help provide our team with a deeper understanding of our customers, Allowing for a stronger level of connection and engagement, including putting everything our sales teams need to know about our customer relationships on their mobile devices. Turning to Slide 36. Making strategic acquisitions is one way we can deepen our relationship with our builders and our trade customers. As you know, we completed the acquisition of South Australian retailer Adelaide Tools last year. Adelaide Tools range of power tools, Power Gardening and Heavy Machinery along with the expert team are helping us cater to more of the products our specialist trade customers need. We're really pleased with the performance of the business and the local team, which continues to be led by Adam Peach. In late March, we opened a new format store In Parafield, South Australia, the store is trading well and it's allowing us to test new concepts, layouts and products, as well as giving us insights needed to expand further. And we'll open our first stores outside of Adelaide later this calendar year. These will be in Western Australia, where we see strong prospects for growth With a new brand that will be announced in the next few months, a staged rollout across Australia and New Zealand will follow over the next 12 to 18 months. Further, as we recently announced, Bunnings has entered into an agreement to acquire Australian hard surfaces retailer Beaumont Tiles, Subject to the satisfaction of several conditions, including regulatory approval. Beaumont Tiles operates in a large competitive category that has the opportunity for strong growth And this acquisition would allow us to build on the success of the Beaumont Tiles business and invest in its future growth. It's also a great opportunity better address the needs of our builder customers and flooring trades as we help them with more of their build. Beaumont Tiles has a great leadership team in place And we'll be run as a separate and distinct business, much like Adelaide Tools. Turning to Slide 37. At the heart of who we are and how we think about our business is We live here too. Our teams live, work and raise their families in local communities right across Australia and New Zealand. We work closely with our incredible suppliers And in doing so, support their businesses to grow and teams to work. On the other side, as a partner and supplier to our commercial customers, Doing the right things in the right ways is so important. And these connections are what makes Bunnings, Bunnings. The deep connections to our communities are loved by our team And are a key reason people join and stay with the organization. And whilst COVID-nineteen has had a significant impact on Bunnings community activities With Sausage Sizzles hands on activities and in store fundraising paused the periods last year, we worked hard to find other ways to support our local communities. They include working with Share the Dignity in Australia, I Got Your Backpack in New Zealand. And as always, I'm really proud of how our teams get behind local community natural disaster relief. For example, following the recent Western Australian flyers, New South Wales floods, where our New Zealand team are doing right now around Christchurch. We're also currently supporting Fight M and D for the 3rd consecutive year with beanies for sale in all Australian stores and trade centers. Pleasingly, with restrictions easing in most of the places we serve, many of our team are thrilled to be back out in the community, supporting local projects and welcoming customers back In store activities as restrictions allow. Turning to Slide 38. This same sentiment carries into our thinking on the environment, Well, we've made clear commitments to reduce our carbon emissions, boost energy efficiency and reduce waste. We hear from our team and communities about how important this is to them And we know our suppliers have similar views. Last year, we announced we transitioned to 100% renewable energy for our entire operations by 2025. Across our network, we have solar PV systems on 74 of our sites with an aim to grow this to more than 100 by the end of the next financial year. In store, we have energy efficient LED lighting. This is now standard inclusion in all new store builds and our existing Bunnings store network is being upgraded. Importantly, these activities and more will help us achieve our target of net 0 Scope 1 and 2 emissions by 2,030. In partnership with our suppliers, we're also looking at ways to tackle waste and minimize total packaging, swapping more recycled materials Ensure necessary packaging is recyclable. Whilst we have some way to go, our goal is to reach 100% sustainable packaging by 2025. Turning to Slide 39 and drawing this presentation to a close, it's hard not to be incredibly excited and energized by what's happening in the business today, As well as the many opportunities that lie ahead of us. We're investing in our product range to ensure it's relevant, better presented with even better service experiences across multiple channels And at the same time, working to deepen the relationship with our commercial customers. The acceleration of our digital and technology agenda We're able to better understand and service our customers, be more efficient and reduce complexity in the business. But As I just mentioned, staying true to who we are with our focus on team and community. Executed in a disciplined manner, it will allow us to continue to drive sustainable growth, Creating long term value for our shareholders. I'm now going to invite my Director of Finance, Justin Williams, to join me and we very much look forward to taking your questions. Thanks so much. Hi, Richard Barwick from CLSA. With regards to Adelaide Tools, is this is Adelaide Tools more about the rolling out that format and what that can mean in terms of Working delivering revenue or earnings or is it about the capabilities of buying power and so on that you can then bring into the inside The normal or the traditional Bunnings business? It's a great question, Richard. It's very much about growing that Well, Matt, the challenge that we've always sort of understood from a Bunnings point of view is that, there's certain brands and Certain types of trades probably wouldn't consider Bunnings Warehouse as the most or Bunnings as the most appropriate place, to purchase They're tools and we see a very strong segment based approach or category based approach to the way that some brands sort of Operate. So for us, it'll be about scaling Adelaide Tools and what we name it outside of South Australia Into a network across Australia and New Zealand, it's probably going to be somewhere in the vicinity of 75 or so stores In the medium term, so the next sort of 3 to 5 years, but it's clearly an opportunity for us to deepen the connection with specialist trades In those categories and provide a differentiated service experience as well as offer them the brands and products that are important in the segments that they work in. Many of those don't have a natural home within the product architecture of the Bunnings format. Okay. And does the same sort of thing Apply for Beaumont Tiles, again when you're thinking about what it offers and then the number of stores? Yes. So, Beaumont Hill has got a much bigger store network well over 100 shops across Australia. For us, It's really the differentiated service experience and deepening the amount of the build that we're able to offer and work with our builder and trade customers on. We also know that we've got a really low Penetration with the flooring trades that they don't sort of see the Bunnings format as being as relevant for them as the specialist Trade, so that ability to operate I should say a differentiated service experience is very much a part of it. And we In the sort of work we've been doing understand that that's something that we think builders will really value. And then a clarification question on your market sizing That's on Slide 24. There were you talking about the interconnected home and lifestyle commercial. You got talking about the market size, dollars 79,000,000 in Australia, dollars 15,000,000 in New Zealand. Is that everything or is that what you're Actually calling that's the commercial element to it. Just wondering what you're capturing. No, it's everything. Everything households as well as commercial. So that's what you see right now as your addressable market? Yes. Okay. All right. Thank you. It's Michael Simotis from Jefferies. Can I just follow on from that conversation around Adelaide Tools? If you look at you guys as well as A couple of the other bigger players, there are plans to put a lot of professional tool stores on the ground over the next 3 to 5 years Across the industry, stores seem to be doing quite well at the moment. Where do you think the sales will come from or where do you model the sales to come Or is it expansion in the market, obviously, bearing in mind that the cycle is pretty favorable as well at the moment? Yes, it's a good question, Michael. I think the way we sort of thought about the business for a long time is grow the market and grow the opportunities that present Within the market, it's really clear, there's a very strong demand across Australia For trades and clearly a lot of pressure on different markets actually get trades into that. So we're seeing a lot more Being done at the sort of apprentice level to sort of grow employment within the sector and I think that's one of the elements. And then it is really clear that across Housing construction, there is real demand. And whilst from a Bunnings trade point of view, we don't play in the heavy construction trade market, The trades are actually working on those sites, are very professional operators and they're looking for the sort of products and brands that Specialist trade players are able to offer and we're able to do that through Adelaide Tools. So brands like Milwaukee and Festool and things like that Our brands we see is having a natural home in the Bunnings environment, but they are very much a natural home in the specialist environment. So participating strongly in that Given there's strong demand in the existing environment and clearly a pipeline of talent coming through, if you sort of think about trades, Apprentices going into trades. That's where we sort of see that growth coming from. Okay. And then just a second question on That thematic. So you've done, I guess, 2 adjacencies in fairly quick succession, professional tools and tiles. There are probably a number of other categories that probably fit in that bucket of the trades people not necessarily thinking Bunnings is the right place to buy that product things Plumbing and Electrical come to mind. Is this a strategy of Bunnings now to pursue these adjacencies or do you need to Take stock of what you've got, and then see how that goes and potentially pursue other opportunities down the track. Yes, it's probably a little bit of both, Michael. I think we've said for quite a long time that we're always interested in categories where We're not able to service customers effectively through the Bunnings format and we do recognize that whilst it has broad appeal, it's not As relevant in some places and some product brands themselves don't necessarily see that the Bunnings format is the right Place for their brand to be showcased or sold. So we'll continue to sort of look. Obviously, we've been doing quite a lot of work on the Adelaide Tools business. Our commercial team has done a great amount of work alongside the Adelaide Tools team in bringing Parafield to life and that's a really good step in the right direction with a little bit more to do When we open the stores later this year or throughout the next financial year in the West, and similarly we'll sort of take the same considerations with Beaumont Tiles. And If there's sensible opportunities that present themselves, and they sort of fit the criteria that we're looking for, we get fantastic support From Rob and Anthony in the West Farmers Board. But yes, we'll just we'll sort of bide our time and if there's an opportunity presents itself, we might look at it, but we'll certainly be focusing The 2 that we've got or the one we've got and the one that we hope to have subject to regulatory approval and a couple more steps in our own process. Thank you. Good day, Mike and Dustin. It's Ben from Jarden. Just interested in just supply chain and also right to play categories. And If you look at what Home Depot has done in the U. S, I know you guys sort of spent a lot of time looking at some of these players, they've increased their SKU count to sort of a 1000000 odd when they look at drop ship, these sorts of things. And I just mentioned your comment, you've launched that rapid deployment center. How are you thinking about supply chain investment and increasing range and moving more aggressively into these right to play Yes. Thanks, Ben. I'll start with supply chain. So for me, The thing that sort of occupied our thinking is what happens as online penetration grows? I think we talked at the half about online penetration sort of peaking at Just over 3% of revenue, it's dropped back down under 2% at present, but that is going to grow. It's going to flow the global trends. And I think one of the things that lockdowns of any sort of measure do is push people to look to different channels and you will eventually get Some more stick from things like that as well. And we recognize that once we're sort of getting up above 5% of revenue coming from our online channel, Fulfilling from store becomes much less efficient than it is today. So what we're looking at in the Western Southers of Melbourne is What's that going to look like? And it really is, in a very Bunnings way, a test and learn environment. And we're also looking, as I said in my presentation, at Are there opportunities to improve efficiency in store by having products that customers want to have home delivered big bulky products, Kitchens, barbecues and things like that, that they're purchasing in store, delivered to their home in a more efficient way. So that formed one part of our thinking. We do know that we've still got opportunities From back dock to shelf, if you like, in terms of install logistics, we receive product on pallet. I Touched on the $30,000,000 investment in our forklifts. We want to get that product onto shelf as quickly as possible. So we're looking now with our partners, our supplier partners that is there something we can do a little bit further upstream to perhaps cross stock some of that product to bring it in perhaps on roll cages, de risk Inside the store having as many forklift moves as we currently have and getting stock on the shelf more quickly. We've got good experience in cross stock from the work we do in Green Life. And clearly ports can be a challenge as well and what we're doing with containers. So we are looking at the whole supply chain and efficiency, but It's certainly early days because the model we've had has really stood the test of time. But given some of the volume increases we've seen, it has given us the opportunity to look at some ways what a future state looks like and what we'll need to think about as we go forward there. So that's sort of where our thoughts are on supply chain and hopefully That's covered that off. On Right to Play, one of the big opportunity we've got and digital is going to do this is really let us Get the whole range that our suppliers have online. So when you go into a Bunnings store at the moment and you go to that blue special orders county, you see 100 of brochures sitting behind the counter and each of those brochures has got 100 if not 1,000 of products in them that we currently don't have Either on our Bunnings website or even in our special orders range. So working with our suppliers to get those ranges But we'll certainly increase the SKU count significantly. And then we'll continue to sort of look at what other partners are out there to widen and broaden that. The way we sort of think about right to play is that front gate to back fence sort of mindset and more around In the main what sort of fixed into the home. So a good example of that is a litter box is fixed to your home but a caravan isn't, it goes in and out. We don't sort of see caravans as a range, but we clearly would see litter boxes as a range. But that will evolve and that will change over time. And what's clear From the time I've been in our business is that 5 or 10 years from now we'll be selling things we didn't think we were going to sell, some of which maybe haven't even been invented yet. But Customer demand will sort of drive and inform our thinking on that offer going forward. So just following up and final one for me. So just on that, Do we need to be thinking about the next 12, 24 months? There's going to have to be some firmer news around some larger centralized distribution points to then These RDCs then allows you to push that range and bring more products in because it seems like given the nature of the model historically, probably need some bigger centralized sheds with some automation. You can do more of the cross dock, etcetera. Yes. Look, I think certainly over the next 12, 24 months, We'll have more to say based on the things that we're doing now to sort of learn from it. So yes, I think it's certainly going to be a stay tuned. There's more to come down the track. Thank you. Mike, Justin. I have a question from David Errington who says at the first half, Mike, you mentioned you added 6,000 new team members. Are they permanent? And how hard are you finding it to obtain and keep quality team members? Yes, great question, David. We peaked in November 2020 at 55,000 and I'm reading from my cheat sheet on that. Then we're at the moment we're at about 53,500. So we do always have a natural peak over the Christmas period with additional casual team, we've been converting more and more of the people who joined us to permanent. And I've been blown away by the number of people who've come to us from many varied industries particularly out of leisure and hospitality and transport who are wanting to stay and build great careers and that's been really advantageous for us particularly in our digital and analytics teams that the Capability and the choices of coming to a business where there's a lot going on in that space, but a business has got a really great progressive engaged and inclusive culture means that Stickability, if you like, of people wanting to put down roots and grow is good. So yes, it's certainly very strong. And in fact, our permanent retentions improved from The mid-80s up towards that 90% that I referenced just before. So absolutely. It's Ross Curran from Macquarie. Just wondering if you'd help us understand the early experience with Adelaide Tools and customer retention, has there been any pushback on the customers or have you seen any customers drop off since it's been part of the broader West Farmers Group? No, in fact actually seeing new customers starting to come through. And What we've not yet done is fully integrate Power Pass. So Power Pass in time will become an accepted payment method at Adelaide Tools as we would anticipate it would It would with Beaumont subject to us being able to complete the acquisition. And that will probably give us a slightly different lens. But yes, certainly Customers have been pleased with the offer. I think Adam and the team have done a great job in continuing to sort of drive the existing store network in Adelaide, Albeit a reasonably modest one really well and we're certainly seeing lots of new customers coming and shopping us, out of Parafield. And then secondly, can I just ask around, can you just help us understand the pricing strategy? So a lot of those raw ingredients, timber, you called out before, are seeing pretty sharp Input cost increases. Can you help us understand how you're thinking around the ability to pass on to customer versus EBIT yourself? We're seeing a lot of inelasticity of demand in the U. S. Around some others, but a lot more around others. So how do you think about it? Yes. Look, the last thing we ever want to do is put our prices up. We think about timber, we've probably got another 6 to 12 months Of some challenge, if you sort of go back behind the mills, feedstock is in a reasonably good in a really good space, but getting it through the mills and clearly the strong demand He's putting pressure on. We do a lot of work with our suppliers to look at ways that we can sort of offset costs through improved efficiencies in Supply chain or volume purchases, which I touched on in my presentation. I think inevitably you get to a point where the market itself is sort of defining where price is at. What we want to make sure is that the value proposition at Bunnings is the strongest in the market. I'll just push on that. Could we expect some gross margin pressure then over the next 12 months or are you making it back on volume? I think there's we always model gross margin going down partly to sort of keep a really tight discipline on costs and partly recognition of Just how competitive the market is. So we certainly focus on that, but volume is one offset. And as I touched on a couple of times in the presentation, there's a lot of things going on Inside the business at the moment, which are really around reducing complexity and sort of pulling costs out. So any sort of gross margin pressure, We do everything we can to not have that sort of fall through to the bottom line. And in a scheme of the overall business timber on its own certainly not something that would have a material impact on us. Thank you. It's Brian Raymond from Citi. Just on the presentation, I think there's a noticeable shift away from Focus on the online opportunity, but I think last time you addressed the market there was a big focus on that and now a bit more towards trade. I'd just be interested in a bit of an update on How are you seeing your online business 12 or 18 months on from it being launched more broadly? How's penetration going and profitability and that side of the business, please? Yeah. Look, it's a good point you make, Brian. I think in 2019, we were sort of at the starting line trying to get Get where we needed to go. I think we've accelerated that and the team have done an incredible job not only to launch our transactional website but actually Completely replatform it as well and do that in the middle of a pandemic on time and on budget was a huge credit to the team. And it's It's still early days, it only went live in April, but now it's part of our business, right? So it's I guess the way we sort of think about it is we move we want that to be as efficient as it can be and a Great experience for our customers, but a lot of growth we're looking at coming out as I touched on from the commercial business, which obviously you picked up on through the presentation. Revenue, as I said before, peaked in the first half at 3.1%, which was driven by the long lockdown in Victoria. That's back under 2% of revenue at the moment. We have a view that it will clearly grow over time. But from a profitability point of view or things like that, it's There's nothing in there that's concerning us at all and the team are really doing a great job on getting product to customers' homes that they want to deliver it or picked up in store or Dropped in the boot of their car through Drive and Collect. And it was really interesting just in the last week here in Victoria just how quickly the team could make That pivot and how well that's operating under what's quite a lot of pressure in this particular market. Great. And so in terms of that getting to a bit more of a profitable position for you guys generally, if you're saying you're sort of not too worried about at the moment, but in order for that to Become a bit less of a drag on margin. Do you think it's a scale game or is it an investment in your business that's going to make things more efficient on a unit basis? Yes, we certainly don't see it as drag on margin, but by any stretch of the imagination. But what we are conscious of is that once It gets to a certain level of volume. There's a for want of a better term, you end up with a bit of a distraction risk in your store because you've got team members Zipping around picking stock and they're being stopped by a customer or needing to help someone move something, you will get You will get efficiency lag there. So that's why we're starting to think about what can we do in a more centralized way, which is what the Western Fulfillment Center, Which is what we're calling it for now, will do for us in Victoria in terms of providing a window into how is there is there another way to do this more efficiently based on the sort of products We have now the way customers are shopping and the sort of efficiency we can get from that. So, yes, it's certainly test and learn, but no negatives at this stage. Okay, great. Thanks. We have a question from Brooke Campbell Crawford, who says, noted the earlier response to a question that some categories for instance tools don't fit Actually within the Bunnings store format, what other categories would you look to penetrate through separate store networks either organically or through acquisition? Yes, it's a good question, Brook. So it's not so much the products, it's more that some brands and brand owners choose to sort of Channel manage if you want, certain products, but we have interest right across that sort of broad ranging lens where We're looking at and we're interested in I should say categories like electrical and plumbing which I think one of your colleagues spoke to before. But that's more the back of wall. So what you don't see after the property is built. We're also interested in categories like appliances that are sort of fitted the home, so we're not really thinking as much TVs and sound systems, but more in sort of fridges and dishwashers. We do have A small range of those, but clearly there's opportunities to look for growth in those as we see our global peers do. So it is within that ranging lens. We're very focused on that. We're not sort of considering homewares or some of the softer furnishings. That's not what we'd sort of see in our purview. But in anything that is Part of the build of a home from foundation through to final fit out, that's what we're interested in. Hope that answers the question. Okay. Thanks, Mike. Thanks, Justin. If there's no further questions in the room, we'll take a break for coffee and morning tea. And for those online, we'll be back shortly. Okay. Well, welcome back. Time for us to get on to the Kmart Group part of the presentation. Well, first of all, good morning, everybody. I'm very much looking forward to sharing our thoughts on Kmart Group and some of the unique assets that we have in each of the businesses As well as the way that we are bringing these together to create more value for our customers and for our shareholders. Now in a very, I guess, COVID like presentation, you've got me in person and then we've got a number of the team from Melbourne who will be joining us via video. So we've got Richard Pearson from Target, Peeps Alborn from Catch, who lead the Target and Catch businesses respectively. And we've got Alex Perseska, the Kmart Group CFO, who will be joining me for questions on the way through. We'll run through a brief presentation on the various businesses and then we'll have an opportunity for questions. We provided an extensive update on Kmart Business, that's the strategic update in April. So the majority of the focus today, not surprisingly, will be on catch and Target. Turning now to Slide 42. This slide demonstrates the significant scale of Kmart Group, which is a source Advantage for all three businesses. Combined revenue in the last financial year was over $9,200,000,000 with online sales of over 1,200,000,000 We expect this to continue to grow as we complete the conversion of Target to Kmart stores, continue to improve Store sales density across Kmart and Target and accelerate online sales across the 3 businesses. One advantage of this combined scale is the multiple customer touch points We have which help us continue to understand our customers better and create further opportunities to create more value for our customers. For example, customers now have the option to order online and collect at Kmart, Target or Catch products from the majority of our Kmart and Target Australia Stores providing convenience and faster and more economic fulfillment. We are completing this rollout in the coming months. Catch also plays an important role as an additional channel to market with the successful launch of Target on Catch Marketplace last year providing Target With the ability to acquire new customers that were previously not shopping either at Target stores or target.com.au. Not only did Target quickly become the 2nd largest Finally, with over 250,000,000 transactions across the businesses, the ability to generate rich customer insights And offer an enhanced and personalized customer experience is greater than each of the businesses could achieve on their own. Turning now to Slide 43. The period of time since COVID appeared has been an extraordinary one. And in Kmart Group, we have consistently focused on three things. Firstly, being there for our customers. Secondly, keep our customers and our team members safe. And third, focus on the long term. We have used this period of time to accelerate our strategic agenda and proactively invest in the future. The way we run the group is to ensure we have Clear accountabilities across operational leadership teams for each business. We collaborate on shared initiatives where it makes sense for each business. And in a small number of areas, we make group decisions. Property is an excellent example of this where Alex and I take accountability for those decisions And this ensures we make the right commercial decisions for the group. Other areas are called out at the bottom of this slide. The main takeout is that there are dedicated teams at Kmart led by John Galtieri, Target led by Richard Pearson and Catch led by Pete Saraborn who are 100% focused on the successful operation of their businesses. Turning now to Slide 44. Sustainability is important across the Kmart Group and we are one of the highest volume retailers in the market. We sell a lot of products And every product sold needs to be sourced from the earth, made somewhere, transported and at the end of its product life disposed off. This equation is no different from any other retailer and the sustainability challenge is one faced by all. However, where we do differ is in the opportunity We have to do sustainability at scale, making it more effective and more affordable. We also see that if we can make this work, we can help lead the way for retail in Australia. And this is why we are working with the leading players globally to build and deliver our program. We have also recently committed to bringing forward our 100% renewal target to 2025 in line with a number of the other West Pharma's businesses. Our full list of commitments right across The people and planet pillars of our program are available publicly on our website and we're excited by both the momentum we've created in this space and the opportunity that lies ahead of us. Turning now to Slide 45. As I previously mentioned, I'll briefly touch on Kmart today to recap on the key messages from our presentation in April. Turning now to Slide 46. Many of you have seen our strategy slide before and has not changed. Our purpose of making everyday living brighter manifests itself in 2 ways for our customers. The first is a rational response to lowest price. People really appreciate low prices as most Australians are on a tight budget and low prices really help. The second is a more emotional response From making products which were previously out of reach for many, but are affordable at Kmart. Our customers love this. It's no compromise. A key element of our model is bringing on trend products to market at the same time, especially players, but of course at the lowest price. Our strategy of better products at even lower prices enables this and we have lots of opportunity to further improve our products and further reduce prices. Our second strategy of a great place to shop that is simple to run and plays to a great store or a great online experience whilst keeping it simple and low cost to operate. Our business model is anchored on volume and economics of scale focusing on families lowest price at everyday items. Our values are very important to us as we strive to have a great place to work And when we deliver, all of the results follow and we continue to aspire to 10, 1, 6. I do emphasize aspire. It's not a forecast, of course. It's $10,000,000,000 of sales, dollars 1,000,000,000 of EBT and sorry, dollars 6 stock turns. These numbers give our team a clear goal to go after and keep us grounded as we make progress towards that goal. Turning now to Slide 47. Kmart is categorized as a department store and globally department stores are in a challenging position. I do believe this is the wrong way to think about our business. Whilst Kmart is a multi category retailer, the comparison with department stores stops there in my view as the fundamentals of this business are very different. At our Kmart Investor Day, we covered 5 topics that demonstrate how Kmart's unique attributes differ from other multi category retailers and I thought it'd be worth summarizing them again briefly today. The core economic model is very simple, but not easy to replicate due to the scale advantage in the product development and sourcing capabilities Kmart has developed. 80% own brand, which is direct sourced through our own team, enables us to acquire products at a very low cost. This enables low prices and consistently we pass those on As cost savings to our customers, lower prices stimulate more demand and as volume grows, volume enables further sourcing benefits. And of course, we keep on repeating that process. Our stores are at the center of everything we do and our store network has been an important driver of Kmart success over the last 10 years. As retail evolves and data and technology become critical, we see These capabilities helping Kmart to enhance our lowest price positioning by improving our customer offer whilst further reducing our operating costs. Finally, as one of the biggest volume retailers, we have a big role to play in reducing the impact we have on our planet. Turning now to Slide 48. Kmart strategic priorities over the medium to long term focus on leveraging its unique competitive advantages by continuing to improve the customer offer, While also increasing efficiency in our supply chains and store operations through a greater use of technology. The first priority is continue to focus on doing the things that have Made Kmart so successful in recent years that he's continuing to leverage its market leading size and scale to expand market share In existing categories and leveraging our product development capability to enter new product categories. We are also making significant investments in our online offer, which will result in significant improvements in the online customer experience while also realizing improved efficiencies. We continue to make progress on building a digitally enabled supply chain, focusing on increasing the resilience and efficiency of our sourcing and supply chain operations and we expect to see significant benefits in this area over the next 2 to 3 years. The investment will be complemented by the technology investment we are making in the store, starting with RFID inventory tracking capability which we demonstrated at our Kmart Investor Day. Over time, this investment will enable us to realize significant operational efficiencies in our store operations. We have also embarked on our efforts to increase the level of personalization that our customers experience both in store and online. This will help us to better anticipate the needs of our customers and to help them discover new products and experiences. Finally, we will continue to pursue our sustainability commitments and ambitions to ensure that Kmart remains a significant force for good in emissions and waste reduction and of course, Ethical Sourcing. Turning now to Slide 49, and at this point, I'll hand over to Richard. Thank you, Ian. Good morning, everybody. And for those that haven't met, I'm Richard Pearson. I've been the MD at Target since November last year. And it's my pleasure now to take you through the Target section. Firstly, I'd like to start by thanking the Target team for their continued efforts and contribution during what There's been a period of significant challenge and change. I feel very privileged and proud to be leading this business. And I'll now start on Slide 50, please. Our vision at Target is to inspire families to live better. We do that by making it easy to afford quality and style. We're very clear in our proposition and where we play as a destination for apparel and soft home. Within this, we see womenswear Has been the category of primary importance, supported by strong offers in men's, kids and home. To deliver this proposition, We're clear on our strengths and how we will win. Firstly, we see the Target brand as our key asset. It's got very strong awareness And a real love for the brand, and we need to continue to build on this. Secondly, our product offer, centered around affordable quality is our real differentiator, We'll deliver great value to our customers by providing real quality at significantly lower prices than our specialty competitors. And I'll provide some examples of this later in my presentation. Thirdly, we're moving towards a digital first offering. We have a really strong online foundation with good momentum, and we're increasing our investment to continue to improve our customer experience As we see online has been our key growth driver. And finally, we're able to leverage advantages from being part of the Kmart Group and Wesfarmers In areas including sourcing, technology, data, digital and sustainability. Turning to Slide 51, please. As you're all aware, the last 12 months for Target has been focused on delivering a major business reset. And I'm really pleased to That the significant actions we announced last May to restructure the business are almost complete. While Target is now a smaller and simpler business, We still have significant scale with a national footprint of 142 stores and annual sales in excess of $2,000,000,000 We've reset the commercial model by significantly reducing fixed costs and we're targeting a higher mix of the cost base to be flexible rather than fixed. This de risks the business model to fluctuations in customer demand. The reduction in our cost base has been enabled by the simplification of our store network Through a reduction in store numbers and the transition to a single large store format. Furthermore, we've sought to simplify our ways of working across the business, Including in merchandise, where we are leveraging partnerships with suppliers in categories where they can provide better expertise and commercial outcomes than us. And we're also automating many key processes. We've reduced our lease liability from $1,100,000,000 in FY 2020 To $800,000,000 which provides us with much greater flexibility to adapt to changes in the external and internal environment. We'll continue to take a very commercial view of every store and only renew leases where there is a strong commercial rationale Supported by appropriate tenancy costs and short term flexible lease arrangements. So we think we've got a really strong foundation And commercial model for the future. Turning to Slide 52, please. Our absolute priority for FY 2022 is to maintain momentum and Profitability. While we've had some pleasing recent results from a combination of external factors and the underlying improvement in the quality of the product offer, There's still a lot of work for us to do and our top priority is to achieve consistent and sustained financial performance. We'll continue to accelerate online as we see this has been the priority growth engine for the business and I'll cover this in more detail later. While we're still early in our data strategy, a key focus for this year will be building a customer data asset. This includes growing and ingesting the customer data we have access And then building the capabilities to leverage this for personalized customer experiences and a deeper relationship with our customers. There's still a lot of work for us to do to continue to differentiate our product offer as we know that customer perceptions of quality, value and style Aren't yet where we want them to be across all our categories. But pleasingly, where we are delivering product in line with the strategy, We can see it's resonating really well with customers. We've seen this in our Children's Wear department, which has delivered strong comparable sales growth in the year to date. Within this area, we have a clear proposition, which is to provide affordable quality to our customers. We've taken steps to elevate product quality And style by introducing new and improved fabrics and designing our products with increased functionality and comfort. The range architecture has been reset to provide value for all customers across our good, better and best product tiers. An example of this is within our leggings range, where our entry product, the essential legging is priced at $6 for younger children and is made from soft organic cotton, Which offers superior quality relative to value specialty retailers and at a lower price. For customers who want something a little better, We have printed leggings priced at $8 for younger children, which offer fun and trend focused prints. And in our best tier, we have a toasty legging product Price from $12 which is made from a heavier weight yarn and provides superior warmth in the colder season and represents great value with quality on a par with Specialty retailers put at a much lower price point. We're confident that we can repeat the success we've seen within our children's wear range By continuing to offer affordable quality and through implementing and embedding a style guide across the business To ensure we maintain a consistency of product design aligned to our strategy. And we'll continue to have a relentless approach to trade To increase our customer transactions, including by optimizing our execution and promotional mechanics. Turning to Slide 53, please. We see our digital online platform has been the front door to the brand. We know that most of our journeys either in store or online start on the site, Which is why it's so important for us to showcase our brand credentials. We've got a bold plan for our online business, where we're increasing our investment to acquire new customers, Including through our relationship with Catch, we're also investing in an improved customer experience across both the site and the app, Including through greater personalization. We'll invest in customer support by creating self-service portals for personalized preferences, Implementing a faster online returns process and making it easier for customers to track the status of their order. We'll make our website easier to shop Through quicker checkout solutions and an upgrade to our search platform to make it easier to search and buy product. And finally, We'll improve the reliability of our fulfillment proposition by leveraging our distribution centers to support consistent throughput and lead times And the optionality available to customers through launching an express next day delivery service to all Greater Metro areas. We also have a stronger focus on apparel through improved photography, fit guides and product descriptions. Turning now to Slide 54. In summary, the key takeaways for the target business are the reset of our commercial model is now complete And our near term priority is to stabilize the business and achieve a consistent and sustainable return to profitability. We have an iconic brand with strong awareness that we need to continue to build. We have a clear proposition as a destination for apparel and soft home. Affordable quality will differentiate our product offer and we'll continue to improve our product quality, style and range architecture. Future growth will be supported by accelerating digital capability, and we're investing in data and digital skills to improve the customer journey And deliver personalized experiences with plans in place to improve operational efficiency and the profitability of the channel. Thank you. I'll now hand over to Pete to take you through the catch plan. Thank you, Richard, and good morning, everyone. As Richard said, my name is Pete Sauerborn. I'm the Managing Director of CATCH. Very sorry that I couldn't be there in person, but happy to be here virtually to share an overview of the Catch business and our strategy with you. So we'll start out on slide 56. Our vision for Catch is to be the trusted place where Australians start their shopping journey. This is an aspirational vision that we've set to guide the team and we're confident that we have unique assets to leverage and investment plans in place to build towards this To start out, I wanted to provide a brief overview of the Catch business. Catch is a general merchandise e commerce marketplace. We're category agnostic, which means we operate in a very large addressable market providing significant opportunities for growth. While our product offer is rapidly evolving, today we offer customers a range of over 2,000,000 SKUs that can be purchased on our website or through our mobile apps. We have about 3,000,000 active customers, but our brand awareness is relatively low compared to some more established competitors And we see this as an opportunity. Our engaged customer base makes Catch one of the most preferred online channels for brands and sellers of all types To connect with Australian customers. In terms of fulfillment assets, we have a 62,000 square meter fulfillment center in Melbourne, Which has automated goods to person picking and automated packing machines. Like many other online businesses, we've seen significant Volatility in demand over the last year as varying degrees of COVID restrictions have caused customers a shift between online and physical channels. We delivered $1,000,000,000 in gross transaction value in calendar 2020, reflecting strong demand and investments we've made in Improving the offer and increasing brand awareness. So moving to Slide 57. Since its acquisition by Wesfarmers in 2019, Catch has been building the foundational elements of a differentiated customer proposition, Which leverages its unique assets. The first element of our proposition is a wide and growing product range. Founded over 14 years ago as CATCH of the day, CATCH has a heritage of a deals based business model bringing great value to customers. The reliance on this deal based business model has been declining over recent years and we're focused on adding more depth and breadth of our product range to serve customers On more and more shopping occasions. Today, there are over 2,000,000 items available for sale on Catch. These items are sold through 2 different business models. First, our retail first party business model, where we sell about 70,000 SKUs And then our marketplace 3rd party model where about 1900 marketplace sellers sell items on our site and we charge a commission. These two business models work well side by side allowing our retail teams to source top brands and high volume SKUs while allowing the marketplace to fill in the longer tail items to serve our customers. The retail offering generally sets a high bar for customer experience since we are in control of the listings, The pricing, the fulfillment experience and for the marketplace, we set performance guardrails and ensure that sellers live up to those. Top brands ranging from Tommy Hilfiger to Calvin Klein to Apple, KitchenAid, Dyson, Carlton Brewing and many more are choosing Catch as their preferred online channel in Australia. Also top Australian retailers such as Bing Lee, Petstock, Kathmandu, Booktopia and more are choosing cash. The second element is providing customers with flexible Shopping and fulfillment options. We focus on providing simple shopping apps in iOS and Android to create convenience for our customers And around 45% of our orders come through these mobile apps. We're proud that our iOS app is the top rated shopping app in Australia. To provide convenient and cost effective shipping options, we leverage Target and Kmart store locations for click and collect delivery of cash purchases And we're seeing strong uptake of these options by consumers. Finally, to encourage repeat purchase behavior, We offer a shopping subscription program called Club Cash. Subscribers have access to free shipping on all of the retail purchases And exclusive offers and special discounts. Cubcatch subscribers are very loyal and shop multiple times more frequently than non subscribers. So moving to Slide 58. Catch's category agnostic model enables it to the business to Access a massive retail market in Australia, over $190,000,000,000 in addressable market. The online retail penetration continues to grow We expect marketplace business models to grow even faster than the overall segment. Our plan is to aggressively grow share in this And in the market through 3 key levers acquiring new customers and increasing the frequency of existing customers Expanding into new categories, ranges and brands and making shopping easier by reducing customer friction points. I'll cover more on our strategies to achieve these objectives a bit later in the presentation. Importantly, we focus intensely on serving our customers Each and every time they shop with us, by creating strong relationships, insightful recommendations and great service, we'll The loyalty and customer lifetime value. On to Slide 59, please. We've previously announced that FY 2021 has been a foundational year of investment for cash and these investments have been focused in 2 main areas. First, we've been focused on accelerating growth through several customer facing initiatives. By improving our relatively low brand awareness Is a key enabler for driving growth of new customer acquisition. During the year, we launched a new brand campaign showcasing the breadth of our product range. This is Catch's first major investment in brand marketing and we'll continue to build on this platform, that we've established in future years. Expanding our product range and introducing exclusive brands has also been a key area of focus, which has yielded Strong results in some areas and key learnings in other areas. Rapidly growing our range has not come without its challenges and has highlighted several areas We're investing in supporting technology and processes are required to support future growth. During the year, we also improved the value of our Of cash subscription by eliminating the free shipping threshold, the second area of investment has been on building infrastructure and capabilities Necessary to enable the future growth ambitions. The most significant areas have been in respect to our distribution center where we've invested in higher levels of automation to Increased capacity and productivity and talent. We've increased the size of our headcount by over 65%. In FY 2022, we'll accelerate our investments in foundational capabilities and long term growth initiatives to build capacity ahead of GTV growth. Slide 16. Our strategic priorities start with the customer to create a proposition that truly resonates with the Australian We do this by providing access to great value and a unique range of Australia's favorite brands and retailers, Offering flexible delivering and return options, and leveraging in particular Kmart and Target for Click and Clacks And by keeping our Australian personality central to our brand and customer touch points, to deliver on our customer promise, we're working hard to become the trusted Online retailer that brands and sellers prefer by providing access to growing and dynamic customer base and Also by providing rich data and insights to the brands. Accelerating subscription is our next priority. As I mentioned, customers that subscribe are more loyal and buy more frequently. The foundation of Clubcatch is a free shipping offer The more the customer buys, the greater they benefit. We are actively adding special offers and unique deals that are exclusive to our subscribers as well. To support this growth and improve the speed of customer delivery, we're investing to expand our fulfillment network into New South Wales in FY 2022 When we plan to commission a 30,000 square meter automated fulfillment center, which combined with our existing Melbourne facility will provide Sufficient capacity for growth for a number of years to come. And finally, we'll continue to drive leverage and synergies From Wesfarmers, including through ongoing expansion of the Anco product selection on the site and continuing to utilize the Kmart Group store network to For click and collect. It's also exciting as both Richard and Ian pointed out, to note that Target joined the Catch marketplace as a seller And became one of our top sellers in a matter of weeks. This is a notable win win win as it has delighted the Catch customers. It has extended the reach of the Target brand to new customer set and it's also contributed to the cash growth. So thank you. I'm going to pass it back to Ian. Wonderful. Thanks, Pete and thanks, Richard. Turning to Slide 62, where I'll take a moment to recap on the key messages from across Kmart Group and provide a summary of the outlook for each of the businesses. In total, we are confident that the strategic priorities As outlined today, we'll put the Kmart Group in a good position to deliver sustainable growth over the long term. In Kmart, The focus remains on leveraging our scale and product development capabilities, completing the store conversion program and delivering on our digital initiatives. In Target, we will embed and stabilize the Target operating model whilst accelerating online and continuing to differentiate the product offer. Across the Kmart Group, we will continue to use our combined assets to deliver incremental value, Particularly through fulfillment initiatives, including click and collect and developing an enhanced understanding of our customers and expanded channels to market. In Catch, we continue to develop a customer proposition that is truly designed for the Australian market. This will mean accelerated investment ahead of GTV growth to allow us to build a scalable model and to grow our customer base. In recent months, Catch has been experiencing negative GTV growth as the business has begun to cycle Significant shift to online channels that occurred through 2020. On a 2 year basis, however, GTV growth remains strong. Following the ongoing progress of the Target store conversion and closure program, we have also been able to revise downwards the one off non operating costs that we expect to incur In the 2021 financial year, these costs are now expected to be a total of $60,000,000 to $70,000,000 a reduction from our previous estimate of $90,000,000 to 100,000,000 That brings me to the close of the presentation. But before I finish, I would like to say a big thank you for the team members across Kmart Target and Catch. I guess for all of us, it's been a really intense last 12 months with COVID and particularly for those team members who are working in stores with our customers every day. I have a great deal of gratitude and thanks for the hard work that they've done over that period. We'd love to go to any questions that you now have. Hi, Ian. I'll go first with one from David Errington. He says the comment that Target has reduced its cost base to reduce its risk. Is there any hot Is there a higher proportion of variable costs versus fixed costs? He says, I can understand how leases and overhead costs have fallen, but other than just making the business smaller By reducing leases and head office costs, can you elaborate further on how the target business is more efficient than before? And can you give us a guide As a proportion of cost of doing business is now variable versus how much it was before. Yes, let me have a go. So a few questions embedded in there. So I'll try and sort of them in total. The first thing is the business is much simpler than it was historically. So I think in Richard's slide, you The big reduction in store numbers, but within that, there was the elimination of target country within the target model. So that simplicity in itself makes life a lot simpler for the business to operate. So if you think of it from a buying and a supply chain, trying to service a small store format And the target model was quite complex. It was a different set of ranging and a different set of product principles that we needed apply to those stores and with the volume that we were pushing through that was complex. So I think that was the first piece, simplicity really helps. We've also looked at simplicity through the lens of the product offer. So there's core areas of the business and you heard apparel and soft home really being called out strongly. And of course, we'll have a lot of our own brand products through those categories. When you get to other categories, which we see rounding out the offer still being very important, we'll return to local Which is again a simpler model which we can scale up and scale down based upon demand because we obviously are leveraging The supply base instead of doing the lead time ourselves through direct sourcing. In terms of the split of fixed versus variable, that's something that we're going to continue to work I don't have the number in front of me in terms of what that split is between the 2. But if you look at leases themselves, historically leases have always been a very fixed cost Basis and have generally only ratcheted up. We've been working very hard across Kmart and Target to move to a much more variable lease structure. And so we generally do have a component that's fixed as well below the revenue line. And as we renegotiate new leases, we have a variable component that then gives us the ability to adjust The cost of the leases as sales go up and down. Now in the Target business, you know we are focusing on really growing our online and we're being more opportunistic with our store So we're not signing up long leases within target. We're very much being focused on the short term with our lease portfolio. That's resulting in increasingly percentage rent deals or deals with an increased proportion of percentage rent. So if you look at the variability versus fixed, What we have is an improving picture as time passes. And that's very much our focus on target is to continue to make that cost base more and more variable as time passes. From Jarden. I'm wondering if I can ask Peter, question. I don't know if he's still on the line. Is that possible? We just thought I'd try and tackle the questions just because it was easier with me in the room. I was interested in maybe sort of in your discussions with I was interested in hearing from the outside as you in terms of some of these obviously come from Amazon and the U. S. Looking into Australia And New Zealand and particularly around just how crowded the whole marketplace space is in Australia. You look at the slide there And sort of being the destination for people to start shopping Amazon's about 50% in the U. S. And the view in terms of the level of consolidation we need In the marketplace space in Australia, the extent to which you guys would look to lead that and then following on from that, sorry, a lot on this, is just his comment around aggressively growing market share. What does that mean? Yes. The way that we look at it is we see marketplaces being a disproportionate beneficiary of online growth. So that's the first core assumption. So as a sector, if you like, or a subset of online, we see it being one of the biggest growth areas, which is one of the reasons why We were so enthusiastic to acquire Catch. So we think there's an opportunity to be a participant of that natural growth versus having to pull share necessarily from other marketplaces And then of course over time there's going to be a competition between the marketplaces based upon their relative propositions. And what you've seen from us is we have an asset Within Wesfarmers of some really strong powerful brands and we're trying to bring that to bear for the benefit of Catch as a differentiator. The second piece we have is, of course, we're part of Wesfarmers. And so we have good funding availability for us to be able to invest in this business and to think long term. I'm sure that's come through in the presentation that we are thinking about this as a long term play versus a near term profit generator. And then of course, yes, we're focused 100% on the Australian market. So we're very keen to ensure that we get really close to our customers and leverage our customer data across our businesses again for the benefit of cash. So just the aggressively growing share comment, just the biggest difference I suppose you have a look at you guys versus say The bigger marketplace in Australia, your range is materially smaller. It's sort of probably less than 5% of what some of your bigger competitors are. How do you aggressively grow your range and then how does price fit into this as well? Yes. I think the nature is there's always going to be some items Very price sensitive, particularly on a marketplace. So the highest volume lines is going to be very little price differentiation Would be my expectation across the key players. But of course, as you go increasingly wide, then there's an opportunity to have unique products within that range. And you look at the offer that we have across Kmart and Target in particular and as we range those products on Catch, Catch will be the only marketplace that has those products on there. So that gives us an ability to product differentiate again in a way that would be difficult for others to achieve on the way through. So yes, product expansion is one of them. I think Pete called that out as one of our strategic growth levers and will be important for us for the future. I think the nature is that the growth rate we expect to be very high as we go through. That's why we're investing in the mails that we are. So I think the word aggressive is probably just in the Relative to the growth rates that you'd expect to see maybe in a Kmart on the target, which obviously a more mature businesses, we wouldn't expect to see quite the same growth rates from. Sorry, just finally. So range if you're at 2,000,000 odd SKUs today, do you see that as moving to 20,000,000 or 30,000,000 or 40,000,000 in the next 5 to 10 years, that just seems like the biggest difference between you guys to suddenly being the destination as you'd be upset. Yes, we haven't put a formal target number of SKUs, but certainly our ambition is to carry more of our own SKUs, our in stock business that Pete called out. So we're sitting at roughly 70,000. Our desire is to continue to expand that number significantly over the years ahead and we would absolutely expect grow the marketplace SKU significantly as well. So it is a big part of the growth is adding more SKUs, so to give more reasons to shop for customers. Really what we're trying to create here is the opportunity to be the place to go for many, many products. So CATCH is very much designed to be much more category agnostic And it gives us the ability to play in a whole number of categories which don't suit any of the other retail brands within West Pharma's. It's Michael Simotis from Jefferies. First one for me on target. Clearly, you've made a lot of changes In the business, how confident are you that you do have a sustainable business now? I mean history would suggest it is Quite difficult and clearly the cyclical backdrop right now is favorable. So how confident are you on that? And if you did need to rationalize Stores further, is that possible or do you then start to get to a position where you're subscale? Yes, Michael, it's a question that's always on our mind Because we I'm acutely aware of the history of Target over the last decade. I think what Richard and the team has done this year has been pretty exceptional. The store closures Have been undertaken incredibly well, equally good on the Kmart side to do the conversions. The net result is the business has maintained good momentum Through this period, which you could have easily lost. The conditions are favorable. So I completely agree with that summation that you have. And so when we look through the results, we're trying to look through to see, well, how much of the improved performance is the environment and how much of the improved performance is Through the activities that we've undertaken, I think there's good evidence points within the data that there are that we should have some confidence around the future. But until we really demonstrate results over an extended period of time, I think we'd all want to see that play out before we said, yes, we've definitely made it. And if I look at it from the flip side, we have derisked the business enormously on the way through. The cost base is a lot lower than it was historically. So we've talked about the variable cost and making sure that cost base is not only lower, but we can adjust it. And if you look at leases, Yes, we can adjust. We can close stores in many cases if we wish to. If I look at the fleet that we have at the end of this year, I think we'll only have a handful of that are negative contribution. So the current position is they're in reasonably strong position and delivering value. Yes. So and the last piece of course is when you look at it in the context of Kmart Group, it's a much, much smaller proportion. So again, the The magnitude of the risk is always going to be smaller because it's a much smaller business than it was historically. So I think there's reasons to have optimism on the If we can deliver on the strategies that we've called out, continuing to differentiate on the product offer around affordable quality, continuing to really drive online and make online Much, much larger part of the business over time. And then of course, I think if you look at it on the risk side, I think that's been de risked. Okay. Thank you. And then just on Catch, Clearly, it's a long term opportunity and I don't want to be short term, but the investment that will be made in FY 'twenty two, The business sort of roughly breaks even. How should we think about that just to set expectations from an operating loss perspective for Catch? Yes. Maybe if I can maybe if I sort of try and take this one a step back and give the perspective. When we acquired Catch, It was a very good business that was run for a specific purpose. And the founders who I've got a great deal of respect for ran their business to be a profitable business every day. But in doing so, it meant it wasn't built for growth. And so when we acquired that business and we spent $230,000,000 on the acquisition, We knew that was not the cost to build what we needed to, to have a scalable high growth business. So if I give you a really basic analogy and hopefully this works, It's a little bit like we bought a really nice house and a really nice street, but it really wasn't big enough for our family. And we knew we had to do the extension and the renovation To really get it to where we needed to. And that's what we're doing through this period. So if I try and bring that to life for you, we clearly got things like automation distribution centers, which came through, which Some of that is OpEx, a lot of that is CapEx. But if you look at some of the capabilities you need to run large SKU numbers, you need a lot of automation In the technology. So at the moment, we manually manage pricing. And we do and we're Relatively dynamic pricing relative to competitors. So the more SKUs we put on, the more people we need to manage that. So investment is sometimes in things like automation and transformation So that we have the ability to scale and grow in the future. The investments also in things like marketing because we know acquiring customers is important. And if you go back on a 2 year basis or back 20 or so months ago when we acquired the business, we had about 1,600,000 customers At that time, we're now up to just under 3. So you can see we've had a big growth in customer numbers through that period. So there's multiple elements here which we'll continue to invest in and I think you should think That investment over a number of years. And if you think of it as cash versus EBIT, I think that might be an easier way to think through it. And think of it of when we bought this business, it wasn't really a scalable business at that point. And what we're now doing is we're layering in the investment to give us that ability to scale. Yes. Okay. Thank you. Hi, it's Ross Curran from Macquarie. Sorry to keep going back to this point. The new rebased Target, are you now committed to that business? You've asked us to sort of look long term. On a 5 to 10 year view, is Target With the store network as it is today, is that still part of Wesfarmers or is it not? Yes, I mean, it's probably a question for Rob, not me. But I think if Rob was on Rob's lap here, he'd probably say that every business is always up for sale if somebody offers a good enough price. Now for me running the business, I see a future for it with us. I think it's a great brand as Richard called out. And we see that consistently. I think we've really returned to where Target was successful around affordable quality and we're really doubling down on that. And I think the new news is the Acceleration of online and making it a smaller, simpler business, which I think gives it the potential for sustainability that we didn't have prior to the adjustments that we've made over the last 12 months. So I do see a future there. I don't underestimate that it's going to have some challenges along the way. But I think if we can successfully Execute on the strategy we have. I think there's reasons for it to be optimistic. Is Rob in the room because this is a pretty appropriate time for Someone here to tell us if this asset is part of business or not? I'm sure you can pick it up right at the end of the day or catch Rob in the break. If it is then part of the business, it's pretty noticeable if you go into a Kmart versus going to a Target that one of them has Been given love over the last few years and CapEx on the stores and one really has been starved of money. Can we expect increased CapEx in the remaining target network from here? It's not the priority. The priority is to focus on the areas Which we've called out through the strategic presentation today. So the investment will be in data. The investment will be in online As we continue to grow that out and we see online being a really substantial part of this business over time. Now I think at the moment with the track record that we have, if we said if we came We're going to go and invest in a whole bunch of refurbishments. So I think that would be criticized and I think fairly so because I don't think we have the track record yet to justify the application of capital into those stores. That may change over time as we continue on this journey and we start to get a really clean read of performances As we come out come into a post COVID world, whenever that may be, but I don't believe now is the right time to be putting more capital into Target stores. Okay. And then on capital in the Kmart stores, again, it's noticeable if you go into a Kmart store and on the weekend and stack floor to ceiling with inventory at the moment. Do you think you've ever corrected on the other way with versus where you were 12 months ago? Yes. It's We still have a number of volatile areas within the supply chain. If I take you through from product All the way from source through to shelf, what we see at the moment is that our factories are delivering to a very high level. So our delivery in full on time is at Pre COVID levels across all locations. So we're seeing good delivery from factories. It's still the freight forwarders, it's the ships, It's the containers and of course it's the Australian ports and to a degree the New Zealand ports as well where the slowdown is occurring. So we have taken more inventory into our And that's a deliberate act. If we had perfect conditions, it's more than we would need. But we've decided we were better off to carry that inventory So that we can manage those areas of volatility that we are still seeing. And at the moment, we think it's the right choice. Now with John Galciero, we're constantly looking at this question to say when is the right time to Bring that inventory down and when do we have confidence that that volatility is going to diminish because in the long run we will be carrying more inventory than we would like through this period. How much risk have we taken through that? Not a great deal because of course we've put more inventory into the 365 ongoing lines and we haven't really increased the inventory on seasonal lines On the way through. So we generally just change the timing of when we brought seasonal lines in. So I think from a markdown perspective, the risk is minimal, But it just costs us a little bit more operationally to carry the inventory than we probably need. Thank you. Hi, and Brian Raymond from Citi. Just on the Catch business again, just it was interesting detail on the 1st party versus 3rd party Business there. Globally, it seems like 3P is a bit more profitable for many of these businesses that do have both Then 1st party, I'd just be interested in your thoughts on the relative profitability of the 2 models and also the inventory intensity. I know some market We'll host inventory and charge obviously the 3rd party for it. Like how do you think about that sort of inventory intensity and profitability of the 2 models? Yes. Both are contributors is the way that we look at the business. And so we don't look to grow 1 at the expense of the other. We actually look at them as we We want to grow growth as fast as we possibly can. And of course, if one grows faster than the other, so be it. The great advantage of the in stock model is we Gives us complete control over price and the service quality. So we do see in stock being a critical element of the product offer Because it goes to that core, the core value and the core service delivery proposition for Catch. I think when it comes to would we supply other people's Products via the marketplace. I think it's things that we will look at over time. I think it's one of those ones that really depends on the capacity that you have available in your distribution network. Of course, if you have excess capacity, as we scale is something we'll look at. I think the priority though on that would probably be Kmart first And figuring out how we can bring Kmart into those fulfillment centers within Catch to serve some of Kmart's volume. We still see a lot of Kmart's volume going through stores, But we think some essentially through Catch could be a good opportunity as well. Okay. And then just my final one just on the Target and came up product on catch at the moment. Is that a meaningful part of the GMV there? And then just how do you account for that? Is there a fee that's paid to Catch and how should we think about modeling that? Yeah, it's pretty I mean, if you look at it at the total gross transaction value for Catch, it's pretty modest. The amount we've got of Kmart product on Catch is still small, which is mainly to do with the replatforming we're doing of the online Business within Kmart, once that replatforming is complete, then we'd expect to see the vast majority of Kmart products on there, which will be the next Within the first half of this calendar year, we'd expect that to happen. So at the moment, the accounting is not that significant on the way through, but of course we do eliminate it at a total level. It's not double counted. Right. But is it so less than 5% of GMV now would be? It will be less than that. Yes. Okay. Thanks. Hi. In conscious of time, I'll ask one from Grant and then let Richard ask his. Grant says, In relation to Catch, could you please expand on the extent to which the Kmart and Target store networks provide an advantage for Catch? Does it tip the marketplace economics materially in favor of Catch relative to marketplaces without access to store networks. Hard for me to comment on But I can talk to it from ourselves. What we do know is that as we put more and more click and collect through the Kmart and Target network, we can consolidate orders As we deliver to those stores and that consolidation means obviously on a unit basis, so the shipping costs are dramatically lower. And then the second benefit that we get A good proportion of the people that pick up from stores purchase from the stores that they visit irrespective of the brand they purchased online. So the economic model for click and collect is really powerful. The convenience for customers is that, particularly the Kmart stores, which is the majority of the stores are open very long hours. So for those of us that do work every day, it is quite easy to pop into a Kmart on the way home to pick up your item. And frequently, that's a lot easier than picking up from some of the other locations like Australia Post Well, some of the options that are out there. So I think there are some tangible benefits that are involved there, but I think The biggest ones go to speed and convenience for customers and it's also an experience which we control because they're our facilities. So it's something we're going to continue to invest in to really make click and collect and returns in store a really simple easy process for customers and we would like that To be a market leading activity for us as we go forward. So it's something we're very much going to lean into. Hi, Ian and Alex. Richard from Cell SA. Hopefully, an easy one. You've talked about the investment obviously in catch. And I think most people probably assume it's about breakeven, but or Perhaps some small losses. To what extent are you prepared to run operational losses and for how long, how materially? Yes. So clearly you're focusing on growth. So it's a hard one for us to gauge because we obviously don't get that visibility, but how should we be thinking about it on a 2 and 3 year view? Yes. It's an interesting model. Yes. So we keep on investing. We invest in costs well ahead of the GTV. So I guess we keep on reemphasizing that point on the way through. And so therefore, we are very tolerant of operating losses as we go through that phase. How long would we tolerate that for? When you look at the math of this, the irony is the better you do, the more you'll tolerate it for longer because you'll keep on actually putting incremental investment based On the performance that you've seen, now we're still very early in the journey on CAGS. We're 20 months in. So and we still see that there's a real opportunity in the market out there. We don't underestimate that it's going to be a competitive market as time passes, but we see enough evidence for us to say they're still worthy of continuing to put in that investment because of the opportunity That exists. So I think what you'll see over time is obviously as we deliver growth, if that's in line Our expectations then we'll probably double down on the investment and keep on investing. Should that not occur, then of course we'll start to trim the investment and we'll right size the cost base base to the revenue And then we can basically flip it into profitability through that process. So I think this is one way if you look at it from a risk view, The risk view is pretty low because the investment that we're putting into this business is pretty modest, particularly when you look at the purchase price we paid for the business when we acquired it. But I would think of it as really meaningful investment in relation to the purchase price, if you can think of it that way And something we would look at investing for the next few years based upon our beliefs and the data that we're seeing today. So when you say meaningful investment, is that talking an operating Outcome, operating loss? Yes, I don't think you should necessarily think we're just sitting at a zero number. Okay. As a net The more successful, the bigger the losses ultimately. In the near term, but of course in the long run, we're going to make very as you'd expect from Wesfarmers, it's all a financial decision based on what we believe the future cash flows would be. And of course, those future cash flows would be enough to warrant the investment in these early years. So if we see like an acceleration or big step up In the revenue coming through, then we should be thinking, okay, that's going to equate to a bigger loss in the near term? I would equate it to ongoing investment, Whether that's bigger or smaller, I think that would depend upon a whole bunch of circumstances. Okay. Thank you. That's it. Thanks, Ian. Thanks, everyone. If you just stay in your seats for 1 minute, we'll try and line up the Officeworks Team who are dialing in, if we can't get them, we'll bring the break forward. Thanks everyone. Thanks everyone. I'll hand over to the Officeworks team for their presentation. Okay. Hopefully, everyone can hear me. Thank you, Ian and Alex, and good morning, everyone. I wish I could be there in person, But I am joined online by Michael Coward, who I'd like to congratulate. Many of you know Michael is our CFO, and this week, he's been appointed our Chief Operating Officer. So congratulations, Michael, on your new role. Turning to the next slide. None of us could have foreseen the impact that COVID would have on how we live and work. And while we've seen significant change Over the past 18 months, I'm so proud of the Officeworks team who through a tough period have not only delivered significant sales growth Whilst changing their ways of working to adapt to COVID restrictions, but have done so more safely than ever before. And I wanted to say thank you to the team for all they do to keep each other safe, healthy and well every day. Officeworks has a track record of investing to deliver earnings growth through strong sales growth and disciplined cost management And in turn, delivering a strong return on capital. And today, I'm looking forward to updating you on our strategy for continued growth. Turning to the next slide. Officeworks has a large and broad customer base, including students, Parents, teachers, micro, small and medium sized businesses and personal shoppers. Our household customers Shop with us to set up a home office or a gaming area, or when looking for inspiration to take up a hobby such as painting or digital design. And of course, for those top up shops, the suppliers draw in the kitchen, you know the one that has everything in it like pens, sticky tape, Our small business customers come to us to help them start, run and grow their business From ergonomic office furniture, traditional office supplies, technology and software to the latest payment devices like Zeller Or to design their first letterhead and business cards to help with their first loan. And parents and students, Schools, early learning centers and educators rely on us to deliver great value and great quality stationery, STEM, Art and Craft Supplies and Technology. So they keep Australian children learning no matter the circumstances And can invest in what matters most, in the education of their children or their students. Since the acceleration of working from home began with the 1st COVID lockdown, we've also welcomed a new regular customer to Officeworks, the work from home customer, Who traditionally worked 5 days a week in a large city office, who we first supported to work from the kitchen table And then to set up a proper office space, who's now working flexibly between their corporate office and their home or if like me you're in Victoria, We are still aspiring to work back in the office regularly at some point. Turning to the next slide. When we last got together for the Strategy Day 2 years ago, our current addressable market was $20,000,000,000 and our market share was 9%. By delivering our strategy, growing sales and repositioning our business, our current addressable market now sits at $28,000,000,000 And we have a 10% market share. Introducing new products and services has driven this growth into adjacent markets, For example, in early learning, art, furniture and Gates to You. The second bubble represents our potential addressable market where we see opportunities to grow beyond our existing business into adjacent areas. This is estimated at $56,000,000,000 double our current addressable market. And we know our customers trust us And have told us we have a right to play in these areas. We remain well positioned to leverage both our store and supply chain network, Our B2B sales capability and our digital platforms to continue to grow in our current market and to extend into Extend into adjacent addressable markets. Turning to the next slide. The last time we met, I introduced the Officeworks strategy refresh. Our purpose and our five strategies remain the same. And our vision to inspire Australia to work, learn, create and connect has helped us communicate focus and ambition to the Officeworks Turning to the next slide. The safety, health and well-being About over 8,500 team members remains our number one priority. We've step changed our investment in activities, programs and training To support the mental health and resilience of our team. And we are increasingly using data and analytics to better understand the root cause of injuries to team members, Enabling us to design out risk. Our team have told us they want to work for a business that reflects the community And we've made significant progress over the last 12 months. We've achieved gender balanced leadership at Officeworks and 3 7% of our team identify as Aboriginal or Torres Strait Islander beyond parity. And as the talent market becomes even more competitive, we're investing in and evolving our workplace to attract and retain the best talent. Our recently launched flexible working policy has been well received and we're continuing to invest in our team to ensure they have the skills they need Both for today and for tomorrow. And our store and supply chain enterprise agreements continue to provide certainty around paying conditions Turning to the next slide. Offering an easy and engaging Experience across every channel remains core to delivering great customer service. But when coupled with our refreshed brand, Personalized experiences, a relevant range and the passion and knowledge of our team, we know our customers won't want to shop Anywhere but Officeworks. We continue to invest in our digital channels and platforms, our website and mobile apps. And knowing our customers even better is of growing importance as they expect online search and communication to be even more relevant and personalized. Customers increasingly expect us to know what they want and when they want it. We've been building our understanding Through the Officeworks data analytics platform and we've invested significantly this year to grow our digital teams and our capability. This positions us well to continue to accelerate knowing and understanding our customers to better meet their needs in a dynamic environment of increasing expectation. We also continue to invest in our store network with our customers wanting convenience, personal service, advice and inspiration. We're investing in renewing our stores and trialing several initiatives we expect to roll out over the coming year to deliver an even easier And more engaging shopping experience. Turning to the next slide. How we support the communities in which we live and work and our operational impacts on the environment is increasingly important for our team, Customers and shareholders. Our 2025 positive difference plan outlines our goals across people and planet To address the issues that are most important to our stakeholders. We have bold targets to reduce carbon emissions and invest in renewable energy. And we've continued to make good progress with a 19% reduction in carbon emissions since 2018. Significant savings in energy costs are being reinvested into additional energy efficiency and renewable initiatives to accelerate further emissions reductions. This year, we installed solar panels on 8 of our stores and will begin our 2nd phase in FY 2022 to install These are the further 50 sites. This rollout is part of our plan to use 100% renewable energy by 2025 As we work towards achieving net 0 Scope 1 and 2 emissions by 2,030. We know our customers also want to shop more sustainably and ethically, and we continue to ensure both our ethical sourcing and modern slavery policies Cover all the products and services we sell, including national brands and goods not for resale. We also continue to take a leadership role around providing sustainable And this year launched our Greener Choices range with over 1800 products, yet another example of Officeworks leading the way. And our customers love recycling their old technology and stationery through our Bring It Back program. We are well progressed against our ambition to be a 0 waste Business by 2025, currently recycling over 92% of our operational waste with waste to landfill down 37% this year. This has resulted in 54 of our stores now paying less than $1 a month in waste costs. And we know our team and our stakeholders, of course, expect us to support the communities in which we live and work. And in the past 2 years, together, we have donated $5,000,000 to support over 13,000 disadvantaged Australian students. Our integrated approach to sustainability continues to deliver meaningful value to people, the planet And the performance of our business. Turning to the next slide. We continue to invest in digital solutions to improve the customer experience and our productivity across every channel. For example, this year, we'll roll out a new print and create self-service experience, which will not only provide a better customer experience, It will leverage our new digital platform and also reduce our cost to serve. Key to delivering these improvements is our ongoing focus On simplifying our ways of working and investing in building the capability of our team. Reengineering these Customer journeys will deliver a faster, easier, lower cost and more engaging shopping experience. And as I said earlier, during the recent periods of uncertainty, our customers have come to expect a faster, easier shopping experience. Our existing capability in supply chain and our customer insights have provided us with the confidence to accelerate the future requirements of our supply chain And store networks to best meet our future growth. Specifically, we are enhancing operational capability and productivity Through automation and increasing capacity across our Officeworks customer fulfillment centers. Here's our General Manager of Supply Chain, Brett Kelly talking about our new Victorian customer fulfillment center, the first of these projects, which is now being commissioned and will be operational next financial year. Please play the video. We're focused on delivering a long term sustainable plan to modernize our A new CFC at Briggs Drive will help us take a step towards world class retailing. It's a significant investment in our future and will allow us to provide a better experience for our customers and continue to grow our business. The operation of Briggs Drive will be different in a number of ways. The new facility has a large capacity allowing for future growth and will facilitate the team to work more safely. We're introducing new goods to person technology and automation, which will replace current conveyors with more scalable and flexible technologies. This change will This is just the start of what's to come in transforming our supply chain. Officeworks is a diverse business with each part of our portfolio Playing an important role in delivering products and services which help inspire Australians to work, learn, grow, connect and Good to help inspire Australians to work, learn, create and connect. We continue to right size our stationery offer and ensure it remains relevant for our customers, Whether shopping for home or for their business and to provide choices and newness in line with their changing preferences. In education, we are looking to help our customers with lifelong learning and development. We're currently focused on the early years. And in the last 2 years, we've introduced 300 new exclusive private label KIDINK products for parents and early learning centers, With a pipeline of over 200 more to come in the next year. We are bold in our ambitions to grow in the art market, Focusing both on art supplies for education and for hobbyists across Australia. And we now have over 9,000 products online. And last year, we launched our new exclusive private label range, Born, which is targeted to personal shoppers, students and schools. And we've also just commenced a program to reposition our stationery education and art ranges in store through our renewal program. And you will see we are dedicating much more space to education and art as this program rolls out over the next 18 months. With many businesses disrupted for extended periods over the last 18 months and with tertiary students not on campus, Customers not designing invitations or hosting events. Our high margin print and create business was impacted more than any other area. But during this time, we took the opportunity to invest in delivering a new online digital platform for Print and Create, which launched recently, Built in collaboration with our partners PrintIQ and Chile. This digital offer will enable growth in the medium term but also creates platform for future partnerships and future growth. Our furniture business has grown significantly over the past year As our new work from home customers explored our range and shopped with Officeworks to create dedicated spaces to work, learn and gain. To give you a sense of the scale of growth, in FY 2019, we sold about 600,000 shares and this year we're on track to sell 1,000,000 shares. We've expanded and invested in our range, including higher end ergonomic furniture and commercial grade furniture to capitalize on the change in customer trends. And this year, you'll see us introduce a broader range of furniture more appropriate for, say, a living space, whether working from home or gaming at home, As style coupled with ergonomics becomes even more important for our customers. As a leading retailer We're always looking for opportunities to expand and extend the range of products and services we offer to embrace trends and support our customers to stay connected. This year, we've seen our customers really embrace flexibility and mobility. They want to be connected from anywhere. To support this, we launched a Geeks 2U subscription product to help our customers connect all their tech, the tech from work, the tech at home and the tech from school. And we launched a broader range of home networking, accessories and communication equipment. And whilst we are a material retailer of phones, Tablets and laptops, there remains an opportunity for us to help our customers connect these devices with plans that suit them. Officeworks is in a strong position to provide total tech solutions for customers. Turning to the next slide. We are also exploring 3 adjacencies beyond our current market to extend into new areas and drive growth. Small businesses are a core part of our customer base. However, we still see adjacencies to explore and opportunities to broaden our offer. For example, today, we only have 1% of the Print and Create B2B market. There is a real chance for Officeworks to help small businesses Build their sales and marketing capability, both in print and digital. And as Australia embraces flexible working, Officeworks can play a role in supporting employers to help their employees set up to work from wherever they want. Our work from home offer will target medium and large businesses, many of whom are not currently customers, and offer a seamless service to make working flexibly, Easy and engaging. And finally, we know we are trusted by parents and students for our back to school offer As customers value and guarantee our best pricing or the convenience of our school list service, last back to school across our offers, we delivered over 700,000 School lists across the country. But we haven't really explored how we can support schools with back to school. So last back to school, we trialed a bulk school list service called Classroom Essentials. What we learned from the trial is that schools trust us to play an important role in ensuring their students Have all they need to start the school year and throughout the year. We are now investing in growing our relationships with schools, Our range and our offer, and we hope this will enable us to scale this proposition over time to many more schools across Australia. Turning to the last slide. Officeworks remains well positioned for growth enabled by every channel model and our relentless focus on understanding our customer, inspiring them and exceeding their We continue to invest in inspiring Australia to work, learn, create and connect, and we're focused on delivering our plan across our 5 strategies. Equally, we recognize the importance of our channel model in store, online and through our sales team and continuing to invest in scaling our channels, Whether it be more stores where we have network gaps or a greater online fulfillment capacity is critical to our future growth. It is more important than ever in a market that's competitive for customers and for talented team members. We continue to invest in knowing and understanding our customer and their And invest in upskilling and training our team, enabling them to build great careers at Officeworks. And during what remains an uncertain period, we are confident Officeworks is well placed to deliver strong growth And provide satisfactory returns to our shareholders over the long term. Thank you. Michael and I are now happy to take questions. Sarah, I'll do the online ones first and I'll ask 2, somewhat related ones from David Arrington and Grant Saligari. David says, going forward to double the Capturable market as presented on Slide 67, how do you plan to do it? Is it needing to acquire adjacent businesses like in Bunnings or can you grow sales of And Grant relatedly says, can Officeworks materially penetrate a $50,000,000,000 market with its existing store size And online channel, if not, does it need to consider larger stores and some other channel strategies? Both Look, I think through our track record over the last couple of years, we've shown that we are absolutely Capable of building out into market adjacencies. We'd also and we do partner with businesses to help us build out adjacencies. And I think we with the support of Westfarmers, we have the capital to be able to do that. So I feel very Then in our ability to build out, in the areas where we have opportunity, obviously around education And the B2B market's being critical. We also see lots of opportunity in our core business to continue to grow and we have acquired obviously Previously, we acquired Gates to you. So we will still consider adjacent bolt on acquisitions if they're relevant, But we feel very confident in our plan to continue to invest in our business and grow our business from both the core and into adjacencies. In terms of our store network, Michael, I don't know if you want to pick that one up because Michael looks after property. We can't hear you in the room, Michael. So we might just try and get that connected and then If we can. Okay. Whilst we're getting Michael connected, I'll have a go at the question then to help. Can you hear Michael now? No, afraid not. Okay. All right. What Michael was saying is that we see stores absolutely part of our future. We have not Seeing a huge incremental growth in the number of stores that we have in our fleet over the last couple of years, but we certainly have a network plan to grow. We see opportunities around that. But we also have a track record in repositioning our stores and finding new opportunities in existing catch So we have opened a couple of new stores this year. We have closed a couple of stores this year to find better format spaces that So what we're looking for in terms of customer needs. So we will continue to invest in our store network and we will continue to invest in our online capability. I think both of those are critical enablers for our future growth as is our sales team and making sure that we can Deliver that B2B service that we know is so important for our customers. Can you hear me? Yes. It's Michael Simotis from Jefferies. Just the first one from me. How are you thinking about, loyalty and data collection? Officeworks seems Like it would be a business ripe to do a lot more of that, and there's not a lot of it happening now, outside of the online channel? Yes, it's a really good question. You would be surprised actually how much we are doing in that space. Certainly, with upwards of 30% of our transactions online, that means that we have very good visibility of our customers online And we are constantly looking at ways to improve how we know our customers and understand our customers in store as well. And through our B2B channel and our 30 day account, we have very good deep relationships with our B2B customers as well. So we are always looking at Opportunities to grow the relationship and the connection we have with our customers every day, whether it be through Even our app and launching e receipts, which you'll see coming to market in the next couple of months, all the way through to a More compelling 30 day account offer, which we're certainly looking at as well. Okay. Thank you. And then the second one, Can you give us some idea of, the contribution to sales, the new categories that you've entered over the last few years are making? Michael, did you want to pick that one up? If we can hear you. Can we hear Michael? No. Okay. Look, it's fair to say, whilst we don't go into the Details of specific subcategories, we have seen very, very significant growth in art And Education, which is why we are reshaping our left hand side of the store and our online offer as you'll see as we do the reflow with our renewal program. But equally, I think it's important to recognize that we whilst we're introducing new ranges like art and learning and development and education, We are being really smart about how we do that. So we still have around 40,000 SKUs in Officeworks online And about 15,000 SKUs in an average store. So where you're seeing in categories, us reduce Space, for example, in filing where we know that that's a declining market. So we're getting much more tailored around that to enable the growth in areas that are new that we can introduce Into the market. And obviously with furniture, we've seen a transformational growth in that business that we think we can now build on. We've seen customers' preferences change towards higher end shares. Certainly 3 years ago, you never would have seen us advertising $1,000 chair at Officeworks. That's a really material change and being on track to sell a 1000000 chairs this year and we think that we can really still continue significant growth from that platform. Thank you. Mark Wade, CLSA. Can we just follow-up on that, Sarah? I mean, the opportunity with the Flexible working, people studying from home. How big is that opportunity do you think long term, assuming as you've got this Huge installed base and we're not going back to old base of working. Can you give us a sense of the opportunities you see there? Yes. Look, I think it's a multi $1,000,000,000 market for us that we haven't been part of, Particularly recognizing a lot of people have been in offices, in city centers and CBDs and we haven't been supplying And those CPD locations. We have obviously at the margin as people shop on their way home or into the office, but We really feel like it's a significant opportunity for Officeworks. I'm obviously not going to give all the secrets away. That would be remiss of me to give all the hints and Tips to our competitors, but suffice to say, you will see us do something quite material, I think, in this space over the coming months. Would it be fair to say that this is a business opportunity where collectively across Officeworks, you're going to be a bigger, better business Coming out of COVID, once things settle down than you have been previously, yeah? I would certainly hope so. That's the plan. Okay. And last thing, on the big corporate accounts, Is that somewhere where you want to play or is it just too tight? Look, I think there are a couple of ways to look at this. Firstly, I'd say that we know that To build a ongoing long term relationship with schools, we need to be actively engaged in government conversations. So that's something that we are looking at. And effectively schools, big schools are like big corporates. So we are building capability in that area. In terms of large corporates per se outside of the education sector, where we really feel our Sweet spot is in enabling flexible working and the work from home opportunity. So I think we are very well positioned to capture that opportunity. So that's where you'll see our focus. Thank you. Hi, Sarah. Brian Raymond from Citi. Just on that you talked about the telco and Tech sectors. And last year, we saw a big mix shift towards tech, which obviously impacted your gross margin for obvious reasons. But Just thinking about that longer term in terms of that mix shift, how you're thinking about it and whether and I think in your presentation you mentioned Partnering with the telcos on plans, just wanting to get a bit more color around that. We've seen a lot of success from JB Hi Fi with Telstra there. Just wondering how you guys are thinking about that space. We certainly are thinking about it, Brian. We've had a couple of goes in this space historically. And I guess what we've realized is that partnering potentially is a better way for us to do it. We need to know how to bundle the service and the product together. So we are investing in developing those capabilities and we hope that we will be able to sell a lot more connected devices over the coming years ahead. So it's something we're over the coming years ahead. So it's something we're conscious of. It's something our customers are asking for. They want us Not just to sell them the laptop or the phone, but actually a complete solution. So it is a really big focus for us And something that we think that we not only have a right to play in, but that we can play and it can be a big difference for our business. Okay. And then you mentioned the premiumization in furniture and specifically office chairs. Just thinking about that, typically you guys have been seen as more entry level on the I would say by suppliers and certainly a good volume retailer, but the premium stuff has tended to go through other retailers. Just thinking about how You might be evolving in that tech space and whether you are able to bring on a bit more premium devices and maybe extract higher ASP and potentially higher margins out of that. Yes, it's a really good question actually. When we you would all be familiar with our Mentone store. When we launched our Mentone store a couple of years ago, we actually introduced a higher end commercial range, more targeted at that business, small business customer To really dip our toe in the water around whether we felt that there was an appetite from our customers. And what we've seen certainly with the changes in the Last 18 months is there are opportunities for us in that space. During COVID, so late last year, When Melbourne was in lockdown, thankfully hopefully the rest of Australia was pretty much not. We actually reflowed and repositioned our tech business across Our stores, and there's more work to do in that space, but we definitely see it as an opportunity, Brian. Okay, great. Thanks. Hi, Sarah. Ben here from Jarden. Just interesting just the comments around the education piece and it sounds like you're not going after direct big corporates, but You've historically not wanted to come up against sort of the likes of Link in terms of these aggressive because obviously margin gets right away pretty quickly. Are you expecting is that going to start impacting your mix looking forward? Should we think if you're going more aggressively after the education side of things, it's going to be lower margin? No. You shouldn't assume that. I think we've proven we are a very, very large B2C player in education already. And so I wouldn't assume just because we're going after schools That would change. We're also an everyday low price retailer and we're very conscious of maintaining our position and our EDLP credentials With all of our customers, where we think we can play is an offer that is broader than just price, particularly in the education sector, Bringing our sustainability credentials to the fore coupled with really great availability and service. So the great news is in the education sector, It's more than just about price, but we also recognize through our own brand, our private label study make Kidding that we are more than competitive In terms of price, so you shouldn't assume that there's a significant margin dilution just because we're going after the school business. So when you say differentiation, is that also things like replenishment teams, etcetera, that likes of your bigger global competitors would have? Well, I won't compare myself to other competitors, but what I would say is that we will speak We're knitting and what we do best at Officeworks, which is priding ourselves on the complete offer to a customer, the service that Credentials that we know schools really value and they really value being part of the communities and in which they are part of. So yes, I think we have schools have told us that they want us to be part of their supplier base and we're really Excited to learn our way into that market. And just finally for me, just on the everyday price piece, you've had a lot of your competitors across different industries have said that they've Pulled back a lot on promotions over the last 12 months because of stock availability, etcetera. I'm just interested in how you guys think you've capitalized on that particularly sort of categories like electronics. And then as we look forward over the next sort of 12 to 24 months, you can have a lot of tailwinds and opportunity on things like currency and admittedly logistics costs offset that a bit. How are you thinking about the level of price investment past 12 months capitalizing on it and looking forward over the next 12 to 24 with some of the tailwinds you're going to have? Yes. Look, I would say certainly the last few months have As the states have come out of lockdown, albeit now we're back in, in Victoria, we've certainly seen everyone get back to a more regular rhythm of trade. I think as we look ahead, probably my bigger concern for the second half of the year, we're used to living in a highly Competitive environment is really around supply recognizing semiconductor challenges offshore And so making sure that we work with our suppliers to continue to get access to the volumes that we really need is our absolute focus right now. So you're not so much concerned about discounting coming back in a bigger way and having to keep bringing price down? We're used to working in a highly competitive market. We've done it for many, many years and we continue to invest in price And work with our suppliers to make sure we can bring the best value to the market and support our low price credentials. So we'll never shy away from that. It's a very important part of our proposition. Thank you. Thanks, Sarah. Thanks, Michael, and apologies to Michael and everyone in the room that we weren't able to get the audio lined up. That wraps the Officeworks Q and A, we'll take about a 10 minute coffee break and then return in the room for a start at about 12:1, 12 noon sharp for the industrial businesses. Thanks. I thought I'd wait till 12:0:1 so I could say good afternoon everyone. It's great to be here in Sydney in person. So I'll start today by giving a brief overview of the West SEF or Chemicals Energy and Fertilizers division followed by an update on each business unit Finishing with a future outlook. So turning to the next slide. Westaff's vision is to create A portfolio of leading sustainable businesses. As I move through this presentation, it will become evident that we are guided by our vision Our decision making and strategic focus. This slide also highlights the shared services approach we utilise within WESF. It should be noted that the Australian Gold Reagents joint venture in that joint venture, CSBP is both the operating and sales agent. Our 2 other joint ventures, Queensland nitrates and Covalent operate as independent entities. However, we along with our partners provide these companies with technical and commercial expertise adding value and ensuring good governance. To the next slide. Westaff has 4 business segments. Firstly, we have the chemicals segment, which is our largest and it contains our ammonia, ammonium nitrate or AN As part of CSBP, our Sodium cyanide business, which we have 75% of and Coogee Chemicals, the other 25% Trading as Australian Gold Reagents. Our 50% share of Queensland Nitrates, which is owned by InstaTech Pivot through the other 50%, their subsidiary And also Australian Vinyls and Mobwood Businesses located in Victoria, which sell various industrial chemicals including PVC And specialty products. Our ammonia, AN and sodium cyanide businesses have developed over time from relatively small investments, Incrementally growing with opportune capital additions to ensure they meet market demand. Concurrently, the business performance has benefited From technical expertise applied to extract better plant performance, high utilization and raw material yield. We are the market leaders in ammonium nitrate in Western Australia and Australian market leaders in sodium cyanide and PVC distribution. Ongoing growth in these businesses centers around further debottlenecking and expansion opportunities, which I'll speak to later. Our second business segment is the energy portfolio, which is our homegrown business operating in the broad energy distribution and retail market. There are several business offerings within this portfolio. The LPG business extracts LPG from natural gas And distributes domestically in both cylinder and bulk forms and also exports in bulk. The LNG business operates under the brand EVOL LNG producing and distributing LNG to regional mine sites and remote power stations. The clean heat branded retailing business provides natural gas to small businesses and residential consumers in WA Electricity to large customers. The broader division leverages Clean Heat's expertise to procure all of Westaff's gas requirements Our fertilizer business has grown with the WA agricultural market Has been around longer than Wesfarmers for some 111 years. It continues to hold the majority of market share In an increasingly competitive environment, the business is focused on expanding its range of unique products and services With its developing technology benefiting our growing customers as they continue to enhance their operations. And lithium is our newest business segment and represents a significant investment by West Farmers via the acquisition of the interest in the Mount Holland lithium project. And additional capital investment towards the development of the mine and downstream processing. These assets will be developed under Covalent Lithium, which manages the fifty-fifty joint venture we have with Chilean Chemical and Mining Group SQM. The project reached an important milestone with the announcement of FID in February and is now focused on securing final government approvals To commence refinery development at full pace. Our project will produce very high quality lithium hydroxide With strong sustainability credentials and we will be one of the world's few vertically integrated operators from mine to customer. Now to the next slide. The majority of our assets are located in Kwinana around 30 kilometres south of Perth CBD. And many of you probably had the opportunity to visit us in Kwinana at the West Surf Strategy Day a few years ago. But for those who couldn't, it's an important strategic Purpose built industrial area in WA to support downstream manufacturing and chemical processing. Many of the operations in the area are interlinked by utilities, rail access and port facilities. The industrial sites in the area are also interconnected commercially, supplying feedstock products into other operations. This map shows the footprint of our existing Kwinana facilities and we look forward to adding to this landscape in the near future With the orange section highlighting the proposed location of the Covalent Lithium refinery. Onto the next slide. I'll speak briefly to this slide. What it demonstrates is that our businesses have many interdependencies and utilize similar feedstocks. This provides economies of scale that come not only from an operational perspective such as sourcing, producing and distributing, But the shared service structure which I spoke about earlier where we leverage skills, knowledge and capabilities. All of these in combination allow us to be efficient with resources. Onto the next slide. WSSF has 4 key strategic focus areas which I'll be referencing throughout this presentation. We are conscious of our environmental footprint And are actively looking at opportunities utilizing our expertise to deploy technology to reduce emissions and deliver investment returns. Secondly, we're looking to leverage existing infrastructure and expand our chemical and energy footprint to capitalise on opportunities in the market. Thirdly, we're focused on providing all necessary resources and support to Covalent to ensure successful project execution And also evaluating opportunities to meet the growing electric vehicle and battery market. And lastly, we're investigating opportunities in renewable power And related technologies. Onto the next slide. Our continued focus on Safety has seen our total recordable injury frequency rate at around 3 year to date FY 'twenty one, which demonstrates the success of our ongoing safety Campaigns in delivering that downward trend. With regards to climate opportunities, Westaff has an aspiration to be net 0 in scope 1 And 2 emissions by 2,050. This aspiration drives our focus on abatement and investment opportunities. While WestCEF is an emissions intensive business, we've always been conscious of our environmental footprint and employ global best practice. Examples of these include utilizing the heat produced in our chemical operations to generate our own electricity on-site, Use of catalysts to reduce greenhouse gas emissions in our chemical processing facilities and the continued focus on water usage and wastewater management Through our wetlands. As a significant producer of hydrogen and ammonia today, West Seff is closely monitoring the emerging technologies And early stage projects in both the green and blue hydrogen and ammonia space. Where CEF has the technical capabilities to assess in this sector and we're engaging with various industry and regulatory stakeholders on this topic. In regards to decarbonization, Westaff has always looked to deploy technology to reduce its environmental impact in its existing business. While our Mount Holland lithium project will increase our greenhouse gas emissions at a local level, we're very proud to play an important role This emerging sustainable market where our investment will have a net positive impact on global decarbonization and help the transition To reducing emissions from the transport sector worldwide. We'll also be looking to employ various techniques during the production phase of this project to reduce emissions. Westaff is focused on indigenous employment with 2.9% of our team members identifying as Aboriginal Torres Strait Islander And we're committed to working towards a greater gender balance in our businesses with 27% of leadership roles being currently held by women. We also continue to support the communities in which we operate via grants, long term partnerships and team member involvement. Turning to the next slide for an update on our chemicals businesses. Great Ammonium Nitrate demand from WA customers remains strong due to robust WA Mining sector and strong iron ore price. This has resulted in lower sales of ammonium nitrate into the fertilizer interstate markets. Sodium cyanide business continues to experience short term weakened export demand due to international gold mine closures as a result of COVID. We've had a number of successful planned maintenance turnarounds over the past few months and our chemical plants have delivered strong output and operational efficiencies. The priorities for our chemicals businesses are optimizing volume and margin mix and extending existing long term customer contracts. We're also evaluating opportunities to leverage our existing infrastructure and to expand production capacity in our ammonia, Ammonium nitrate and sodium cyanide businesses. It is worth noting that while no decisions have been made at this stage, As part of the preliminary assessment of a potential expansion to ammonia production capacity, Westaff will lodge a major project plan with the Australian Participation authority over the current month. Onto the next slide, please. As you can see, our sodium cyanide sales have increased by an average of 3,300 tonnes per annum since 2003 Our solar production plant became operational. This has been achieved through incremental investments in plant debottlenecking And extensive engineering using our data and digital capabilities to optimize plant performance. The Ammonium Nitrate business is focused on driving continual operational improvements in its nitric acid plants, which has resulted in strong plant availability. As a result of these improvements, the business has continued to maintain strong production output. Turning to the next slide. Moving on to the energy portfolio, I won't go into too much detail here as I did discuss these various segments earlier, But I will touch on the market dynamics of each. Clean heat is the only domestic producer of LPG and operates WA, domestic producer that is, of LPG and operates in a mature market. While the market is unlikely to exhibit long term growth Due to shifts in energy demand, our LPG business has experienced an increase in domestic sales due to the recent BP refinery closure Which I'll discuss shortly. Our EVOL business holds the majority of the market share, supplying LNG to remote power stations And also remote mine sites. However, it is a market which is becoming increasingly competitive. New players are positioned to enter into the Northwest and the Midwest regions to leverage favorable transport economics Customers located in these regions. The natural gas retail business operates in a highly competitive market. However, Clean Heat has a very strong local brand, provides leading customer service and is trusted in our community. And the electricity business is relatively small in the retail electricity market in WA. The West Australian market is not fully contestable, Which limits our ability to grow this business materially. State government owned synergy holds the majority market share as a legacy retailer in WA. Turning to the next slide. As alluded to earlier, The LPG business has experienced an increase in domestic LPG sales following the closure of the BP refinery. This refinery was the only other WA domestic producer of LPG and its closure means that clean heat sales will now be more heavily skewed The domestic market, the natural gas retail business maintains a strong customer focus and drive to customer Attention and continued growth. In regards to growth, Clean Heat is investigating opportunities in renewable power and related technologies. Our LNG business is evaluating expansion opportunities in line with our strategy of expanding our businesses by leveraging our Capabilities and Infrastructure. Moving to the next slide. A strong harvest in 2020 Coupled with good early seasonal rainfall in 2021 has improved grower sentiment for this season. While we are experiencing increased competition in nitrogen due to investment in storage infrastructure by competitors, Our fertilizers business provides a differentiated offering through targeted customer services such as our traditional soil and plant analysis laboratory, Our Decipher Ag Digital Mapping System, Field Trials and more recently the introduction of CSBP Detect and Tank Telemetry. The business is also prioritizing the investment in corrosion management across its aging assets to ensure a safe, sustainable operating environment. Turning to the next slide on lithium. As I've mentioned, in February this year, we announced a successful final investment decision For our Mount Holland lithium project with our joint venture partner SQM. Subject to receiving all relevant regulatory approvals Which are due to be received later this year. We expect that Wesfarmers share of total project capital expenditure to be approximately $950,000,000 Covalent has commenced infrastructure development at the mine site, made commitments on some critical long lead items And continued engineering design work while we wait for the final approvals. Subject to receiving those approvals, Project construction will commence in the second half of this calendar year with the first production from the refinery in the second half of calendar year 'twenty four. Westaff senior management are focused on supporting Covalent to ensure successful project execution. Additionally, over the past few months, we've seen the market dynamics improve for electric vehicle adoption worldwide, Following an increased focus on climate change and government support. Moving to the next slide. Regarding outlook, in our ammonia business, we are both an importer and a manufacturer. The Current ammonia price volatility is causing a short term weakness in earnings which we expect to revert in FY 'twenty two. We've got a planned 5 yearly maintenance turnaround of our ammonia plant scheduled for FY 'twenty two Which will mean the plant will be down for approximately 5 weeks. Production of ammonium nitrate is expected to remain stable, However, subdued export demand for sodium cyanide driven by the ongoing COVID disruption to international gold mines is likely to continue for some time. The energy business is expected to continue to benefit with the increased LPG domestic sales following the closure of BP's refinery. The fertilizer business is expecting solid earnings with positive growth sentiment following a strong 2020 season. As I mentioned, the early rainfall experienced in this 2021 season. Overall, earnings for chemicals, energy and fertilizer will to be impacted by international commodity prices, in particular, ammonia and Saudi contract price for LPG, Exchange rates, competitive factors and seasonal outcomes. So that's the end of the presentation. So I'd now like to invite Aaron Hood to the stage, our Chief Financial Officer, who will join me for the Q and A. It's Michael Simotis from Jefferies. I was just hoping we could get some color on your expectations of the implications of the potential change in The anti dumping measures on Russian ammonium nitrate. So for those not aware, there has been dumping duties applied to Ammonium Nitrate Important from Russia for quite some time. And just recently the minister decided not to continue with those dumping duties. Our view is that Russia brings or can bring low priced Ammonium Nitrate into Australia And that is notionally dumped and that affects the import price and therefore the flow on effect is that It impacts the domestic market price. I think in the statement from the commission, they We're saying the volumes associated with product coming in from Russia were so small that it wouldn't impact local pricing. We take a different view on that. Can you give us any sense of how material it could be for the business? Probably wouldn't like to say in terms of dollars, but we believe and if you read that Submission to the commission, there will be some information there indicating the sorts of duties that have been applied on the Russian product in the past. That might give you some indication as to what the pricing could fall to should the Russian product come in. Okay. Thank you. And then just a second one from me. On the lithium refining plant, how confident are you in the CapEx that's been allocated given the labor market continues to tighten in the West and there's been some cost blowouts for other projects of a similar nature. Thanks for that. We're obviously watching the labor market and the stresses in the West Australian Economy at the moment on that front, but a lot of those factors had been Put into the plan and the announced CapEx that we came out with. I think what's The focus now is getting the long lead items from offshore vendors and trying to lock away things like steel prices and the copper price inputs To go into all of that equipment. So the Covalent management team is really, adopting a strategy of trying Secure those items upfront and it's really timed very importantly with our approval regime And when that drops for the refinery, we can then start securing those items early. Okay. Thank you. Ross Curran from Macquarie. Similar question to Michael's, just I noticed that there was a variation to Plans on the EPA website from 2 weeks ago, they've had to add in 120 kilometer water pipeline from Moreen Park to Mount Holland. Has that not resulted in an increase in the expected CapEx of the project? Yes. The water pipeline for the project has always been factored into the CapEx estimates we've provided to the market. That's been part of our long term plan. There was an analysis as to whether we should be purifying the water on-site or Acquiring water by the pipeline analysis showed that we should purchase the water by the pipeline. So you're not having to add a pipeline in? That's an example. No, no. We're having to add the pipeline in, but there's always CapEx associated with that pipeline or alternatively the water plant. Okay. Just because it was only just added to the plans 2 weeks ago, so. Yes. It hasn't been Added to management's plans and our overall flow sheet and process and the capital estimates were provided TU has always included that pipeline. It's also appropriately scaled for future potential expansions of the project. Ian Aaron, I have a question from Brooke Campbell Crawford at JP Morgan. Can you quantify the increase in ammonia and AN capacity that you are considering? Are you able to provide a timeline and capex estimates related to this? Not very clearly on any of those really. We're still evaluating the size of an ammonia expansion, But the expansion would be sizable in terms of we currently produce 250,000 to 270,000 But our demand is about 500,000. So we'd be looking at filling that delta somehow. In terms of Ammonium Nitrate, we're in early stage evaluation, but that would be More of a debottlenecking than a significant expansion. And no, I can't give capex at this stage. Okay. Thanks. In the absence of any others in the room, I'll go from Grant Saligari at Credit Suisse who says two questions. Firstly, how do you compete with Orica and Dyno where they are prepared to reduce pricing on bulk AN to sell in their technology products? And then the second one is in relation to blue or green ammonia and hydrogen and whether you're expecting to undertake any pilots in that space. The explosives companies bundle Not only their technology, but their services with the AN. We sell our AN to The explosives companies and also to 1 end user is in a mine site. I Don't believe that necessarily we're competing with the explosives companies reducing their humble offer To the mine side, so not quite sure I understand the question. I think we'll leave it at that then. And on, pilot projects in relation to blue or green ammonia. Yes. I think on that one as Ian mentioned in one of the slides, we have set up a climate opportunities team and one of Their key focus is actually working on collaborating with other technology providers, other chemical manufacturing entities and government Stakeholders around reviewing all of the potential hydrogen and green and blue ammonia projects that we could Look at in Western Australia, I think in the last count, there was over 22 projects in the state. So, it's quite a big field, but a lot of those are very early stage at the moment. And we think we have The team and the capability to assess those. Okay. Thanks. And there's one final one from David Errington online. And if there's no further questions in the room, we'll go to the industrial and safety business after you finish with this. He says, Ian, could you go into some detail as to the process you've put in place to ensure the construction of the spodumene concentrator and lithium hydroxide refinery Our on time, on budget and more importantly, completely competently constructed. For example, we've seen greenfield plants In other areas, face material delays or breakdowns? Yes. And good question. Thanks, David. We've put in place a team which is a combination of both Westaff and SQM people Which will provide us with certain capabilities and in addition to those people, we've employed, well credentialed project managers To assist with the construction and management of the project. The team from both SQM and West SEF have been involved in Major projects in the past and have successfully delivered those projects and know What processes have to be employed to ensure successful project delivery? Furthermore, we've had the opportunity over the last 12 months with the delay to the FID decision to undertake significant Additional engineering work and also additional process test work. So we have a high degree of confidence The process will work and we have a high degree of confidence that our capital estimates are correct. I think if you look at some of the other projects which have been or are being built, their level of engineering definition And process test work that they'd undertaken was perhaps not as great as what we've been able to do. Okay. Thank you both and we'll move on to Industrial and Safety. Hi, everyone. My name is Tim Bolt, and I'm really delighted to be here and Present the West Farmers Industrial and Safety Businesses as my first strategy day is with MD. Before I do get started though, I would like to recognize the hard work by all of the teams within the Wizz businesses, particularly following on from the challenging Times we faced from COVID-nineteen that continued to impact our business as well into FY 2021 and our team's capacity to navigate through these challenges. The resilience shown by our teams has been outstanding and has positioned the Wizz business as well for the next challenge. Starting now on Page 94, Wizz is made up of 4 distinct businesses operating in the industrial segments. The largest in terms of revenue and growth potential is Blackwoods, which is a distributor of over 300,000 SKUs Essential to the supply chains of Australia's and New Zealand's largest corporate and government entities. Blackwood's has an established number one position in a fragmented market in both Australia and New Zealand in safety and industrial supplies. It is a it has a strong competitive position and a diverse customer base. Corgas is a producer and distributor of industrial gases in stable market, but with increasing competition. Corgas holds the number 3 position, which we see as the Brand in the market given its reputation for expertise and innovation. Workwear Group is a leading provider of uniform solutions And he's also a manufacturer and supplier of leading workwear brands. Key Uniform customers include the likes of Qantas, Queensland Health, The Australian Defence Force and Major Banks. Its portfolio of iconic brands includes King G, Hard Yacker and NNT. Workwear Group operates in a mature albeit evolving market and has operations across both Australia and New Zealand. We simplified the business by divesting the UK operations earlier this calendar year. GreenCap is a risk management services business Comprising over 250 industry experts and a market leading contractor management digital platform known as CM3. Common across all the Wizz businesses is the competitive advantage we enjoy by giving our customers confidence in the products and services we deliver. This is through anticipating our customer needs, acting with integrity and honesty, being fair to our suppliers and sourcing ethically, Providing a safe work environment and developing our team members in an inclusive culture, supporting the communities we Operating and enhancing our environmental performance. As you can see, each of our businesses have strong market positions And each offer a strong point of differentiation in their offer, supported and enabled by our sustainability credentials. This has played into the essential nature and support we provided as a critical and differentiated supplier during the bushfire crisis And the COVID-nineteen pandemic. Some examples there were Blackwood's kept customers operating by sourcing critical products in global shortage Including respiratory cleaning and hygiene products. The strength of Corgas' Healthcare segment led it to being a key contributor to both The bushfires in Southern New South Wales and Central Coast covered hospital regions and the COVID-nineteen pandemic Including surge planning and increased oxygen demand from New South Wales, Victorian and Queensland Hospitals. Workwear Group supplied garments to emergency services and health sectors as well as supporting the surge in industrial demand. GreenCap provided new COVID-nineteen assurance services to its customers. This reinforces the whiz businesses providing valuable solutions to its customers. Turning now to slide 95. Looking at the recent performance of the division, We clearly have had a disappointing financial performance in recent years and particularly in FY 2020 driven by the turnaround activities that were undertaken And then the impact of COVID-nineteen on our operations and customers' operations. We saw improvement in the first half of FY 'twenty one, Primarily driven by Blackwood's through the achievements that I'll talk about in the next slide. Safety is a key priority for us. We are pleased that the total recordable injury frequency rate shown on the slide continues to show long term declines as a result of the actions Initiatives across all of our teams. We are also pleased with how the business has handled the safety and well-being of our team members during COVID-nineteen Between keeping team members safe at our distribution sites and the immediate work from home adjustment a number of our team members made, notwithstanding this, there's still plenty to do in the safety priority. Moving to slide 96, I'll give a little bit of an update on Blackwoods. Since the last Strategy Day, there has been good progress in the turnaround. The BIDS business continues to focus on building market and leading product supply offer to businesses across target industry segments. The business has made key achievements in the past 18 months that has successfully improved performance to date. These include the closer to customer initiative. This is focused on driving profitable sales growth and market share in target industry segments. We have localized customer facing teams to be closer to the customer and the communities we operate in. This has Enabled a deeper understanding of our customers' needs and stronger relationships, enabling us to deliver an improved customer experience. We are pleased to see consistent sales growth now demonstrated over an 18 month period and the customer net Promoter Score improving to 20 and just over 18 months ago that was a minus number. Secondly, the Link proposition. We have launched the new Link value proposition, which is an integrated supply program delivering an end to end Procurement solution and reduction in the total cost of ownership. This program goes beyond the supply of individual product And looks at the total business non strategic procurement and end to end opportunities including consolidation of vendors, Product substitution and optimization, warehousing solutions, working capital improvements and sustainability. And the 3rd dimension is outstanding supply chain. We have implemented warehouse automation in 2 of our 8 distribution centers, A freight management solution and improved demand planning capability which has resulted in an improved operating leverage and business scalability. We have seen a reduction in the cost to serve over the past 18 months on supply chain. Looking forward, the current priorities to drive growth. Firstly, to continue to build a market leading customer value proposition focused on the target industry segments of resources manufacturing, Construction, Government and Retail. The CVP is focused on 4 key value pillars being unbeatable range, Reliability, expertise and ease to do business. Secondly, is to continue to transform the business model. Automation, data and digital play a critical role in this. Key priority areas are customer and supplier digitization And continued warehouse process automation. And finally, completion of the ERP implementation. On that turning to Slide 97. I'm pleased to report that we have started deployment And successfully went live in April with the 1st states in operation being Victoria and Tasmania and also with the finance modules operating across The Blackwood's business. The rollout is planned to be completed state by state over the rest of calendar year 2021. The first rollout deployment, whilst it's had its challenges, has met our expectations and what can be expected with the large and complex ERP Implementation Program. This is a significant transformation program, so getting to this stage we see as a great achievement. We are working hard with our implementation partner on the remaining operations go live rollout in coming months. The ERP replacement remains a core component for Blackwood's to deliver its strategic initiatives. We will be able to remove constraints And risks on legacy systems, reengineer processes to reduce costs and improve the customer experience, Provide a stable modern platform for efficient scale leverage and future operational and digital enhancements And as an enabler for Blackwood's to underpin a market leading offer. Turning to Slide 98, we'll just run A short video that hopefully brings some of what I've talked to, to life. For over 140 years, Blackwood's has Built a reputation as one of Australia's most trusted suppliers of industrial and safety products. Today, our value is centered around providing tailored procurement solutions to businesses, helping reduce cost and complexity and allowing them to focus on what They do best. Customers rely on Blackbirds to deliver tailored procurement solutions to With their daily operations, we leverage our extensive, fast and scalable network, which includes the latest Automation. This is also supported by our local branches, which are positioned close to the customer, allowing us to hold stock Can tailor our offer to local market conditions. Blackwood's continues to make it easy to do business for both our customers And supply partners, with continued investment in our digital capability, we are now delivering a faster, personalized web experience, A market leading online ordering platform and improvements to our inventory management and tracking systems. Currently, over 50% of Blackwood sales are Through digital channels. At Blackwoods, our deep product and industry expertise enables To provide tailored procurement solutions to our customers, we have over 50 dedicated technical product specialists and our sales teams are aligned to industry We also have a strong market leading presence in safety and apparel as well as on-site services. We're also Proud to have the largest range of industrial and safety products. This provides our customers with choice and the ability to their everyday spend. What's more, we're committed to working with our supplier partners to continuously improve ethical sourcing practices. Hope you found that useful and thanks for the team for the work on that, which will be used in other forums. Turning now to Slide 99, I'll make some comments on Corgas. The business successfully launched into healthcare in 2017 to 2018 and it continues to grow the segment with opportunities in the pipeline. The success of the program has been from the customer offer in providing unique solutions, cylinder tracking and asset management, Enhanced security of supply, low to no wastage and reduced manual handling are some examples. As mentioned earlier, Ensuring security of supply for those customers impacted by the bushfires and COVID-nineteen and more recently, Corgas prepared and delivered 4 ISO Containers At the Perth Airport in early May 2021 for collection by the Indian Air Force to assist in escalating COVID-nineteen outbreak in India. Those ISO containers are used for transporting 80 tonnes of liquid medical oxygen for distribution in the country to those people of need and it was a great effort by the team and there's more that's being provided in coming days. Corgas has gained market share with major customers by developing solutions to meet their needs. A good example here is purge project activity for natural gas exploration and LNG plant shutdowns which require rapid deployment of assets. The Trade and Go Gas is an innovative disruptor offer from Corgas along the lines of never pay rent again Targeted mobile tradies who use cylinders for welding and heating. Part of the program is offered through Bunnings Providing a geographic spread and extended trading hours, Corgas sees more growth in this segment. Corgas operates a merchant hydrogen plant at Port Kembla, New South Wales supplying refineries, laboratories and universities for heat treatment and soon for fuel cell vehicles. Corgas' expertise in hydrogen led it to being heavily involved in the hydrogen energy supply chain pilot project and Corgas will shortly load the 1st world's 1st liquid hydrogen ship in Victoria which will travel to Japan. Corgas is also developing a hydrogen refueling station in its existing Port Kembla hydrogen production facility so that it can introduce hydrogen fueled Distribution assets into its own supply chain. The business remains active in several opportunities in this growing sector, but is being selective In where it can play best to provide decent returns. Turning to Slide 100, on Workwear Group and Greencap. The Workwear Group business was impacted due to COVID-nineteen over the past 12 months, particularly the airlines retail and hospitality uniform segments Customer demand was significantly lower. We think that will continue to impact the business going forward for some time. Notwithstanding this, the strategic focus for the business held up well during 2020. Workwear Group is continuing to invest in technology to improve the customer offer Supply Chain Efficiency and simplifying its operating model to improve operational efficiencies. The key industrial brands Hard Yacker and Kingjee delivered continued double digit growth for the 4th year running, driven by new product innovation and development. We continue to invest in brand desirability initiatives aimed at driving consumer desire and choice. Greencap He's seeing stronger pipeline of tender activity and has capitalized on new opportunities in the past 12 months including Offering new risk consulting COVID-nineteen services. Greencap's online offer continues to grow strongly and we are further investing in the CM3 product to capitalize on this Turning to Slide 101, sustainability update. As outlined at the start, common across all of the whiz businesses It's the competitive advantage we have in giving our customers confidence in the products and services we deliver in having the right product with reliable supply Backed by our sustainability credentials and achievements, we think this is critical to generating long term sustainable earnings. As you can see from the slide, we have a lot of activity to prioritize and enhance our sustainability agenda. I'll just pick out a couple of key highlights. Firstly, on indigenous engagement. During the year, each business hosted an intern from Career Trackers, a national non profit organization with the goal of creating pathways and support systems for indigenous tertiary students. Blackbauds has long been a supporter and partner of the organisation and was awarded the prestigious Careers Tracker Corporate Plus Award earlier this year. The award is presented to an Employment partner who strives to create best practice in the implementation of the Careers Trackers program and who goes above and beyond in embedding the program in their business. We are very proud of this achievement. On ethical sourcing and product safety, Workwear Group achieved an all rating from the Baptist World Aid 2020 COVID Fashion Report, which recognizes the immediate actions and initiatives implemented by organizations to support their supply chains during the COVID-nineteen pandemic. This ratings means Workwear Group provided evidence of assistance against all six commitments. Only 43 companies worldwide received this rating and Workwear Group was the only uniform provider to receive such a rating. And also on the screen you'll see at the right hand side is a photo of what I already mentioned about Corgas in providing medical ISO Containers to support the Indian crisis. Now turning to Slide 102, key themes and outlooks. We recognize in Wizz that the financial performance of the division must improve. Our teams are aligned on the task ahead of us. We see a clear strategy on our differentiated offer. The strong market position and total value proposition for our customers, Enhance operational capabilities and to execute new growth opportunities. Secondly, providing confidence in the products and services we deliver by offering the right Product with reliable supply and finally investing in digital and data to improve efficiency and the value of our offer. Market conditions are expected to remain uncertain. We'll have continued demand anticipated in sub Some segments particularly the Workwear Group. What we are focused on is building market share and integrating sustainable practices to ensure long term regardless of the market conditions. That concludes the presentation. I'll invite Dan McCartney who heads up Finance at Wizz to the stage to answer any questions you might have. There's no questions online yet. So I'll give everyone in the room another minute and anyone online an opportunity to email through to us. Otherwise, we'll wrap it up there. Just quickly, sorry. Brian Raymond from Citi. Just on Blackwood's, just interested in the path to that Recovery in that business, you obviously talked to the ERP system being rolled out by calendar 2021. Just thinking about the other steps in the process to get back to kind of Previous earnings, what's how should we be thinking about the various building blocks for the turnaround in that business beyond the ERP system? Yes. So I think what I've tried to outline is that the team is building momentum Both in sales and in performance with customers, what we see is that the ERP is a Big enabler to continue that momentum going forward. And also it will facilitate a lot of the other initiatives that we have that are Frankly, not on hold, but being developed slowly until the ERP is in place. So a lot of investment in digitization, not only on the customer side, but on the Our side will bring great efficiencies and we'll also get, I guess a lot more ability to streamline our processes And putting new systems once the ERP is in. At this stage, it's not holding us up with the turnaround, but it's really important that we deliver So that we can continue to bring the scalability and the capacity up to serve efficiently what we see as a growing demand from our customers. Excellent. Thanks. And Tim, there's one online from David Errington who says, the message he's taken away from the investments that are made in Blackwood's in recent years have not yet got Blackwood's position for the future with lower risk And that FY20 was an anomaly. Is that the message that you intended him to take away? Look, the message that I was intending to take away was that performance Has in past years clearly been unsatisfactory. I think that the team at Blackwood's have done a great job In bottoming that out and are starting to build some momentum, it's early days and there's a lot of work to be done. But we are optimistic that with the continued application of the strategies and the efforts by the team We can continue to build market share. Has David confirmed whether that's answered his question? I haven't been speaking to him. Grant Saligari has a question and I'm reading it for the first time now. So would you expand on next steps in your hydrogen pilots and what you think the business opportunity could be? So in relation to hydrogen, the next steps to build in So far as Port Kembla is concerned is to build the refueler facility over the next 12 months or so And to have that running next calendar year to supply a couple of fuel cell vehicle distribution From our distribution fleet to help deliver our product throughout New South Wales, we will also have a small amount of extra capacity to sell to third parties who may wish to Demonstrate and use hydrogen both for its economics and its credentials in that particular location around sustainability. We've got other projects in the pipeline and I mentioned the hydrogen energy supply chain project in Victoria. We're working on that at the moment albeit we have a very defined role. So we're being very selective around hydrogen. We're looking in core gas at the spaces that we can actively contribute rather than trying to do necessarily everything. And it seems to me that we have The team has some capability around liquefaction, around transportation And the distribution and handling of hydrogen. And we're looking at there's so many projects out there at the moment. We're having a very, I guess Careful look at where we can participate and where we can do that viably. Okay. Thanks, Tim. Thanks, Dan. There's no further questions online. So I'll hand back to Rob to wrap up. Thanks, Tim, and thanks, Dan. Well, that brings us to the end of the day. For those in Sydney, thank you very much for joining us and for those online for joining us online. I just wanted to Make a couple of closing remarks. Firstly, just to follow-up on an earlier question regarding portfolio management. As I said, after a number of years of quite a lot of activity, I'm really pleased with the composition of the portfolio at the moment. The last year has represented a lot of change as well within the Target and Kmart portfolio. And it's Just been great to complete that work and now both businesses are positioned in a much stronger way going forward. So we're very pleased to continue With the momentum there, not only have we significantly enhanced the growth prospects of Kmart, but we've derisked Target to a great extent and we're excited about the possibilities for the Target team and the business there in terms of future growth. The other point I just wanted to make was you may have seen our businesses have announced in the last 24, 48 hours we'll be supporting all of our Australian based team members providing, 3 hours paid leave in order to get vaccines should they be keen to So very keen to be doing our bit to help get Australia vaccinated so we can continue to move on post and through COVID. We feel that we've navigated the last year such that our businesses are coming out of COVID Bigger, stronger, better than they were going into COVID and we feel that we've also in recent years established some really exciting growth Platforms for the future and hopefully, you have a better understanding of that today than you did yesterday. So thanks very much for your patience with us.

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