Earnings Call: H1 2021

Nov 5, 2020

Welcome to the results presentation of Tyskim Half Year 2021. Across several consumer voting platforms, the scheme remains South Africa's favorite pharmacy. Public sentiment is positive reaffirming that our long held policy of value, service, direction, and competitive pricing continues to resonate well with South African shop us. However, we can't downplay COVID 19, once in a lifetime occurrence which coincided with the start of this reporting period, on 1st March, it still continues to date at level 1. Conditions during the period under review saw uncharacterized shopping behavior with fewer shopper visits, but with greater basket sizes. This was particularly evident during the early lockdown of places. Peak trading times also changed. Few customers were allowed in store. Real time was down, there was a noticeable downturn a weekend trade due to social distancing. The stores in super regions and regional malls were particularly affected with extremely low more foot counts. March was a bumpy month with strong footfall numbers and increased pantry buying. As an essential service provider in the healthcare industry, we remained open throughout the lockdown period. Across levels, 5, 4, and Part of 3, the prohibited sale of non essential categories, which to 20% of our business saw us operating under extremely difficult circumstances and resulted in the negotiation of partial rent relief for April for the loss of trade on non essential items. With fragrances and color cosmetics trading opening up only in the middle of May, we lost a very important Mother's Day trading opportunity. However, as despite these constrained times, this scheme continues to gain market share in the luxury fragrance mall from retailers, including the from department stores. Stores located in commercial notes have noticed that have re felt that bin of consumers working from home, while we are generally starting to see an increase in footfall since level 3 at larger malls. The speed at which the Cbd stores and pharmacies in commercial notes returned full customer capacity is largely dependent on when office workers return to work. I'm pleased to say and want to that every permanent staff position has been retained, and each employee was rewarded with a 1500 rand bonus in recognition of the exceptional dedication. Numerous staff has went the extra mile by filling in for colleagues who were ill and many battled with public transport. It managed to get to work. We salute our frontline essential health care workers in retail and wholesale whose diligence and commitment deserves acknowledgement. Most of the scheme's office staff work from home. We minimized the pandemic's economic impact by introducing various cost cutting measures such as reducing overtime hours across our retail and wholesale divisions and operating with fewer staff. We're always diligently following all health and safety protocols ensure the absolute safety of our staff and customers. Over and above the usual protocols, widespread testing of any employee showing symptoms was undertaken by chronic sisters, leveraging our very strong position as a primary health care provider, we established numerous COVID 19 testing stations across the country. The only retailer to do so Although we were forced to temporarily close this offering due to severe backlog at laboratories around the country, we subsequently reopened with the rural authorities could open to continue to provide the variable service in the fight against the pandemic. We have now introduced testing for antibodies at all our clinics. Deliveries, particularly of dispensary items, increased substantially and online sales were catapulted beyond any expectations. Despite the virtual absence of the usual cold and flu scripts in OTC, sales, thanks to the measures taken to contain and avoid infection by the general public Tyskim was the only corporate pharmacy that showed growth in the dispensary category. A vote of facts he extended to my colleagues, the beginning of the epidemic was difficult with increased operational demands, but this team lived up to the saying when the going gets tough, the tough get going. I thank them for their quick action and adaptation in introducing greater operational efficiencies and cost cutting measures under very trying circumstances. The group's ability to pivot and react appropriately meant we still produce good results over this period. I'm now going to go over the the group's highlights. During the reporting period, group revenue increased by 8.2percentto12.8000000000 reiterating the defensive nature of our business. Total income improved by 9.4% to 3.6000000000 as we continue to focus on return on invested capital and total income margin improved by 30 basis points to 27.8%. Headline earnings per share grew by 16.1 percent to $0.36 per share. We again decreased our working capital days, which is now 32 days. Retail revenue grew by 6% to 11,400,000,000 underpinned by strong sales in personal care, FMCG And Health Care And Nutrition. The group experienced a change in its sales mix due to sales restrictions during levels 5 and 4 other lockdown. Lark for Lark retail sales grew at 1.5%. During the 6 months, we opened 13 new stores with a total floor space of just over 11,500 square meters. Our wholesale revenue increased by 14.9 percent to 9.3000000000. Our TLC franchises and independent pharmacies drove external sales growth of 29.2%. Wholesale total income benefit from more favorable terms as well as an increase in external customers. We are also pleased to announce that our wholesale business made an operating profit for the first time of 41,000,000 rand. The group is investigating an acquisition of a community based pharmacy group that will expand its store base and ability to provide primary health solutions. Currently in the due diligence stage, the acquisition will increase the existing store network with the majority of the Network in community convenience centers. The group is in the advanced stages of concluding an acquisition of a strategic interest in a health care asset with specialization in a design, administration, risk management, and delivery of primary health care insurance. As well as gap cover and psychological well-being. COVID 19 has highlighted that individuals and companies are more prepared than ever to spend on health care. To this transaction, the group will benefit from vertical integration into the health value chain with access to a unique set of assets. This investment also provides access to segments of the population who have historically not been covered by the private health care sector. I will now hand over to Roy for the financial results. Thank you, Ivan. Good morning, everyone. As is customary, I will take you through the statement of comprehensive income, statement of financial position, and we'll talk to each of the lines separately as we flow through the slides. As you can see in the statement of comprehensive income, as a result of our reporting period overlapping, directly overlapping COVID, we've included a version of our results that excludes directly related COVID costs, those directly related COVID costs, which I talked to and break down later in the presentation, totaled 45,400,000 and we have an instance that shows, our reporting against, H1, 2020 and, H1 2020 excluding COVID-nineteen related costs. If we run down some of the highlights of the income statement, as Arvin mentioned, revenue increased by 8.1percentto12.8000000000. We were able to increase total income ahead of, revenue by 9.4 percent to 3,500,000,000. And we increased, equity to holders of our parent company by 16.1% in line with HEPS growth. Two important points to make on the summary slide, and the reduction in finance costs of 17.4 sent, really driven by 3 levers, the first being, the reduced Absa term debt, which we have been paying down, 125,000,000 has paid since the prior reporting period. And the second being the preferential interest rates that we have seen, and the third is the working capital improved position that the group has delivered as a focus on of return on invested capital. If we then move into the statement of financial position, a few points worth noting, again, I talk to each of the lines separately the property plant and equipment line and the lease liability line moving in very similar trajectories. That is a function of IFRS 16. With space growth now being capitalized. The intangible asset has moved by 15%. We took the opportunity of of a very attractive commercial negotiation to acquire ZAR 80,000,000 worth of, SAP licenses. The SAP licenses allow us the ability to change our point of sale system. We'll be moving to a an SAP driven point of sale system to encourage and allow greater retail flexibility, examples include access to greater tender types, the ability to have more flexibility when dealing with, promotion and pricing. The other point on the summary statement of financial position that is worth noting is the change in other liabilities The change in other liabilities totaled, $70,000,000 and grew at 19.3%. Interestingly enough, as a result of the COVID period, we had a an annual increase of ZAR 40,000,000 in the leave pay liability as a function of our employees being at the front line and not being able to take leave. Together with that, we had an increase of ZAR 37,000,000 in our benefit point liability as a result of reduced foot traffic which came about as the as a result of the implemented regulations of COVID-nineteen, we saw, lower benefit point redemptions in our stores and, hence, the liability increasing. We take these 2 costs as indirect COVID related costs and haven't taken them into account in the statement of comprehensive income, which takes out direct COVID related costs. Group revenue increased by 8.1 percent to CHF 12,800,000,000. Retail revenue grew by 6% to CHF 11,300,000,000, retail impact retail revenue was re very much impacted by, COVID-nineteen regulations. As as Ivan mentioned, we saw much higher baskets and and much lower foot traffic. Our network of stores is weighted towards regional centers, And as a result, the inability of consumers to travel in the geographical containment of consumers influenced the like for like and sales trajectory of moles when compared to convenient sensors. Towards the back end of the presentation, I take you through the different levels and and and the recovery of malls relative to convenience centers and how we're seeing those, sales patterns changing. Wholesale revenue grew at 14.9percentto9.3000000000, external wholesale, is important for us from a volume perspective in terms of getting wholesale to, a profitable situation, grew 28.1%. And that was again supported by independent pharmacy and the inroads we've been making into TLC. TLC growth climbed as a function of of of new members and increased support and independence supported us as a function of the benefit that they saw because of as geographical containment. Internal supply or intra group revenue grew at 12.8%. It was quite influenced by the COVID related stock that was sold from warehouse into retail, excluding the COVID related stock sales, intergroup sales would have grown at under 6%, which talked the stock control that we've seen in our stores, which we will discuss later in the return on invested capital slide. Like for like retail growth, was at 1 a half percent, again, influenced by the metrics and some of the points that I've highlighted previously that that came out of COVID nineteen, And in terms of sales price inflation, incredibly difficult to compare an arrive at a price inflation number because of the SKU changes and category changes as a result of the COVID period, which drove both retail revenue moves and transactional margin moves, which I talk when we go through the operational results. If we move on to total income, total income really had 2 levers. We had transactional gross margin, which affected the retail poor of our business, lagging sales, transactional gross margin at 3.5% compared to retail sales at 6%. That very much impacted by category mix and the inability for us, to grow our beauty segment, which is a higher margin segment, it was in retail. It was supported by better back end terms, again, as a function of the return on invested capital exercise, and the normalization of purchases when compared to the prior reporting period. That offset, assisted in increasing total income in the retail business to 6.2%, and a slight increase of 10 basis points to 27.3 compared to total income margin of 27.2 in our retail business. Our wholesale business saw total income growing at 20.7 percent from 7.5% in the comparable period to 7.9% in the current period. The reason for that was better back end terms, which was concentrated to wholesale. So Chris will talk about the exercises that we've gone to better understand supplier profitability and cost in our wholesale, and that has allowed us to extract better terms from suppliers. And that's that has been one of the levers that has allowed us to drive profitability of wholesale. In total, the the the group moved its total income margin from 27.5 percent to 27.9 percent, growing at 9.4% ahead of sales growth at 8.1%. And a good result considering the pressure that we saw at a transactional growth margin level in our retail business. So prior to going to expense growth. We wanted to give some more clarity in, in, in, in, in, in breakdown the buckets of COVID-nineteen related costs these are direct costs, as I've spoken about, in terms of the statement of comprehensive income. The biggest driver of costs for staff vouchers and donations These will be weighted towards the first half of the year and we don't expect these to occur in the second half of the year. We gave our staff vouchers of 1 and a half thousand rand that was centered around, food and health, in light of them being in the front line of the pandemic and and working tirelessly day and night to support South Africa through the pandemic. PPE and screening costs We will continue to incur these costs into the second half of the year and have been incurring these costs into the second half of the year. It's important and a priority to ensure that the safety of our employees and customers. Staff testing was weighted towards the first half of the year or we still absorb the cost of staff testing and as much as the infection rate is reduced into the second half of the year, it is likely that some of these costs, although residual, will still be incurred into the second half of the year. And the other costs are costs of, that we incurred in terms of setting up our head office staff to work remotely So these would would be infrastructure costs, and also infrastructure costs that were invested in our office to ensure that the the pockets of staff that have returned to work, have returned safely and feel comfortable, working in our environment. If we move into retail operating expenditure, it has been a challenge to maintain cost growth below total income growth. If I talk through each of the lines, depreciation and amortization has grown at 17.8%. That is really a function of space growth as a result of IFRS 16, if you exclude depreciation and amortization and you exclude the COVID related costs, which predominantly set in retail as a function of the majority of our employees sitting in the retail environment. Operating costs increased by 9.1%. So slightly ahead of total income growth, which was severely impacted by transactional gross margin, We did get the benefit of lower trading hours in terms of employment costs, and you can see employment costs well managed at 6.5%, excluding COVID related costs. We have seen and we do anticipate an increase in 10% to 15% in trading hours in the second half of the year as we normalize, as level 1 normalizes and as we are mandated by our leaves, by our leases, we feel that it is going to be a challenge to manage variable costs as we see increased public holiday the necessity for some of our staff to take leave. We feel that that combined with some of the margin pressure will result in cost management being a focus for the second half of the year to ensure delivery of of, of good results. If we move into wholesale operating expenditure, wholesale operating expenditure, excluding COVID related cost was well managed at 0.3 percent growth. Depreciation and amortization, again, a function of some of the investment in, in assets that we have made historically. Occupancy costs, although small, grew by 28.28% as a function of a once off municipality immenseable electrical back billing. Employment costs are well managed at 6.8% considering the 14% growth and the 28% external growth and that was really driven by the continuous improvements that we make in output volumes in the DC and other operating costs reducing by 6.5% due to the investment in technology that we made in the prior period, allowing us greater visibility of productivity, customer performance, and individual supply performance together with staffing and shift pattern understanding. We saw the benefit in Chris will explain of allocating and changing weekend shift patterns to allow cost management in the wholesale environment. If we move into operating profit, all of that rolled up, excluding ones of excluding the COVID related costs, we saw operating profit move from 5% to 5.1% and growing at 10.8 which implies an improvement in in operating margin, if you take the direct COVID costs out. And a good performance, we think, considering the environment and the direct overlap of the COVID period. Take into account the COVID related cost operating profit grew by 3.1% absorbing and taking into account the ZAR45 1,000,000 spent in in operating costs. We saw that the pressure on retail So retail margin, retail, operating margin reducing by 6.8% and that's purely a function of the transactional gross margin pulling down on the total income growth and your total and your expense growth running ahead of that. And we saw operating and we saw the wholesale environment move from a loss making position at the end of last year, in terms of the comparative period into an operating profit of CHF41 1,000,000 as a function of better total income and well managed cost growth really centered around more and more volumes and efficiencies coming through the wholesale channel. If we think about earnings per share and headline earnings per share, just a summary, so earnings per share and headline earnings per share at $0.36 per share growing 16.1% as we benefit benefited from, each of the lines that I had spoke to previously as well as the benefit of finance charges, And excluding COVID costs, just for the purposes of comparison, earnings per share and headlines, earnings per share would have grown at 28.5% with the weighted average number of shares, barely or insignificantly moving year on year. If we move to working capital, this is the this is the lowest working capital that the group has reported since listing, and we've seen a steady improvement of working capital across the 4 years, Since we've listed, this has been a big area of focus for us. If we look through each of the different lines, day to day is slightly pushed out from 23 at FYyear at FY20 year end to 25, are purely a function of, an over indexed, external, wholesale applied to independence, which obviously comes with terms, inventory days at 83 at 86. That includes COVID stock, which we had to buy COD, so we didn't get terms on COVID related stock, which Craig will talk to you a little bit later. Excluding COVID related stock, and looking at it from an operational rolling stock day, metric, the group is at 78 days, a slight improvement from 79 days at FY2020, in creditor days at 79, allowing us a neutral position between inventory and creditor days, We have also seen substantial support for the supply chain finance program that we introduced with more and more vendors participating in it highlighting the continued need for cash through this difficult with what we believe is an excellent solution that allows our vendors attractive cost of finance. In total, working capital improve to 32 days from 34 days at the end of the financial period 2020 and from 37 days, at the comparable period. And if you consider rolling stock days, our actual net working capital position is at 24 days. If we move to cash management, a lot of these bullets we would have covered, the working capital movements of 482 investment talks to the COVID related stock that we invested in that were that was done without terms and on a COD basis, the net finance costs I've spoken to, and we can see an improvement, if you compare that to the previous cash management graph as a function of lower, of lower finance costs, tax talks to the single provisional tax payments we've made, there's a small dividend line that reflects dividends that were paid to our minority partners from our, in our minority interest line, CapEx and proceed CapEx, I'll talk to you in a separate slide. And then loans, treasury share, and finance lease repayments that talks that continues to talk to, the Absa loan repayment talked to the contingent consideration, which is in its last cycle. These were some of the franchisees that we bought on listing, and we showed a decrease in cash and cash equivalents of 281,000,000 since, February 2020. As the stock, the COVID-nineteen related stock has cycled out of, our balance sheet. As of today, the cash position is 350,000,000 rand higher than it was at half year. If we move to capital management, Expansion CapEx has increased by 30.9% as we've added new stores in the first half of the year. A big portion of that 183,000,000 relates to the R80 million rand in SAP licenses that I previously spoke about. As I mentioned, this is in preparation for a point sale upgrade. We are moving away from our current, point of sale solution to a SAP GK pause solution. The solution, as I've mentioned, gives us greater retail flexibility and it's important for us as a group to take the next step, to be able to offer innovative solutions to our customers. Interestingly enough, the cost per square meter has ticked up slightly from 7 and a half and and it loads between 7 and a half and 8000 rand per square meter we are seeing a slight increase in this as a function of running slightly smaller stores, and expansionary CapEx and Ivan alluded to the four stores that we've opened in the 6 to come potentially could be influenced by COVID in the long term, either this year or or in the 2022 financial year. If we move on to retail trading performance and core category performance, As I've explained, one of the fundamental levers and drivers of our results has been the difference between revenue growth and the change in transactional gross margin. Can see revenue growth at 6% with transactional gross margin at 3 a half percent. If we break each of the categories down, dispentry grew revenue at 2.7%. In in our mind, the dispensary growth and we talk to it in the market share movement growth. We outperformed the rest of the market in the dispensary growth, e even though our network is more specific, and that just really talks to Dispentry being at the heart of the brand. Transactional margin grew slightly ahead of that and benefited from SAP increases better negotiated dispensing fees with certain schemes, as well as the higher OTC margin that was generated during level 5 and level 4 and pre lockdown levels. Personal Care And Beauty grew revenue at 4.1% with transactional margin declining by 4% two specific reasons for that. The first was the inability for us to sell beauty during level 5 10 days into level 4. Beauty comes with much higher gross margins. And with with reference to personal care, personal care, was overweight from a SKU perspective in some of the commodity 1000 lines that are lower price point and lower margin lines, with less impulse buying, as Alvin mentioned, healthcare nutrition grew 19 percent revenue and 14.5 percent gross margin, very similar in characteristics to personal care in terms of commoditized lines like vitamin vitamins see being shopped and less impulse buying, which resulted in gross margin lagging sales growth. Baby was similar again, characteristically. So we saw a change in revenue of 1.6% compared to a decline in margin of 9.6% with overweight index, commodity lines such as baby paper, being appies, etcetera, wipes, and baby food. Others saw a very slight uptick in revenue. Biggest contributor of others, obviously, confectionery and it's very much impacted by lower foot traffic with gross margins tracking slightly behind at 0.1%. If we look at category market shares, interesting to note that we saw a decline in all of our categories from a market share perspective, Avan spoke about the reduced foot traffic, which was driven by regulations. We also think and we can start to see the recovery as the economy opens up that consumers were very much impacted by single shot patterns that were driven predominantly by food. And why we and what what we mean by that is we see, instances of other categories being shopped in food retailers from shoppers to avoid multiple shops, and the risk of multiple shops certainly during level 5 and level 4. The dispensary market share, as I mentioned in the previous slide, was the least impacted and highlighting our best in class dispensary position of the brand and some of the initiatives that we'll talk to you later that were able that we were able to ensure grew our chronic basket. As we move to the market weighted share trend of our core categories through lockdown, this highlights and shows the recovery of our market shares as we move through the different levels. As I mentioned, we believe that the single shop patterns of consumers impacted market shares where the food gross is benefiting from a single shop. And as consumers become more com more comfortable with multiple shops and engaging with multiple retailers, And as the regulations change it across the levels of lockdown, you can see that personal care and beauty and health care nutrition have recovered substantially and are almost at the same levels of market share, market shares, prior to to lockdown. And you can see the impact in dispensary was much more muted, again, as a function of our destination and position of our brand even considering the overweight store network in large malls. On slide on this specific slide, we have only taken it to level 3 which align with our half year, but we have continued to see market share improvements across both level 2 and level 1. I'll now hand over to Craig to take you through the benefits and the improvements we've seen on our return on invested capital strategy. Thank you, Roy, and good morning to everyone listening in. I'm going to take you through the progress made in our ROIC Improvement strategy. From a margin perspective, these half year numbers covered the full COVID period. So transactional margin was under pressure as a result of the change in consumer basket mix and our inability to sell certain high margin categories deemed non essential during periods of lockdown. Retail gross margin Growth was therefore lower at 3.5% compared to turnover growth at 6%. Despite the GP margin pressure, total income growth at 6.2% still exceeded turnover growth as a result of the strong improvements in back end terms and rebates coming through from the base work we did towards the end of the previous a year. As South Africa has moved through the lockdown levels from 5 to 1. We've started to see normalization in transactional mix as well as a gradual recovery in gross margin. Health And Beauty is very resilient, but we do still expect continued GP margin pressure during the second half of the financial year, We know our customers are under pressure, so we'll continue to invest in price providing the best possible value. From a private label perspective, we saw share gains across the core categories over the 6 months. Trade terms income grew at 15.2% versus purchases at 9%, This increase in terms of percent of purchases came as a result of deeper penetration into our supplier base as we expanded coverage. The terms increases drove the total income margin growth ahead of turnover growth, and that included the portion of COVID purchases. Some of these goods being in scarce applied at the time, led to COD purchases with no rebates. Total stock days decreased from 95 to 86, from an operational stock perspective, so looking at stock as a function of 91 day cost of sales, stock days reduced from 79 to 78 days and excluding COVID stock. To support these improvements, we increased the pace of rollout of our SAP automated forecasting replenishment system or F and R. This newer generation system uses advanced algorithms and machine learning to optimize demand forecasting replenishment volume and timing and ultimately inventory management. Coverage of turnover on full auto replenishment increased to 31.6% of total French shop. And I'm going to give you a brief overview of the impact on ROIC levers that we are seeing after turning vendors on to FNR Auto. Creditors days at $79,000,000 were flat compared to a year ago and slightly lower than at financial year, 20 year end. The reduction versus year end was partly influenced by the COVID cod purchases. Rolling stock days were in line at 79, so we maintained our neutral stock creditors working capital position, and we saw increased usage of our supply to in finance solution across the period without allowing our suppliers increased flexibility in managing working capital. The SAP forecasting and replenishment slide illustrates the impact our FNR system is having on the key roke levers as we wrote it out. These numbers are for 18 suppliers that we converted to full FNR auto at the end of June. And it's a decent sample size at around 90,000,000 turnover per month. I've compared the results from 3 months prior to 3 months post implementation, and the metrics we analyze are potential lost sales, total stock levels, sales growth, and system forecast accuracy. So we achieved a 387,000 rand reduction in average monthly potential lost sales, so that's 12.6% down. If you look if you compare the previous 3 month low versus post automation low, we reduced that by 952,000. As with machine learning systems traditionally, accuracy improves the more data you feed it. If lost sales are looked as a percentage of sales, this shifted from 4.8% to 3.3% on average and a low of 2.6% in October. We also carried on average 16.2 days less stock post automation. So stocks shifted from 98.9 days cover to 82 point 7 on average, with a 5.2% reduction in average stock on hand at cost for these 18 suppliers. Turnover growth was still higher year on year at 11.2 in the trend prior to automation. The working capital chart is a graphical illustration of operational stock days again, based on 91 day cost of sales versus credit to day trends across multiple periods. As you can see from the gray versus yellow dotted chart lines, ended in a neutral stock versus creditors position, Gallo being creditors days and the gray line being group stock days, excluding COVID, We previously explained the decentralization theme that led to an initial increase in DC and group stock at the end of selected previous reporting periods, then as it played out, a decrease to below pre decentralization levels with the improved efficiencies that resulted. From then on, we maintained what we felt was a closer to optimal stock levels and after 6 month period to August, stock days were stable at 78, with a slight reduction in store stock as seen by the dark green line to 45 days cover. There may still be a couple of days improvement we can find in some of our more mature stores and from gains in replenishment efficiencies. I responded to extreme shortages of COVID related items in March through May, along with the high volatility in demand, resulted in higher stock position in specific categories as is evident in the closing stock number in August. It will be a case of cycling through this stop to more normalized levels, timing would be influenced by COVID and how that progresses. A portion of the COVID high stock could potentially be exposed to price volatility risk, but we've not seen any impact as yet. I'm now going to hand over to Saul to discuss online and benefits. Thank you, Craig. Loyalty card benefit members. We have 10,100,000 customer profiles, of which 5,700,000 are benefit members, up from $9,700,000 $5,500,000, respectively. Both our full youth customer base ages 18 to 25 years and the baby members are showing good growth by 9% 13%, respectively. We have shown steady growth on our app, which are up 29% at 257,800 downloads, driven by chronic dispensing initiative, comprehensive above the line advertisement digital strategy and member statements. During lockdown, we successfully launched 2 banking partnerships, Absa rewards and Standard Bank U count, both which has got off to a flying start. We also put together an offering with clientele Life and Vodacom Vodafax rewards, With the start of our COVID pandemic, we saw consumer shopping behavior continue to shift to shopping online. In line with the South African lockdown restrictions, following similar trends experienced in international markets, This boom saw our online sales grow remarkably up to 4 27% in July, leveling up to 3 44% by end August, elevating it to our largest store or 3 times larger than the average Dis Chem Store and the fastest growing store across the group. Partly due to the lockdown restrictions it accelerated our e commerce goals by 3 years within the past few months. With that said, we are also seeing online shopping steadily leveling up to what's going to be a new normal as consumer starts to venture back into stores, but will remain high and continue to grow. We have been investing in our online platform for over the past 5 years A lot of work has been completed behind the scenes to boost efficiencies operationally as we doubled our number of fulfillment hubs in order to continue to meet customers' expectations on these massive new demand levels. We partnered with 3rd party tech firms furthering embracing technology for additional efficiencies and to drive down performance costs while enhancing the last mile service delivery This implementation is now being piloted in some of our stores and we will soon be seeing the fruits of these enhancements. We have embraced different technologies that allows customers to choose the services that suit their specific needs and convenience. A one day online only wonder Wednesday deals has taken off well and is achieving our objectives of creating a Black Friday light buzz on the website Every Wednesday, Wednesdays have become our most popular day in terms of the order rates, has doubled our average daily sales from being the least number of average order days to the most. Our online store is a profit contributor as a function of us using decentralized fulfillment hubs, increasing operational efficiencies, and we expect further improvements as we scale up. Back to Roy to conclude operational performance. If we move into the up into the primary care space and you would have seen this slide depicted previously, Ivan spoke about our interest in, primary health care insurance assets and our differentiated clinic infrastructure allows the delivery of health care at lower costs which obviously opens up margin, in the healthcare insurance business. The slide tries to depict the different channels that encourage footfall into our stores and then how we use the strategic health care assets that we've acquired, which would be bolstered and complemented by the health care insurance asset to recycle patients, and consumers into our stores. As we've mentioned, we believe we have a differentiated clinic infrastructure. We will talk about our telemedicine offering and the uptake that we've seen and we believe we are well positioned as we control the 3 biggest cost levers of primary health care insurance. In terms of the size of the opportunity, currently with 4,000,000 medical scheme policies, they employed, but uninsured lives in South Africa that are consuming health care on a cash basis and potentially become the market for healthcare insurance products, or around 12,400,000. So as as Ivan mentioned, a great opportunity for us to vertically integrate into into a a part of the health care channel that allows and opens us opens up potential margin. One of these strategic assets that we have spoken about and that is assisted during the COVID period is health window, health window is a chronic adherence business, and analytically, tracks and ensures adherence from from chronic consumers As you can see, the first half of twenty twenty one has grown 3 a half percent relative to the comparative base, a 3 a half percent growth in volume, and that is much higher, index than any comparative pharmacies in the market. On the right hand side of the slide, you can see a distinct shift change on the trading range of chronic volumes as we've adopted, this chronic management solution across our entire chronic base There's, of course, a lot of volatility across the COVID period, but important to note that the trading range continues and drives dispentry volumes, hence, the minimal movement in dispensary market share. If we move on to the next slide, which denotes Pak Mahmeds. And as a reminder, Pac Mahmeds is our digital chronic adherence solution. So we touch our consumers in multiple ways. The first being through a call center, we then also offered for convenience purposes, a digital solution, the digital solution comes with 2 mechanisms. It's either SMS or app driven. And what the graph illustrates, it shows the adoption of this digital solution across the COVID period and the facilitation of many more chronic, scripts through a digital service. So trends and matches some of the online store growth that Saul has seen, and it's important in terms of delivery as we find multiple channels to touch our, consumer base. Health window is one of the strategic assets that we think will help us manage risk and cost within primary care insurance products and potentially ensure optimized routing to reduce further the primary care price points of these products and make them very competitive in terms of how consumers see them and how healthcare gets spent on and consumed. If we move on to clinic connect, clinic connect to the solution that we offer in store that gives consumers access to, telemedicine or the ability of our clinic system to pass on a consumer into a GP or practitioner environment necessary. You can see the adoption rate has increased drastically and even, in in the COVID period where we saw lower foot traffic from the inception in December 19 to October 2020. We are now doing the most telemed consults that we've ever done. Importantly, and denoted by the 2 paragraphs in the middle of the slide, you can see that the script conversion ratio remains relatively high, which talks to the point that I mentioned on the first primary care slide around recycling our customers, that again assisted and is enforced by adherence management And on the right hand side of the slide, you can see the consultation payment methods have now opened up from it being predominantly a cash based solution to a support from the medical schemes. And the reason for this is that it becomes a much more efficient way of dealing with health care costs. As in many instances, the nurse is able to solve for the solution without passing the person onto the GP environment, which is obviously a lot more costly. The last point to add on the slide and maybe going back to the utilization of the GP is that we are able and we have been increasing the scope of services of our clinic sisters in terms of what that means from a pass through percentage into the GP environment. And again, the lower the percentage pass through, the lower the health care cost for the consumer, And again, that opens up potential margin in a primary health care insurance asset. It also allows us to better price, prime primary health care insurance assets. And again telemedicine and Cani connect as a brand fundamentally important as we potentially take a stake and a strategic stake in a primary health care insurance asset. I'll now hand over to Chris to take us through the wholesale trading performance. Good morning, ladies and gentlemen. I was going to start the session by playing this song I have the Targa, the theme song of Rocky, as a celebratory song for being profitable in the wholesale section But Roy said it's not allowed, and I'll, in any case, just be giving away my age. So as you have heard, and you will now see more detail of The wholesale division had a very successful trading period in very tough and challenging times. I truly believe that these results are a culmination of concerted efforts which were well executed at a very by very capable operational and financial team. As a part of our strategy, We've established a continuous improvement team called CIT, whose main focus is constant efficiency improvements. We have adjusted our focus from a daily output target, which is a finite goal to an infinite goal of adding value to the entire supply chain. From supplier to store to consumer. By adopting this goal, we have identified a number of areas in our business where we could by making small 1% improvements in these areas, achieve long and sustainable improvements in efficiency. By adopting this 1% principle, we have seen that multiple small improvements throughout the process clearly resulted in exponential gains from an operational perspective. Which in turn faltered through to our improved financial results. If we go to the first slide external wholesale revenue, you'll see that external growth is at an astonishing 28.1% during these challenging unprecedented times. You'll see the second bath shows a negative ZAR22 million. That is for 2 pharmacies that we acquired. That's now seen as internal stores. And we just backed it out of the base when we compared revenue growth. Connex, the wholesaler that we took over in the Western Cape, grew by 20.3% year on year. The growth in the revenue and volumes in connects over the past 18 months resulted in the need to consolidate into the Western Cape DC as the Kwinnet's DC was bursting at the seams. We have started the consolidation process in September, and I'm happy to report that we have successfully implemented 2 of the 4 stages. Whereby we have rolled about 40 percent of the KONEet's customer base into the Cape DC already. This process will be completed by the end February 2021 with anticipated savings. Looking at the TLC support, TLC customer growth revenue grew by 25.7%, reemphasizing the feasibility and success of that business model. The TLC franchise stores increased from 96 to 110 stores. We mentioned last year the establishment of a corporate TLC model We acquired a pharmacy on the 1st March 2020, which is currently running very well. In the second half, we've acquired another store which we actually took over the weekend on the 1st November, which we are very excited about the opportunity. The independent pharmacy support grew by a phenomenal 36.4%. We believe that our sustained focus and service levels during the COVID lockdown period contributed to this success. We were able to maintain our cutoff times and delivery schedules right throughout the various levels of lockdown Due to restrictions on people's movements, consumers opted to support their local independent pharmacy. Which had a positive impact from a supply chain perspective. If we look at the next slide supply profitability You'll see 4 levers there. As mentioned previously, we developed a tool that helps us measure profitability at a supplier level. We have 4 levers that we make use of to improve supply profitability. The 2 levers that have had the biggest impact have been increased stock turn in other words, reducing the day's stock cover, which can be seen in our inventory days coming down. The second successful lever that was implemented is renegotiating better logistic fees, which contribute to the growth we can see in our margin. This is however a continuous process of improvement as we endeavor to improve the profitability of suppliers. Turning to the expense slide. This graph seeks to compare total revenue growth to total expense growth. It can be seen that revenue has grown by an impressive 14.9% compared to the same period last year. However, the figure that excites me more is the fact that expenses only grew by 0.3% over the same period. Despite the growth we have seen in revenue and output. As mentioned earlier, this was achieved by sustained focus on efficiencies and the 1% principle that I spoke about. The main contributor to this was the payroll expense. During COVID with its restrictions on travel and curfews at night, we were forced to relook at our shifts. By rescheduling and relooking at how we staff our weekly shifts, we were able to increase output and reduce the need for weekend shifts. This resulted in considerable savings especially on our overtime costs. 2 other expenses that we'd like to highlight is firstly motor vehicle expenses, which were reduced by a combination of things. The first being the renegotiation of maintenance contracts, delivering savings as high as 30 to 40% monthly. Secondly, we were able to cancel to cancel certain truck rental contracts because of better and optimized routes. Lastly, we concluded a national diesel supply rebate contract with favorable rebates. When we look at computer expenses, Savings were achieved by the cancellation of external IT consultant fees. These resources were used last year to help implement the technology platforms we use to better measure profitability and efficiencies. Going on to the local choice site, We decided this year to provide insight into the TLC franchise group at a retail level. You might wonder why the image of a tree We adopted this image as a symbol of what we strive to achieve in our long term strategy. The more you take care of the basics, being the roots, the better the results. The routes depict our inputs from a franchise oil point of view and the fruits of the results we achieve from these inputs. If you look at the image, you'll see everything around the routes are the franchisor inputs, being things like business intelligence, centralized stock file, choice card loyalty program to consumers. There's retail support. We measure compliance management, We do merchandising, ranging, store design and layout. We offer operational support. There's clinic assistance we do local area marketing, national marketing on both radio and TV, franchise franchisees qualify for DSPs with medical aids, we also have an in house industry specific training academy. These inputs deliver some impressive results. The annual turnover of the group at a retail level is just below ZAR1.9 1,000,000,000. The average size pharmacy is 248 square meters. We currently have 110 the local choice pharmacies, 89 of these pharmacies have clinics, To date 31 of these 89 clinics offer video made functionality, the group is currently ten years old and growing, We have a franchise in 8 out of the 9 provinces in South Africa. From a group perspective, the monthly average sales growth is 41.5%. And if we look at the dispensary versus front shop split, it's sitting at 67% dispensary. Versus 33% front shop, which is above the average for independent pharmacies. Roy and I will now take you through the COVID trading period in wholesale and retail. Thanks, Chris. We will broke we've broken this down into retail and wholesale separately, and then I'll finish off with giving some sort of, insights into the trading patterns that we're seeing, in our mall stores versus our convenience centers. If you look at the retail impact, you can see pre lockdowns, pre lockdown or in our financial 2020 year. We saw turnover growth of 11% and like for like growth of 4%, normalized trading environment considering some of the economic pressures that consumers were already seeing. We then saw the pre lockdown spike, as Alvin mentioned, in his introduction as people pantry loaded. We then moved into level 5 where all the regulations implemented or effected our trade, and we saw a decline in, turnover and in like for like. And then you can see the improvements into level 4 into level 3 and 2 and to level 1. Just some point note worth noting, and we will clarify them as we talk about malls and convenience. But typically across the entire group, the natural improvement across the levels of lockdown as the economy opens up I think importantly, the lost sales number as a result of restrictions to non essential products. So about 20% of our non essential products of our of our base was restricted, during level 5 that was predominantly indexed by beauty, which was unable to trade across the entire level 5 10 days into into level 4. And we've summed that lost sales opportunity at around 274,000,000 rand. Importantly, retail sales for the 1st 2 months post year half year from September to the end of October have grown at 6.7% with October showing the highest trading number that we've reported, during the COVID period. And the group revenue number growing at 7.1% as we've seen normalized trade in the wholesale environment with external sales growing at 13.1%. Chris, if you take us through the wholesale piece. Thank you, Roy. The graph shows the resilient nature of the industry during the challenging COVID period. As can be seen in the external sales numbers, the independent market really benefited during the initial lockdown period due to various travel restrictions. Wholesale external sales showed rapid growth, free lockdown and during level 5, as we can see on the second and third graphs. There was a decline in growth during level 4 because of the dramatic stockpiling during the previous period from consumers. However, the growth for both internal and external remained positive. Levels 302 showed positive increases again despite there not being any real winter season spike. Level 1 shows growth in both external and internal sales as lockdown restrictions were eased. If we look on the right side, total growth over the total period shows sales growth to the FY2020 numbers on the left hand side. As I said, just to break the trading across malls and convenience centers. If you make reference to that slide, at a sales growth level, you can see that pre lockdown, the group experience phenomenal growth, as we've explained before, with convenience centers, outgrowing malls, at 58% compared to the 29%. And then it's very evident that support that the convenience centers had across level 54 3, 2, and 1. You can see that flattening out as the economy starts to open. And as you see the improvement in the mall stores, which at level 5 were 38% down and at level 1 or 3% down. And for the first time, showed growth in the October month. Importantly, we've combined level 3 and 2 just because of the trading patterns across those periods. Level 3 had a 94 trading day and level 2 had a 34 trading day, but a different weekend shift mix. So from a comparison perspective, it made sense to combine levels 3 and 2 If you look at like for like sales, the trend follows exactly the same as the sales trend. Important to note that the like for like sales numbers in the mall situation are very similar to the mall sales growth, and that's a function of our new space being added in the convenience centers and it talks to the potential community based pharmacy acquisition that Arvin spoke about, which is very much weighted to convenience center space. There's a slight increase. There's a big difference between convenience center like for like growth and top line growth. And again, that's a function of convenience stores being this newest stores that we're adding to our base. I'll now hand over to Alvin to take us finally through the dates and the outlook. Thank you, Roy. The babysitting acquisitions, which we announced in May of this year, is still pending competition commission approval, which we believe is due to the backlog at the Competition Commission. Our board has unanimously decided that due to spending acquisition of the pharmacy groups and the health care asset, as well as the uncertainty around COVID 19 recovery, we will not be paying a dividend at this time we believe when completed the acquisitions of both synergistic and strategic and will over time develop shareholder value external agents are managing the sale of our distribution centers, and we believe that this will be concluded by the end of our 20 21 financial year. We believe that the impact of COVID 19 and the lockdown that came with it will last for many more months and the consumer will remain under severe pressure. The extended trading hours of our stores and category sales may will put pressure on margins in the second half of our financial year. We opened 3 new stores since half year, and we are on track to open another 7 stores before year end. The airport and many clinic pharmacies have not been included due to the uncertainty of the opening times. We are confident that our latest acquisitions will be valued enhancing for all our stakeholders, and we will provide more details once we receive all approvals. This concludes the Dis Chem presentation. Thank you for listening. Please note that this is a prerecorded presentation. Should you have any questions, please send them via email to the address on the screen in front of you.