Good morning, everybody, welcome to our year-end results. It has been an extraordinarily challenging time. Blackouts have placed the economy under enormous pressure. South Africa is simply not growing at the required rate to ensure improvements in employment and living standards for all South Africans. We need to grow the size of the cake before we try to cut it differently. The energy crisis is particularly challenging for food retailers because we rely on electricity to keep food chilled and safe. Burning diesel generators adds massively to our costs. Pick n Pay has had a resilient performance in this challenging environment. I'm grateful to Pieter and his team. They can be proud of what they have achieved. We have made excellent progress on our Ekuseni strategic plan. We are pleased with the results that have converted stores, and the stores conversions are achieving great results for us.
Our clothing division, omni-channel, value-added services, and Boxer are once again our standout performers. We are at a particularly precarious time in South Africa, with official unemployment sitting at 32.7% and much higher among young people. The IMF has just forecast our country's growth at 0.1% for this year. That isn't even standing still. It's going backwards. Investment in our economy is critical. Pick n Pay's investment of ZAR 4 billion into the business over the past year shows our commitment to build for the future. Not many companies in South Africa are making this scale of investment. In our experience, food manufacturers are not investing in their plants to the degree required to maintain adequate market supply. This is having a big impact on food security.
I was also disappointed to see how poorly South Africa was doing relative to other economies in attracting foreign investment, as reported at the recent investment summit. As outlined in our announcement this morning, in recent months, we have spent about ZAR 60 million per month on diesel. It's an extraordinary challenge to manage a business on this basis. Without this unnecessary cost, our results would have beaten our own forecast and those of many external commentators. Shockingly, 37% of the cost of each liter of diesel we have bought, over half a billion ZAR worth, has gone into government coffers and the Road Accident Fund as a windfall tax. This is unconscionable, particularly when rolled up across the economy and the hardships the blackouts are causing. Requests by the retail industry to be included in the government's diesel rebate package have so far fallen on deaf ears.
Daily blackouts have become our new reality, which is not to say that we simply accept it and do nothing. We've worked hard on an energy resilience plan, and I'm pleased at the progress the group has made. No company can absorb these costs indefinitely, and given the scale of investment needed to keep the power on and to keep our stores open. Maintaining consumer sovereignty is our priority at a time when unplanned costs of energy weigh on every citizen. We have absorbed much of the cost inflation, particularly on basic commodities, by saving costs in our business. We cannot insulate consumers entirely from the impact of the energy crisis. Food inflation is also being driven by global factors. Eskom has transferred some of its generation cost to industry through the stages of blackouts. We have had to absorb these costs.
Despite these pressures, we have once again this year kept internal inflation below CPI and at less than half the current 14-year food inflation high of 14%. This is taking a Herculean task. It is therefore distressing to see irresponsible efforts to shift the blame for food inflation onto retailers. The recent statements by the Competition Commission and government spokespeople are a case in point. They have inexplicably accused the sector of making unjustifiable profits. This is incorrect and, in our view, irresponsible. An estimated 45% of South Africa's total available food supply is being lost or wasted annually. One of the consequences of blackouts is increased food waste. In a country that already registers troubling levels of poverty and hunger, this is unacceptable.
Over the past four years, we have reduced food waste by nearly 30% as we work steadily towards our target of 50% by 2030. We have also donated more than 880 tons of edible surplus food to Food Forward South Africa. This is valued at more than ZAR 35 million. I feel compelled to caution that the entire food industry is under existential threat. The probability of social unrest relating to food shortages and possible store closures if blackouts get too high is now heightened. Faced with the reality of structural economic decline, the only meaningful government action seems to be inaction, and to place the blame on those trying to help solve the problems.
At a time when growth-orientated policy change and certainty should be the only items on the agenda, we are mixing up policy with politics. How our government can risk AGOA and other bilateral agreements through overt support for Russia after its invasion of Ukraine and threatening to withdraw from the ICC is beyond understanding. That's before we've even considered the possible effect on the Western economy's pledge to help finance the energy transition away from coal to the tune of $8.5 billion. Without this capital, it will be difficult to end the blackouts and reduce our reliance on coal-generated power. South Africa's growth depends on important policy shifts, we are unlikely to see them happen before next year's election. Our country has boundless potential, we must all act decisively in shaping our destiny.
It's how individuals, the private sector, and civil society respond that will now determine our future. We fully support the BUSA BLSA initiative to work with government to resolve key areas and are committed to support where we can. Pick n Pay remains committed to serving our customers as best we can. We will continue to play our part in society, we will do both by being the most efficient business we possibly can be. We look forward to continuing the huge strategic transformation that the company has embarked upon. It will produce strong longer-term performance. Before I close, there have been a number of requests from shareholders for us to increase our dividend cover to cover some of the Ekuseni costs. The controlling shareholder has agreed to revise policy from FY 2024 payouts.
Finally, my thanks once again go to Pieter and the Pick n Pay teams and to the board for their performance through what has been an extremely trying period. Finally, I'd like to thank you all for attending today. I'd now like to hand over to our CEO, Pieter Boone. Thank you.
Thank you, Gareth, for the introduction and touching on the key topics that affect us all as retailers and, more importantly, as citizens of this wonderful country. I've been with the business just over two years now, and reflecting on our journey, we have come a long way. However, the operating environment continues to be challenging. If I look at the progress we have made and the underlying performance of the business, I feel proud and inspired. I feel proud of the dedication of our operations, our staff in stores, serving our customers despite the disruption of load shedding. I'm inspired by the capabilities of our people and the entrepreneurial spirit of our franchise partners to manage a business during this challenging trading environment. I would like to thank you all for your hard work and dedication, but the journey only has just begun.
The structure of this year's presentation is slightly different to the past. I'm going to provide you with some high-level thoughts on the past financial year, the progress on our Ekuseni strategy, the challenges we faced, more importantly, our response to these challenges. I will then hand over to Lerena to go into the details of the financials, after which I will provide you more feedback on the progress of our Ekuseni strategy. The group delivered another resilient results. The group sales for the financial year 2023 are ZAR 106.6 billion, up 8.9% compared to last year. We know South Africa is a highly price-conscious market, the overall market has been highly competitive.
Nonetheless, we have been able to deliver sales growth while maintaining our gross margin at 19.6%, in line with our gross margin for FY 2022, excluding fully insured stock losses relating to the civil unrest last year. In absolute terms, an additional ZAR 1.9 billion was delivered. This is an incredible achievement by the group. The group delivered a trading profit margin of 2.7%, 40 basis points lower compared to last year and marginally down in rand terms. This reflects strong underlying performance and progress on our Ekuseni strategy, as we have successfully mitigated some of the significant load shedding costs during an investment year. In May last year, we presented our Ekuseni strategy and targets to the market. Our strategy is built on five pillars.
Winning with the Pick n Pay customer, building Africa's number one discounter in Boxer, a market-leading online offer, funding our ambition through Project Future, and delivering through our people. I'm pleased with the progress we have made in this first year of this multi-year strategy. We announced the decision to decouple our brands last year when we showcased our customer value proposition in the then Pick n Pay Blue and Red divisions. We subsequently launched our Pick n Pay QualiSave brand as the banner for our Red division. This change has been well received by our customers. Since the announcement, we have converted more than 130 stores to the new Pick n Pay and Pick n Pay QualiSave CVP and are seeing strong turnaround in those stores.
Boxer continued its exceptional performance in FY 2023 by opening 60 new stores. Sales are up 20.2% in South Africa. We continue to invest and build our omni-channel business. Online sales close on double their contribution to overall sales. The growth has been largely driven by our on-demand grocery offers, which have more than doubled in sales over the past year. We are on track to grow this business by eight times over the next four years. We achieved ZAR 800 million in savings under Project Future. We are on schedule to deliver ZAR 3 billion in savings over a three-year period. From a people perspective, we signed a significant multi-skilling agreement with our main union. This enable our store colleagues to work more flexibly and productively to meet the needs of our customers.
We also continue to make progress in the consolidation of our support office. The delivery of our Ekuseni strategy has not been without headwinds. We showed immense decisiveness this year, given that we responded to a number of unplanned external challenges. From the second half of 2022, we, alongside with the rest of South Africa, experienced a serious escalation in load shedding. The daily challenge of lengthy electricity outages is still with us and has intensified in recent weeks. This has become the new reality for the foreseeable future. Despite this, the group has contained cost through tight control of its trading expenses and is implementing an energy resilience plan under the leadership of our Head of Transformation and Strategy, David North. A depressed economy and persistently high inflation have placed consumers under financial pressure.
The launch of our QualiSave brand, targeted at our lower and middle-income customers, was timely to offer customers with the highest financial exposure with a cost-effective option. More than 25% of our store estate across Pick n Pay, QualiSave, and Boxer is now geared towards the fastest-growing lower and middle-income market. We made significant investment in price and promotions to provide relief to our customers during these testing times. We decided to strategically buy in stock, specifically on commodity lines, due to the global supply chain disruptions associated with the Russian invasion of the Ukraine. The decision was taken to protect our customers from the full impact of sharp price increases in the market and reduce the instances of out-of-stock scenarios. We remain very focused on mitigating these challenges and the risk that they may intensify further in the coming year.
We provided guidance last year that FY 2023 would be an investment year for the group with broadly flat earnings. This guidance was provided before the disruption and additional diesel costs associated with the elevated levels of load shedding, specifically from H2 onwards. If one considers the underlying performance of the group, excluding the ZAR 430 million of additional energy cost, net of electricity savings, our pro forma profit before tax would have increased by 7% compared to FY 2022 and ahead of our Ekuseni guidance. The underlying performance of the business reaffirms that our Ekuseni strategy is the right strategy for the future, and I'm energized for the year ahead. I will now hand over to Lerena Olivier, our Chief Financial Officer, to give you more color on the numbers. Lerena, over to you.
Thank you, Pieter, and good morning, everyone. Pieter, I could not agree more on how proud I am of the dedication of our operations and supply chain teams, our staff and stores, franchise partners, and our support offices. To deliver a strong underlying result during another unprecedented year for South Africa. As Pieter has indicated, the group delivered a resilience performance in a heavily disrupted first year of its Ekuseni strategic plan, with group turnover up 8.9%, 4.8% on a like-for-like basis. Despite spending an additional net incremental cost of ZAR 450 million due to load shedding, as well as incurring planned costs in implementing Ekuseni, the group still delivered a pro forma trading profit of ZAR 2.9 billion, down only 4.3% on last year.
As a reminder, our pro forma profits excludes the ZAR 145 million of insurance proceeds received this year relating to last year's civil unrest. Our South African operations delivered turnover growth of 8.7%, like-for-like up 4.5%, driven primarily by a market-leading performance from our Boxer operations, with turnover up 20.2%. The groups focused on and investment in its growth engines are delivering clear results. Boxer increased its turnover participation to the South African segment by 3 percentage points during this year, now totaling more than 30%, supported by space growth of 14.4%. Boxer opened 60 new stores during the period, compared to 36 last year. Clothing's trading space increased by 16.8%, and turnover grew by 15.3%. Both Boxer and clothing is an illustration of the Ekuseni strategy at work.
Pick n Pay South Africa, for the Pick n Pay and QualiSave banners combined, grew turnover by 4.3%, like-for-like 3.5%. The Ekuseni strategy for Pick n Pay is prioritizing driving like-for-like sales growth ahead of new space growth. It is important to note that like-for-like sales growth was disrupted by the CVP upgrade of 131 stores completed during this period. Our South African turnover grew 11.2% during the first half and 6.4% during the second. Pick n Pay's turnover growth slowed in H2 as the pace of the CVP upgrades accelerated. 90 stores were completed in H2 and 41 in H1. At the same time, the base hardened, impacted by the civil unrest and COVID-19 related restrictions last year.
Boxer's exceptionally strong sale performance of +27.2% during H1 moderated to a strong 14.4% during H2. This was due to the disruptions in the H1 base as a result of the civil unrest last year, as well as a shift in the promotional activity in the base year as the Boxer team refocused promotional activity traditionally planned for H1 into H2 last year, also as a result of the civil unrest. Notwithstanding these disruptions, albeit in the base or due to the CVP rollout, we are pleased with the sales progression in our growth engines, as well as the early results from our upgraded stores in Pick n Pay. Pieter will take us through more detail on the progress in this regard. A depressed economy and persistently high inflation have placed consumers under financial pressure.
With a focus to deliver better value for customers, we have again contained our internal food inflation of 8.5%, well below CPI food of 10.4%. Notwithstanding this important and significant investment in the customer, gross profit margin, excluding the impact of civil unrest in the base, was held constant year-over-year at 19.6%. A solid performance considering the following: increases in fuel prices impacting logistical costs, an intensely competitive market. We were able to deliver a stable GP margin despite our investment to support under-pressure consumers by leveraging our strategic buy-ins through Project Future Better Buying initiatives and unlocking logistic efficiencies. A commendable performance, in my opinion, that is delivered for all stakeholders. The group's underlying other income, excluding insurance recoveries relating to the civil unrest, is up 14.1%.
A pleasing performance supported by income from both value-added services and digital and media. Franchise income increased by 4.5%, reflecting the conversion of 22 franchise stores to Pick n Pay and Boxer company-owned stores during the year. Commissions and other income include value-added services income up 19.8%, driven by innovation in specifically our financial services offering. Digital and media income up 10.1%, reflective of the optimization of our digital platforms in order to generate additional revenue streams for the group. The group's trading expenses grew by 11.9%, 7.9% on a like-for-like basis, and includes the following cost pressures.
Cost contributions of new stores due to the successful execution of the Boxer and clothing store rollout, the significant increase in energy costs as a result of load shedding, an estimated net incremental cost of ZAR 450 million that I will detail on the next slide. The increase in security and insurance costs as a result of the civil unrest last year, planned increases in marketing costs as we refocus the Pick n Pay brand and its price perception with our customers. Project Future initiatives have driven strong cost control in the business and assisted in offsetting, specifically, some of the load-shedding impact, the most notable being the solid progress made on our biggest expense line. Our employee costs are up only 2.9% on a like-for-like basis.
Pieter will take us through what we have done to date to achieve this and what efficiencies we will unlock into the future. Trading expenses, excluding the net incremental cost of load shedding, is up 9.5% for the year, reflecting strong cost control in a highly inflationary environment. The group incurred net incremental energy costs of ZAR 450 million. This cost consists of the diesel costs required to run our generators and to keep our stores powered during load shedding, net of the electricity savings we make. Our net incremental load shedding costs increased in January and February to approximately ZAR 84 million per month, compared to the ZAR 60 million per month as disclosed in our trading update on the 8th of February.
You can see from the graph that this was a direct consequence of higher levels of load shedding during January and February when compared to that of October, November and December last year. How will load shedding costs impact our FY 2024 results? It is exceptionally difficult to know. It depends entirely on the levels and frequency of load shedding that will be experienced during the year. To assist your understanding, we've provided an illustrative indication of what FY 2024 net incremental energy costs could be if the FY 2024 overall load shedding were at the same levels we've experienced in January and February. The table shows that the net incremental energy costs for the year would then be approximately ZAR 390 million.
Please note that this is before the impact of any of Pick n Pay's energy cost reduction efforts, whereby we are intensely working to reduce our diesel costs via initiatives such as further LED lighting installation, automatically switching off certain equipment during load shedding, and the reconsideration of our optimal refrigeration footprint. We are targeting at least ZAR 200 million of savings from these initiatives. Overall, however, FY 2024 net incremental energy costs will primarily depend on the levels of load shedding experiencing during the coming year. As we all know, this is highly uncertain. Notwithstanding the significant headwinds during the period, the group has delivered a pro forma trading profit of ZAR 2.9 billion, down only 4.3%. The group's pro forma trading profit margin of 2.7% is at 3.1% if the net incremental load shedding costs is excluded.
This is reflective of the strong underlying trading performance and our progress on Ekuseni. Net finance costs increased by 15%, driven by our increase in gearing to support the investment in Ekuseni, as well as the increase in the repo rate of 325 basis points during the year under review. The group's pro forma of profit before tax of ZAR 1.7 billion declined 15.1%, with the South African PBT down 18%, reflecting significant impact of load shedding on this year's results. The group's rest of Africa segment contributed ZAR 5.1 billion to segmental sales, up 7.8% in constant currency terms.
The segment's profit before tax of ZAR 154 million is up close on 30% on last year, reflecting an improved performance in Zambia as well as the franchise operations in the rest of Africa, with the Zimbabwe earnings being in line with that of last year. As I've mentioned, the group has entered into an investment cycle supported by a strong balance sheet. The underlying performance of the FY 2023 result is testament of the future returns these investments will deliver. CapEx investment of ZAR 4 billion, up from ZAR 2.1 billion last year, has resulted in an increase in our net gearing of ZAR 3.7 billion. The group invested just over ZAR 0.9 billion in working capital during the period.
This is as a result of the increase in inventory that I will detail on the next slide. I would, however, like to commend the finance team and our Head of Retail Finance in particular, Gary Lee, for implementing our Fast Pay program seven years ago. Pick n Pay's Fast Pay program has been awarded the best working capital funding solution at the International Working Capital Awards last year. The platform allows suppliers, specifically SME suppliers, to gain instant cost-effective funding. We currently have ZAR 600 million on the platform, up close to 50% on last year. The group's inventory increased by 28.6% to ZAR 10.7 billion this year. The increase in the inventory up to the ZAR 9.9 billion level has been funded through trade payables. This funded increase is as a result of the following.
ZAR 1 billion due to the higher cost inflation, especially in commodities. ZAR 0.4 billion due to the new stores. An incremental strategic buy-ins of ZAR 0.6 billion that has supported our investment in the customer and the maintenance of our gross profit margin. Lastly, the range reduction in our CVP stores across both Pick n Pay and QualiSave delivered a reduction of ZAR 0.4 billion with more benefits to follow into the future as we execute the full conversion rollout plan. In addition, the timing of the Longmeadow to Eastport handover coinciding with the group's financial year end has added ZAR 400 million of stock that will be cleared by the end of Q1 of FY 2024. During the current year, we have increased our stock position with ZAR 0.4 billion of unfunded excess inventory.
The reduction of this inventory is a key focus area for management, with plans to ensure that this stock will exit our business before the end of the first half of FY 2024. As guided, the group has increased its investment into the business to support Ekuseni, specifically the growth initiatives of Boxer and clothing, as well as the revitalization of the core Pick n Pay brand. The latter includes an increased investment in omni-channel as well as digital innovation. We have invested ZAR 4 billion during the period, up 90% from last year. It is important to note the substantial increase in CapEx in two of our most important growth engines. Boxer, where CapEx increased by 104% to ZAR 1.3 billion, and clothing, where CapEx increased by 130% to ZAR 145 million.
The ZAR 2.2 billion of CapEx spent on the Pick n Pay core brought about a meaningful improvement in the look and feel of our stores as we refurbish stores in terms of the CVP program. This positions our Pick n Pay store estate to compete more effectively in the future. For the coming financial year, we will continue to focus our investment on the growth engines while balancing the investment requirements against what is needed to ensure we are energy resilient. As a result of the increase in the group's investment cycle, our net gearing is now at ZAR 3.7 billion, 1.1 x net debt to EBITDA. The increase has been driven by both our planned CapEx investment as well as the increase in working capital, with strong plans to pull back on the increase in working capital during FY 2024.
We are near to completion in securing ZAR 5.5 billion of long-term funding at very attractive rates. The funding will comprise a mix of three to five-year unsecured funding, all ESG-linked. The group's net funding increased by ZAR 3.3 billion during the year, primarily driven by the elevated CapEx, as I have just detailed, as we are investing in Ekuseni. Cash flow from operations of ZAR 2.9 billion was down from last year's ZAR 3.3 billion. If one were to add back the ZAR 450 million relating to load shedding, cash flow from operations would have been largely in line with that of last year. The FY 2023 total dividend of ZAR 2.21 per share is down 16.3% in line with the decline in pro forma headline earnings.
Our existing dividend policy of 1.3 x cover thus hold for FY 2023. The board has, however, resolved to change the group's dividend policy from FY 2024 onwards. The new policy is a range of between 1.5x and 1.8 x cover compared to the existing 1.3x. This equates to a dividend payout ratio range of between 56% and 67%. The new policy, including the fact that we are guiding a range, is designed to proactively provide the group with the balance sheet flexibility required in light of the Ekuseni capital investment. The choice of a range allows us to increase dividend returns to shareholder once the capital demands of the Ekuseni strategy taper off.
It is important to note while we have reduced our payout, the lower end of our new payout range remains broadly in line with what some of our peers paid out in FY 2022 and is significantly higher than others. We are proud of what we have delivered under very difficult circumstances. These circumstances are likely to remain for the foreseeable future. To assist investors in understanding the outlook for FY 2024, given this uncertainty, we provide some high-level guidance on the following. Our CapEx spend is likely to be between ZAR 3.5 billion - ZAR 4.5 billion. Working capital is expected to release between ZAR 0.5 billion and ZAR 1 billion as we execute on the working capital opportunities I have detailed before. Our net debt to EBITDA is likely to trend up from the current 1.1 x to 1.5 x by February 2024.
Our FY 2024 earnings before restructuring costs may not exceed that of FY 2023 pro forma headline earnings. The outcome will ultimately depend on the level and frequency of load shedding that we experience. Higher finance charges from our increased gearing will also impact FY 2024 earnings. We expect the first half of the year to be particularly challenging as the normal earnings seasonality is compounded by a number of factors, including the following: load shedding that is minimal in the first half base, our energy cost reduction initiatives that will only incrementally gain traction throughout the year, H1 will also be impacted by approximately ZAR 120 million of DC cost duplication during the Longmeadow to Eastport handover, as well as restructuring costs from the VSP and junior store management processes we are currently running.
Importantly, the efficiencies from these restructurings will only begin to flow from HY2 on, from the second half onwards. I hope this will help you in your projections. I now hand over to Pieter for an update on our strategy. Thank you.
Thank you, Lerena, for taking us through the details of the final full year results. As Gareth stated in his opening, it has been a challenging year for retailers. A year where we launched and began to execute our Ekuseni strategy while facing several global and local challenges, including persistently high inflation and increased load shedding. Through the determination and resilience of our teams, we can stand before you today and bring you a positive underlying full year result. We have been converting our stores to reflect our new customer value proposition for Pick n Pay and our new banner, Pick n Pay QualiSave. Since the launch in May 2022, we have completed 131 full conversions. We've also rebranded 118 stores to our new Pick n Pay QualiSave banner across our corporate and franchise estate.
This is an incredible achievement, whereby we have converted more than 30% of our store estate that had not been upgraded in the past 10 years. It is important to note that the majority of the CVP conversions were only completed in the second half of the financial year. This provides significant runway into FY 2024 as the positive results that I will share with you shortly flows through into our overall sales performance. We continue to execute our range reduction strategy announced last year to deliver a differentiated and targeted value proposition in our Pick n Pay and Pick n Pay QualiSave stores. To date, we have reduced overall SKUs by 22% on average in a number of CVP stores across both banners.
This is an ongoing process. We have already recorded ZAR 400 million in benefits in working capital during this financial year, with a full benefit to be expected to flow into FY 2024. Ultimately, the success of our strategy will not be measured by operational metrics only. The true test is whether customers support on what we are doing. I'm very pleased to say that our Net Promoter Score increased by 9% in the revamped stores since relaunch. Now, one might argue that customers only say that they like our strategy, but do the sales and the performance support this sentiment? Yes, I'm happy to say that the numbers do support this sentiment. Since conversion, our CVP stores have recorded a sales uplift of more than 10% on average versus the same period last year.
This is very encouraging when compared to the 4.3% sales growth in total Pick n Pay South Africa for the year. These stores have also seen an average increase in customer transactions of 7%. Customers in these stores are buying bigger baskets than last year and bigger baskets than in our non-converted stores. More customers are coming to these stores to enjoy our revised ranges and great deals in what we call Traffic categories. Customers are also shopping the categories that we have set up as differentiators or what we call Power categories. We believe that these are strong proof points demonstrating that we are on the right track. I'm very impressed with the progress that we have made to date. There is further optimization or what I call fine-tuning required.
Over the last two years, we have aimed to win the trust of our customers by ensuring that our pricing is highly competitive and consistent. Customers have noticed the difference, and we have seen a pleasing improvement in price perception. Funded by Project Future initiatives, our core Pick n Pay banner prices were perceived to be around 2% cheaper than our key competitor. Customers are also recognizing the differentiated offer in Pick n Pay QualiSave, with price perception being lower compared to Pick n Pay. Therefore, the decoupling of the brand is yielding positive results as we are able to increasingly target our pricing and promotions to the right segments of the market. Boxer continues to enjoy market-leading sales growth trading in the largest and fastest-growing segment of the market.
We opened nearly double the number of stores compared to last year and have reopened 99 out of the 100 stores looted during the July 2021 riots. South African sales grew with 20.2%, with customer growth at 16.7% and a positive basket growth. We have a strong own and confined label penetration in Boxer and delivered more than 100 new confined label products in the year. This strategy not only adds value for our customers at affordable prices but also aids margin management. As Boxer continues to expand its service offer to its customers, it has seen value-added services gaining significant traction with growth in excess of 40% over the past financial year. The relentless expansion of Boxer also create over 3,000 additional employment opportunities in areas where people are in desperate need of jobs.
Therefore, offering these communities not only an affordable and highly quality product range, but also employment opportunities. Boxer's growth will provide further efficiency opportunities. The Boxer team is in the process of testing a market-leading forecasting and replenishment tool with plans to go live in FY 2024. The tool will allow for improved cash flow and improved availability through reduction of inefficient stock. We will provide more details on this during the course of the year once testing is completed. As said before, the Boxer business is a gem in the Pick n Pay group, and I'm extremely delighted with the magnificent achievements delivered this year. Our clothing business is a key engine of growth for the group. Our standalone clothing stores achieved a growth of 15.3% for the year, with a net profit growing at 11.6%.
The division has achieved cumulative market share gains over the last four years. We have opened 56 net new standalone clothing stores this year, more than double compared to any other period. This is an amazing achievement by the team to contribute to the overall performance of the group and create additional employment opportunities in the communities we serve. The clothing team continues to do great work on local sourcing with approximately 45% of our units sold that are manufactured in South Africa, a 100% increase in volume from 2019. 38% of our volumes sold are manufactured with sustainability as a key attribute. I remain encouraged with the overall performance of the clothing divisions, including the opening of the first 4-star green-rated store in South Africa at our store in Blue Route Mall, Cape Town.
The online grocery market is still in its infancy in South Africa. We expect significant growth over the next few years as it matures. Our online value proposition continued to show strong sales growth building on the success of last year. Growth in online sales was driven primarily by our on-demand offers on Pick n Pay asap! and Pick n Pay Groceries on Mr D. Pick n Pay Groceries was launched on the Mr D platform in October last year, and we have seen more than promising growth on the platform. We have continued to more than double the size of our on-demand grocery sales year-on-year. We are also expecting online to be profitable in FY 2024. We have an extensive delivery network enabling on-demand groceries to be delivered from more than 400 locations nationally.
Our on-demand customers expect a consistent experience with the orders delivered within an hour. The team really has doubled down on efforts to improve the end-to-end process. I'm proud to say that we have seen improvements across all key KPIs, including average picking time, delivery time, and perfect order rate to deliver Pick n Pay Groceries within an hour with the items that the customer wants. Average picking time is down 42% and delivery time down 24% on average. Scheduled delivery remains a huge opportunity in South Africa, but it needs to be a sustainable business model. Given the increase in fuel costs, we are busy trialing new fulfillment routes by using our hypermarket network as delivery hubs. This approach reduces our overall distance from the customer and provide access to a broader range of directly picked from our hypermarkets.
The results are promising and will be rolled out to our broader hypermarket network if results remain on the current trajectory. Value-added services experienced a resurgent year post the pandemic as people start to travel more often, travel, events, and gaming sales up with more than 30%, and we continue to build our overall value proposition to customers in this area. It was a year of firsts for the Pick n Pay value-added services team. During the past 12 months, we were the first retailer to launch a cash-in and cash-out facility for the customers of the VodaPay app, where customers can top up their VodaPay wallets and withdraw cash at our tills. The launch of a Pick n Pay funeral policy that we believe offers superior value compared to other products in the market.
Leveraging the value of our Smart Shopper by combining the use of loyalty and value-added services that allow Smart Shopper customers to buy airtime and data using their points on the Pick n Pay Smart Shopper app. The buy now, pay later method has seen a steady uptake in online retail and is only getting more attractive as cash-strapped customers grapple with the rising cost of living. We have positioned ourselves to serve these customers through our Pick n Pay Store Card and our partners in TymeBank with our MoreTyme offer. We have also seen an increase in demand for mobile products and services in our stores. In response, we have launched two new mobile concept stores at Pick n Pay clothing in Kenilworth and Brackenfell Hyper.
These stores have a new and wider range of handsets across all networks with an ever-growing mobile accessory business. The results have been overwhelming positively with sales growth of over 15%. We plan to roll this concept out to further 48 stores in the new financial year. FY 2023 saw a greater migration of our customers to our tills for banking services. With a greater convenience and safety, cash withdrawals were up more than 60% year-on-year. Our value-added services business has increased its overall contribution. We are excited for its continued success in FY 2024. Our Smart Shopper loyalty program is one of the crown jewels in our estate and has consistently been a point of differentiation for Pick n Pay for more than 10 years. This year, we achieved strong sales participation at 80% for 11 million active customers.
During a year where our customers were under immense financial pressure, we were able to deliver more than ZAR 6 billion in Smart Shopper savings and points. We believe that we will be able to deliver more value to our customers as we redevelop targeted and personalized discounts through a single home of customer data and analytics with this Pick n Pay Smart Shopper team under new leadership. In an ever-increasing digital world, our customers expect us to engage with them through new and modern digital channels. We are excited for the opportunity this presents and will provide greater details over the next 12 months on our plans in this area. The ongoing crisis in the national electricity generation is having profound impact on every part of society and the economy.
All Pick n Pay and Boxer stores have backup power in the form of diesel generators and are operational throughout the load shedding. Severe load shedding creates significant challenges. The government needs to come forward with a sustainable plan to solve the electricity crisis, it is clear that progress will not be rapid. The Pick n Pay Group therefore takes the view that the current crisis is a permanent new reality requiring a rapid, determined, and concerted response. The Pick n Pay Group is implementing an accelerated energy resilience plan to mitigate at least ZAR 200 million of load shedding costs in FY 2024. The plan includes tighter store discipline to even be more energy conscious, accelerated investment in low energy lighting, and more efficient refrigeration. We're also in the process of trialing other forms of energy resilience technology, including battery energy storage systems.
The outcome of these trials will underpin the development of an energy store of the future as a template for future resilience against potentially long-term or permanent reality of load shedding in this country. ESG initiatives remain core to Pick n Pay, founded on a core principle of doing good is good business. We have an active role to play in reducing our impact on the environment, our waste, and ultimately become a more cost-efficient business as a result. In FY 2023, we have reduced our waste in our stores, distribution centers, and head office by diverting more than 60% of our general waste away from landfill and reducing our food waste by close to 30% since 2019. This is a significant step towards achieving our targets of 75% and 50% respectively over the next three to seven years.
At Pick n Pay, we have made a commitment to building our communities. We are seeking to play a role in the low-income communities through short and longer-term initiatives, such as our partnership with FoodForward South Africa , Feed the Nation Foundation, and the Pick n Pay School Club. Through these initiatives, we have delivered more than 40 million meals at the value of more than ZAR 175 million to people in need. I'm extremely proud of the work being done by our teams, these achievements would not have been possible without the support of our partners and franchisees. Thank you to everyone involved. Our collective efforts are significantly more valuable than the acts of us individually. Another major achievement this year is the opening of our Eastport distribution center in Johannesburg.
The project was one of the largest capital projects we have ever undertaken, and it is a momentous occasion to announce that it is fully operational. A transition of this scale doesn't occur often, and the team has done an incredible job to develop and implement an efficient cut-over plan without any business disruption. Our Eastport investment supports our future growth ambitions and will be key to delivering the cost efficiencies. The Eastport DCs enables us to consolidate our Longmeadow distribution center and three smaller facilities into one. This increases our centralization in the inland region to 95%. Greater centralization results in efficiency gains due to process optimization, economies of scale, and physical layout improvements.
We expect to deliver 20% productivity improvements in FY 2024, while consolidating our Longmeadow distribution center and the three smaller facilities into one, which will further reduce fixed costs. When we announced our Ekuseni growth strategy last year, we committed to fund a significant portion of our ambition through Project Future. Project Future phase II encompasses a range of projects focused on improving efficiency, increasing flexibility, and reducing costs by ZAR 3 billion between FY 2023 and FY25. In FY 2023, we secured ZAR 800 million in savings through modernization and efficiency initiatives across the business. These initiatives included supply chain and working capital efficiencies, better commercial buying, improved corporate purchasing, and use of goods not for resale, and improved store and head office productivity under the Office of the Future program.
The team continues to deliver excellent results and support the overall funding of our Ekuseni ambitions. I've always said that our business is a people business. It's one of the greatest assets in our business that requires continuous investment and reorganization to delight our customers every day. In the past year, we have been doubling our efforts to improve skills and service of our people in our Power categories to support the new Pick n Pay and Pick n Pay QualiSave CVPs, and have been on an extensive recruitment drive to support our growth engines in Boxer, clothing, and omni-channel. We have created more than 4,000 jobs in the past year. With expansion plans set to continue, we have aimed to create more employment opportunities for the communities we do serve.
After more than a decade, a multi-skilling agreement was signed in partnership with our main trade union, allowing Pick n Pay supermarkets for the first time to schedule employees for more than one task with a single shift to improve customer service and store productivity. We began to implement multi-skilling in the second half of FY 2022, and we anticipate that the customer service and efficiency benefits will come through from FY 2024 onwards. We also recognize that we need to modernize our support office and ways of working as part of our Ekuseni transformation. Therefore, in March 2023, we commenced two new Project Future staffing initiatives, which both impact the entire group. The first is the modernization of our junior store management structure, removing roles which were no longer required. We're also creating new roles that provide greater service and flexibility in our stores.
Overall, more jobs will be created in stores than exist at present. The second initiative is a voluntary severance program aimed facilitating the group achieving its targeted benchmark in terms of support office and store level employee costs. This process is completely voluntary and offer our employees an opportunity to exit the business with an enhanced exit package. Both the VSP and junior management restructure will be completed at the end of May. Looking forward, we recognize that much work remains to be done to deliver the Ekuseni transformation plan in terms of sustaining the momentum of our growth engines, rejuvenating Pick n Pay supermarkets and optimizing our cost base. We expect trading conditions to remain tough, with no predicted end to the load shedding and a depressed economy weighing down on consumer confidence.
However, given the positive the results discussed during our presentation, we remain committed to our Ekuseni strategy. The promising results delivered by our new Pick n Pay and Pick n Pay QualiSave converted stores confirmed that the strategy is correct. We continue to roll out while taking the learnings from the past to adjust our value proposition going forward. The plan is to convert a further 80 stores in total during this year across Pick n Pay and Pick n Pay QualiSave. We will continue with the sustained expansion of our growth engines in Boxer and clothing. The results speak for themselves, and there is no doubt that we need to continue with that trajectory. We plan to open up an additional 75 Boxer stores.
Through the continued expansion of our Boxer business and Pick n Pay QualiSave banner, we are well-positioned to serve the fastest-growing segment of the market in the years to come. In Pick n Pay clothing, we plan to open an additional 60 standalone stores in support of the growth strategy. These stores will deliver further reach, greater scale, and a platform to serve our Pick n Pay customers even better. Online grocery shopping will continue to mature and grow this year. Our online business will service our traditional grocery customers that shop both in store and online, but also access a different, more convenience-oriented customer segment through our partnership with Mr D. We are excited for the developments planned in this space, we will share with these with you throughout the year. We plan to pursue and develop new revenue streams throughout the year.
The continued growth in retail media remains a significant opportunity for us. The data and insights available in our Smart Shopper program will allow us to serve more targeted and relevant ads across our stores, apps, and websites. We have excellent leadership teams in our traditional retail business and growth engine, and have full confidence in their ability to deliver these plans. We will also need to ensure that we fund these growth engines in a sustainable manner while simultaneously managing the cost associated with the load shedding. We will continue with the execution of our Project Future initiatives, including the finalization of the junior store management restructure, voluntary severance program, the consolidation of Pick n Pay support offices, and modernizing our support office structures and ways of working. We have achieved a lot in a year, but there is still significant work ahead of us.
We will continue to implement the new energy resilience plan, given the escalation in load shedding and the ongoing uncertainty on the overall outlook in the years to come. Our energy resilience plan is flexible, depending on the realized level of load shedding, as we will need to respond to the scenario that will ultimately play out this year. We plan to adopt a more balanced approach to capital investment, given the current uncertain environment, to ensure we invest in areas of business that will deliver the highest return. In closing, I want to be clear that despite the challenges we face as a company, we have made significant progress and achieved a lot over the past 12 months. Ekuseni is the right strategy, and we are committed as a leadership team to continue driving the transformation to serve our customers better.
I would like to thank all Boxer and Pick n Pay colleagues and our valued franchise partners for their commitment and contribution, and for their dedication to the customers and communities. In particular, I would like to thank our colleagues and partners for the energy they are bringing towards the realization of our Ekuseni goals. We will now open up the floor for questions. I would like to thank you for your attendance.
Good morning. There's a good number of questions, so I'm gonna group them where I can, beginning with you, Pieter. Question, a few questions really around the, would you say that your Ekuseni strategic plan remains the right one after the year that you've just reported on?
Thank you. Thank you very much for the question. It's reviewing the tape a little bit. We started with the announcement of our Ekuseni plan to the market less than a year ago. As explained in the strategy, in the results presentation, I'm extremely pleased on the progress that we have made. I think that is demonstrated if you look at our underlying performance for the year. We've done a lot. I think we have realized a lot, but we also recognize that there is much more to do. If we go back and ticking the boxes, our growth engines are full on steam, and we recognize there is more work to be done in the Pick n Pay retail part of our business.
In summary, yes, it's the right plan, and we will continue to execute this.
Related question, Pieter, again from an international investor. Is this the most difficult environment you faced as a CEO?
Nice question. Never a dull moment. That's the way I describe my journey, so far in this beautiful country, and I say this with a smile. It's country number eight or nine that I'm in now. I think it's quite a challenge, but every challenge provides opportunities as well. I think that is what we're doing hard with the team, as well to explore new opportunities that will provide us in order to further strengthen the brand and the brand equity that Pick n Pay has in this market.
I'm gonna group a question from Paul from Nedbank and Saad from Citi around the fact that the group reported internal inflation below CPI food. Can you comment on that and comment in particular on the outlook for inflation and internal inflation?
Yeah. First of all, I think it's difficult to give an outlook in relation to the inflation going forward. I think where Paul and colleagues should drive confidence out is that our internal inflation for the last year has been well below CPI food inflation. I think that's something we continue to strive on also in the months to come. I think as well our price perception as such has improved substantially in the last 12 months. The fact that we have taken different initiatives in order to control inflation, for instance, strategic buy-ins, is a good example of that.
Still with you, Pieter, specific questions from two colleagues from Nedbank, Nandi and Sean, which is can you provide some clarity on what you mean by Power categories?
Yeah. Again, for both Pick n Pay QualiSave and Pick n Pay Blue, what we call internally, we have redefined category roles, and I think that is expressed well in our new customer value proposition that we have rolled out. For QualiSave, that is clearly bakery as an example, frozen meat, where especially frozen chicken, IQF chicken is an example, but also when you talk about commodity lines and soft drinks. In Pick n Pay Blue, you talk about hot beverages, that's coffee and tea. You talk about the butchery department. You talk about the cheese department, but also when it comes to what we call the wine department in that part.
Thank you. Before I turn to Lerena, one final one, Pieter, at this stage, which is Sean Holmes from RMB asked a question about franchise sales that we don't disclose. Could you say anything more broadly about franchise and its performance?
First of all, the franchisees are a full member of the Pick n Pay family. The relationship and the way we work with each other, the way we cooperate with each other is a strength of this business. We continue to jointly explore different initiatives, how we jointly can further improve the customer value proposition within Pick n Pay. The fact that also within the franchisee estate, all those stores that we have identified as Pick n Pay QualiSave have been rebranded in the last 11 months is a sign of encouragement.
Turning to you, Lerena, there's a lot of questions around load shedding. Can you comment on the impact on load shedding, the ability of the group to recoup costs in relation to load shedding and any color in terms of the impact on forward targets and KPIs? It came in from quite a few colleagues, including Funeka from JP Morgan, Saad from Citi as well.
Yes, David, I'm not surprised that there is a number of questions on the topic. That's why in my presentation today, we really try to be as clear as we can be as to what the impact was for the year that's passed and as well has given some illustration of what it could be if it's maintained at the current levels. As I've mentioned, it's very, very difficult to be precise as to what the actual impact is. Given the fact that all of us are experiencing various levels of frequency and stages. What we can say is that we are working tirelessly to mitigate these impacts.
We've indicated that we've got energy plans of at least ZAR 200 million worth of savings for this year. We can do a lot just by doing things better. Just by focusing on operationally what we do, making sure we switch off lights, making sure that we bake at the right time, ensuring that our LED lighting rollout is accelerated. Focusing on capital investments with strong ROIs in this environment and proven track records. We are very, very careful to focus on operational responses first and ensuring that our CapEx allocation remains where we know there is specific ROIs that we will get from this area. I hope that the information provided in the presentation has given you some clarity of where we see these numbers are. We do believe there's a lot for us to do to mitigate the impact.
Maybe for me to add, for Funeka and colleagues is, I think you should draw out some confidence of the presentation that we have not been sitting still. I think we have been very proactive when it comes to dealing with the new reality as we speak, and we will continue to drive that with the different initiatives as explained, by Lerena.
Lerena, a number of questions. Philemon from Visio, Sean from RMB, Funeka from JP Morgan, and one or two others around what the group has said about employee restructuring. Can you provide a bit more color on perhaps on the costs, number of people affected, et cetera?
The employee restructurings is a critical part of our Project Future initiatives. We've indicated that over the planned period of Ekuseni, we are targeting ZAR 3 billion worth of savings, the steps that we've taken to date is very important steps in the execution of that plan. The once-off costs that come with these are all worked into our overall plans. Currently, we can't disclose those numbers 'cause we're in process of actually finalizing these. We're in consultation with our staff specifically to modernize the employee opportunities in our store. Ultimately, we will not be reducing any jobs. We will simply be modernizing opportunities for our staff through both the multi-skilling arrangement and the store modernization. We see great opportunities for our staff and to drive efficiencies into the business.
I think I would want to highlight again our like-for-like employee costs up only 2.9% for this year. It is already illustrating the progress that we've made. We firmly believe that there is much more to do in this environment while creating a better working place for all our staff. We will come back to the market and communicate additional information regarding any cost impacts as soon as they are clear.
I'm gonna let Lerena pause for breath for a moment. A couple of questions, Pieter, from one from Telleki, from Maritoni Capital. Any comments on any plans around M&A?
Merger and acquisitions is always on the radar screen, but it would be foolish in order to disclose the things we are working on here in this open forum. We will continue to scan the market, and at the moment, there is clarity and there's something to announce, we will come back to the market. I think coming back to what Lerena said as well earlier is, the company has taken a different approach in the way we engage with the market. There's more transparency and there is more frequency when it comes to providing updates to the market. I think that should give some confidence as well on the different elements of the business we are working on, and M&A is one of them.
A couple of questions, Pieter. Funeka from JP Morgan and Paul Steegers from Nedbank. Can you provide an update on the group's prospects and plans to sell the Longmeadow DC?
I think we reported that already in our October disclosure when we presented the half-year results. We are in the finalization of the process of the sale of Longmeadow, and we envision that that is going to be completed before the end of the half of this first of this financial year.
Lerena, the few questions around capital allocation and also obviously the announcement in respect of dividend cover today. Could you provide more color on that? That's come in, for example, from Mbuso, from Sentio Capital, and again from Funeka.
Mbuso, Funeka and others, we absolutely support our Ekuseni strategy. Pieter has absolutely reiterated the fact that we believe it's the right strategy for the group, we've already seen significant success in our growth engines, both Boxer and clothing. We will remain investing in the areas where we will get our highest ROIs. The capital guidance for the year to come, we've given a range from ZAR 3.5 billion-ZAR 4.5 billion, the focus of that capital will be firstly on our growth engines. We are very conscious of the fact that we do have the uncertain impacts of load shedding, there's also the need for energy resilience in our capital allocations.
As I've mentioned earlier, we don't believe that that is significant because there's a lot that we can do from an operational perspective with great returns at the end of the day. The reason we've given a range on the capital is for us to be very, very clear that as the uncertainty unfolds, that we make sure that we spend the right amount given the current environment. That is also one of the reasons why we have announced a dividend change today. As guided to the market, we've maintained the 1.3 times dividend cover for the past financial year. The board has thought it the right decision to support a change in that cover to a range that gives us the necessary flexibility going forward, depending on what we are required to support Ekuseni or any energy initiatives.
That range will be between 1.5x to 1.8x , with in all likelihood being towards the upper end of the range, for in the medium term.
Lerena, again, a few questions, including one from Brian Thomas from Laurium Capital. Could you provide any further color on the flat earnings outlook for FY 2024?
Brian, as I've highlighted in the presentation, the outlook for all of us is uncertain. What we do know is that we are working hard to mitigate the impacts of load shedding, therefore we have guided that we believe we will be largely in line at current levels from FY 2023 to FY 2024. Remembering that we are lapping some load-shedding costs that are not in our current year base, as I have detailed, as well as the fact that we are taking very important steps in our employment initiatives through the VSP and the Section 189 through our Ekuseni Project Future initiatives. At this stage, we have given some illustrative guidance to assist you with a forward-looking position.
What we do know is that we believe that our Ekuseni strategy is working, and that ultimately, through this multi-year program, we will deliver earnings growth for shareholders.
Thank you. Couple of questions for you, Pieter, around multi-skilling agreement that you spoke about. Specifically, are you worried about the multi-skilling agreement affecting customer experience? Then also there was one related to that from Shamil, from Prima Research. What financial concessions were given to the unions to secure multi-skilling?
First of all, multi-skilling is what I call a modern retail and a normal practice. Within Pick n Pay, we have been dealing for multiple years with a legacy, we're extremely pleased that in August last year we have been able, together with our main union, SACCAWU, to agree on a multi-skilling agreement going forward. We have been training staff since, we started to implement. I think as Lerena has expressed as well, is some of that you have seen in our like-for-like personal expense development already, much more to come. At the end of the day, multi-skilling should result and will result in a better service towards the customers because one person can do multiple jobs during one shift.
A question from Jovan, from Laurium Capital. Has the 10% uplift in sales from the CVP stores continued since the initial or post the initial openings promotions? Is this encouraging franchisees to also take on the CapEx to upgrade stores?
The short answer is yes. I think to once again, to end up, the 10% sales uplift that you have seen is excluding what we call the relaunch period. It is giving us a good base when it comes to the development of those stores that we have converted, whereby the new CVP has been implemented. We had in August last year a franchisee conference whereby we unveiled as well the initial results from the first stores that we have touched, and that was only a very limited number. There is great appetite within the franchisee community in order to have an implementation of the new CVPs as well.
The fact that we already rebranded the franchisee stores with the QualiSave brand for those that it is applicable to is a good sign of confidence in that sense.
Still with you, Pieter. Atiyyah from Avior, question about clothing. Are we still seeing positive like-for-like growth? In the current economic climate, where are you still seeing opportunities for growth in clothing?
First of all, we are still a relatively small player in this market. I think under the leadership of Hazel and her team, we have seen encouraging developments in the recent years. The fact that we have confirmed for this year that we will continue to accelerate our new store opening program in those areas where we're not present is a good confirmation that we are on the right trajectory.
Then specific one for you, Lerena, from Funeka. Can you comment on the position on excess stock and the relationship to the CVP rollout?
Funeka, our CVP rollout has already delivered success in the stock reduction. The range reductions in the stores that have been CVP'd has delivered ZAR 400 million worth of working capital benefits this year, there is definitely more to come. It is extremely encouraging looking forward, the working capital opportunities that we have. As I've mentioned in the presentation, there is two specific pressure points at the moment on our inventory. The one is the duplication of stock due to Eastport, which we will clear at the end of the first quarter. That's ZAR 400 million. Then there's the additional ZAR 400 million that I think that you are calling out.
That inventory is inventory that we know we need to get out of the business, and it will result in working capital benefits flowing into the group. If both the Eastport and the excess stock is removed from our net debt to EBITDA ratio, which is currently standing at 1.1, it will go to 0.8. I've guided on both of those items that they will definitely be out of the business by the first half.
I think, Funeka, to add from what Lerena said is post-closing of our FY 2023, we do see encouraging progress when it comes to those initiatives in order to take excess stock out of the business and the reduction of multiplication of stock from Longmeadow to our Eastport DC.
Thank you, Pieter. Thank you, Lerena. We are out of time. Where there are, more questions, we'll get back to the individuals who have asked them. Thank you very much for those.
Thank you.
I'd like to thank everybody for today's attendance, and looking forward to further engagements on a more one-to-one basis. Thank you very much.
Thank you.