Good morning. Welcome to everybody, and thank you for joining us for our interim results presentation for the six months ending December 2022. We will keep to our normal format, where I will give a bit of an overview of the company in its totality, and then Anton will give color to some of the financial numbers to understand those and unpack them better. I will end off again with a bit of a strategic view and what we set ourselves to do in the next six months. Firstly is that we have now surpassed for the six months the ZAR 100 billion in revenue. I mentioned earlier in the previous presentation that the group is now clearly set on to become a ZAR 200 billion revenue company for the full 12 months.
16.8% double-digit growth, very high double-digit growth, on top of last year's double-digit growth is a remarkable achievement. One easily can get lost with percentages. I'd like to call out that the absolute value of additional sales amounts to over ZAR 15 billion. That is what the group had to add new revenue to achieve the 16.8%. The gross profit have increased slightly less than what the sales have because we decided to invest in price and for our consumers. I will mention some of those numbers later. Because our consumer are currently really in the stress, and we do what we can, as always. Shoprite, we find solutions and ways how to support our price perception and assist our customers. Also pleasing to be able to increase the dividend payment to ZAR 2.48.
For me, an absolutely astounding number is the fact that our customer visits to our stores have increased by 12.9%. We all know that customers have got a choice. For us, it's really pleasing that they, in such numbers, have elected to choose us as their shopping destination. That resulted in almost 5% volume growth. Over 166 million additional products sold during the year. You will see naturally those kind of numbers will require from us to invest further in our supply chain. All of this, the growth of the revenue in customers and in volume, have resulted in a ZAR 3.9 billion gain in market share, marking now 46 months of uninterrupted market share gains.
It's been a busy six months for the 152,000 Shoprite employees, who at this point, I would really extend my greatest, sincerest thank you for a job incredibly well done. I remain with the saying that nobody executes like the Shoprite people. That is clear in this very fantastic set of results. From the left, we can see it, the period started with us reopening the very well-publicized burning of the Pietermaritzburg Hyper store. We have started the expansion in the distribution centers. We are leveraging our capacity in terms of different market segments, categories, adjacent categories where we under index like new formats in outdoor, Little Me, baby, pet, etc. We have doubled down on the digital with our ShopriteX.
We have got by far the largest loyalty program in the Xtra Savings Reward program. We have extended our platforms and customer data to our suppliers who now, in collaboration with us, can improve the return on the investment of their promotions. I would be remiss not to mention that we had 144 out of 182 days what we call these days rolling blackouts or load shedding, interruption in trade that comes with quite an additional extra cost. We had a fantastic Black Friday. It's worth a mention just because it's so big. The Shoprite Group have been able to create new job opportunities, almost 4,000 of them. The alternate sources of revenue is starting to become more and more meaningful.
We did tell you last time about Rainmaker, our media, business, specifically, in the digital space, starting to become really meaningful. The Sixty60 On-Demand service is continuing its growth, still very well accepted by the market. We've opened 187 stores in the last six months, basically a store a day. While most have enjoyed the festive holidays, Team Shoprite have transformed 94 of the Massmart stores that we acquired into the Shoprite brand. If it sounds like we are doing a lot, we are. There are 152,000 of us doing it together every day, making these things happen. The consumer, I did mention, the consumer is under distress, and we do what we can. At Shoprite, we don't make excuses.
In the six months past, we gave back customers over ZAR 7 billion in Xtra Savings. At Tillpoint, instant cash rewards. We're still selling our ZAR 5 loaf of bread since 2016, helping people to survive. As always, Shoprite never compromises on price. It is very clear that we have remained the price leader, and Shoprite is still the cheapest supermarket in the South African space. I'm gonna unpack these four points just very quickly. We have growth, our investment, some costs, and our customer portfolio. First is our industry-leading growth. We have a combination which we believe is the value that we create between fresh, our in-store experience, as well as digital. One must never underestimate the in-store experience to the consumer if you wanna go digital in omnichannel.
That's why it remains very important for us what we deliver in the physical space, then we enhance it with digital. A really outstanding performance from the South African supermarket division, growing at 17.5%. As we call it like-for-like, I know international people refer to it more like, same-store sales, of double digits. The only retailer, to my recollection, that have managed to do that, 11.1%. Very, very significant number. Liquor continued to do exceptionally well, gain a lot of market share over the last six months. The Sixty60, which I mentioned earlier, are continuing to grow, 87% on top of last year's 250%. Our in-store visits have also managed to grow by 12.9%, which I mentioned earlier.
In the combination of all of this has had the banners, all of our banners, achieving the 1.4% additional market share gain. If you look at the graph, you will see that pleasing to say that the contribution almost equal from the Shoprite brand, customer brand, and the Checkers customer brand. As you can see, they're ZAR 2 billion and ZAR 1.9 billion respectively. It's not a question of a once off. I did mention our 46 consecutive months of market share gains. That's four years, roughly. On there is the last three years' halves, and you can clearly see the gap is actually significant. The red line being that of the Shoprite Group, in terms of revenue growth compared to the rest of market. We believe this is not by luck, but by design. We have invested in price.
We elected to invest in price. Inflation is now, I think it's the highest that I can remember in 13 years. It especially hits hard at your more, most vulnerable and price-sensitive customers. The inflation at a Usave store would be higher than what it'd be at a Checkers store, just because of the high propensity and penetration of commodities. We all know those are priced internationally. Clearly, again, on the graph, you can see that the Shoprite internal inflation lags that of official food inflation by quite the margin. There is, for the smart shopper, there is a way to contain your inflation. We put on there, we've got this ZAR 99 combo. If you take those items in that combo, the inflation of that basket was 1.8%.
It is possible, by being selective in your choice, to contain your own inflation. It will be a miss from my side not to mention the additional costs that is brought by the load shedding, the additional diesel that we have to spend, ZAR 465 million for the six months additional. The 144 days that we had interrupted trade. Of course, we're not alone in this, but I think what a lot of people miss is that the entire value chain is bearing the brunt of this cost. It's not only the diesel cost. That's one component of it. It actually starts from farm to fork because there's times when farmers can't irrigate because they don't have power. There's the actual cost of the generators, et cetera. The CapEx cost of it, as well as the maintenance cost of it.
The interruption in the production line, I mean, when you're busy with producing food and you are interrupted midway, all of that has to get wasted. Which easily disappears because everybody sees the big picture and the price of the diesel. All the waste and food also goes into our cost base, and the additional maintenance, and then eventually it all spills over to the extra security that we have to take because it's dark and it's unsafe, and one has to spend extra money on that, and it all goes into our cost base. It's not only the diesel when we refer to the effect of load shedding. Our balanced customer portfolio between the Shoprite brand and the Checkers brand has really been performing well for us. As I mentioned earlier, the contribution from both these consumer brands are almost equal.
Checkers now contributing for the six months, almost ZAR 34 billion and Shoprite ZAR 44 billion. Although the footprint of Shoprite is much bigger than that of Checkers. You've also have noticed that the market share gains were almost equal from both of the consumer brands. Checkers growing at 16.9%. We now have got the balance with the Sixty60 on the month in 394 outlets, and the private label contribution in Checkers now increased to 19.7%. Especially in Checkers environment is it helps us to stay with the global trends, closest movements in global trends in terms of food. Hence why we have the Simple Truth and the Forage and Feast addressing two very different market segments. 255 Checkers stores in the portfolio and 38 of the hyper stores.
Significant number, Checkers alone, the brand, having 9.6 million Xtra Savings members. As I mentioned, Shoprite contributing ZAR 44 billion in the last six months, also growing 15.1%, double digit, high double digit. The contribution also to the gain in market share almost equally between Shoprite and Checkers. Private label participation in Shoprite is higher than that of Checkers, just purely because of the penetration of the commodities in the lower income segment of the market. Astounding number is 16.4 million Xtra Savings members for the Shoprite brand. The split between the two brands in Shoprite banner is 550 stores under Shoprite, branded as Shoprite, and 429 branded as Usave stores.
The supermarket's non-RSA division, or also referred to as rest of Africa, have had a very good performance in the last six months, growing in ZAR by 17.5%, but in constant currencies by 6.9%. Most telling here is we remain on target, our medium-term target in terms of the profitability, where we have indicated that we would like this segment to contribute about half a billion to total profitability. That summarizes just the bit of the overview of the total group as quick as I could. I would like to hand you over now to the Chief Financial Officer, the very capable Anton de Bruyn, to take you through some more detail on the financial numbers.
Thank you very much, Pieter, for that introduction and giving us some insights into what we've seen is the main drivers for our sales growth during the first half. My part of the presentation will deal more with what we've seen, our growth in our total income line and also some of the anomalies included in our total expenses. As in the past, we have included additional information, that I will not deal with as part of my presentation. You can ask us questions later about it. That deals with what we see as our adjusted HEPS number. The difference this year around adjusted HEPS is that we've also excluded the ESOP results from that, adjusted HEPS number. What is also important to note is that our results deal with continued operations, which means...
You will see that we've exited the DRC region during the first half of the financial year. We had two remaining stores within that region. It was an asset transaction, which means that we sold our assets, our property and equipment, as well as our stock. The total loss from the discontinued operation for the period was ZAR 137 million, of which ZAR 84 million related to the remaining lease liability of those two sites. I then turn to the financial highlights, Pieter spoke a lot about the 16.8% growth for revenue of ZAR 106.3 billion. Our total income increased by 15.6%, excluding the impact of our loss of profit claim, which I will deal with later. Our core income increased by 14.6%.
Our total expenses increased by 17.8%. Excluding various anomalies, our expense growth was around 14%. What is extremely important for management and as part of our decision making as well, is that our income growth exceeds obviously our expense growth. If we therefore look at the core growth, we had a 14.6% income growth versus a 14% expense growth. Trading profit increased by 8.6% to ZAR 6 billion. A testimony of the cash flow generation within the group, our EBITDA increased by 17.9% to ZAR 9.3 billion for the first half. Our earnings per share increased by 20.9%. One would ask yourself, what is the gap between the trading profit growth of 8.6% and the earnings per share growth of 20.9%? There's basically two reasons.
The one is, during the first half, we did manage to realize a foreign exchange rate profit on the back of currency strength within our Zambian and Angolan operations, where we had a loss in the previous financial period. We also had an increase in our items of capital nature through the realization of a profit on property sold, as well as a reversal of various impairments we had in the previous financial periods. Our return on invested capital, excluding IFRS 16, sitting at 16.2%. As part of the additional information in the back of our slides, we're also given a reconciliation of that. What is imperative is that our return on invested capital is at a higher rate than our weighted average cost of capital of between 14% and 14.5%.
Our interim dividend increased by 6.4% to ZAR 2.48, and our return on equity is currently at 26.4%. If we turn to sales highlights, the real purpose of this slide is to give indication of the base effects on which we actually increased our sales. Total sales for the group increased by 16.8%, with like-for-like sales of 11.3%. That was really on the back of a store opening program in the past financial year where we had 225 stores opening. If we go to our various segments, supermarkets RSA increased sales by 17.5% with like-for-like sales of 11.1% and on the back of a very strong first half performance on the previous year of 11.3%.
We are planning to open 195 stores in the second half of the financial year, which is partly driven by the 94 stores that we acquired as part of the Massmart transaction. I will deal with that in the next slide. Our supermarkets, non-RSA, very strong performance, 17.5% growth with a like-for-like of 16.6%. I think what is very positive for management is that that sales growth also converted into profitability growth, which I will deal with as part of our trading profit. The constant currency growth was 6.9% on the back of that strengthening currency within Zambia and Angola. Our furniture business increased sales by 8.6% against a negative 6.5% in the prior period.
One has to see this in context with regards to the 2021 result, where we went into lockdown and we had COVID, where the business actually grew at more than 21%. We did see positive growth in the prior year in the second half, and we expect to obviously grow and increase our profitability and sales on that. Other segments that includes our MediRite, Transpharm, and also our franchise business increased by a very good 12 and a half percent against a like-for-like of 9.6% and a base of 8.9%.
I then spend a little bit more time on the growth within our supermarkets RSA environment, Pieter spoke about and unpacked a lot about what we've seen within the Shoprite and Usave and what's driving the sales within that brand, as well as what we saw in the Checkers and Checkers Hyper. I think what's imperative, what's important also is to look at the growth that we saw within the liquor business, where we saw a 35.6% growth on the back of some base effects in terms of where we had 48 days of closures in the prior financial period as a result of that social unrest and COVID, where we traded the full period in this current financial year. We then turn to some of our brands, I don't think we've ever given this view.
In the strategy piece, Pieter just referred to some of the new brands and the new store formats we've launched. In the second half, we aim to launch around 68 Shoprites and also 72 liquor shops. 94 of those stores is as a result of the Massmart transaction. Very positive for us is that we are actually opening more than one store, one liquor store a week again, as we had prior to the COVID period. We've also opened 20 Petshop Science standalone stores during the period. We see it's a very nice opportunity for the group to also increase our footprint there. There's another nine stores that we will open during the second half of the financial year. Pieter will deal with Little Me's and Outdoors and what we're trying to achieve with those format stores.
We currently have five each in Little Me's and Outdoors, and we plan to open another three stores within those formats. Turning to total income, we've seen a 15.6% increase to ZAR 27.5 billion, and a trading margin or sales margin of 25.9%. Excluding the impact of the insurance claim, our core total income increased by 14.6%. Just maybe to give some clarity around the insurance claim, with the civil unrest in July 2021, we had an asset claim as well as a loss of profit claim. The asset claim was settled already in the previous financial year, where we had cover of around one and a half billion rand. The remaining part of the claim pertains to the loss of profit piece, and that was concluded during the first half of the financial year.
There is no more outstanding debtors on the balance sheet pertaining to that civil unrest, and that full claim is now settled. As part of the other income, you will see a loss of profit claim of ZAR 244 million. You would ask, what's the difference? The ZAR 232 million is purely the movement year-over-year. Within our first half of last year, we've already included a portion of the loss of profit pertaining to the furniture business that was settled. If we then go into more detail, our gross profit increased by 13.7% to ZAR 24.9 billion, a slight decrease from the 24.1% that we achieved during the previous financial period. There are three or four main reasons why we saw that decline in gross margin.
Firstly, it was that price investment for our customers, where we spoke about that ZAR 7 billion to shield our customers against the high inflationary environment. Secondly, we saw a 15 basis point move as a result of the inflationary of more than 50% increase in diesel price. We also experienced additional waste as a result of the load shedding in the first six months. However, our efficiencies around our managing of shrinkage remained intact, and we still have world-class shrinkage results. Other operating income increased by 43.8% to ZAR 2 billion. We've spoken a lot in the past about around the impact of what we are trying to achieve through our alternative revenue streams through our ecosystem. First line is the commissions received, where we saw an 18.6% increase.
The money market business through our Shoprite and Checkers business saw a lot of innovation through our value-added services which drove an increase in our footfall. We also play extremely important part in paying out social grants, which again led to an increase in footfall and increase in our commissions received. Our delivery recoveries increased by 43.6% to ZAR 286 million, which was mainly driven by our increase of more than 86% in our on-demand Sixty60 app and deliveries as well, and also supported by our increase in our furniture business. Marketing and media had an income of ZAR 225 million, and that was mainly driven through our Rainmaker digital media operations, which was a majority of that income. I spoke about the loss of profit claim.
Operating leases delivered an income stream of ZAR 241 million, and that's generated through our own buildings. The remainder of the ZAR 535 million is a combination of that strong growth we saw in the franchise business of more than 16%. We spoke in the past around our insurance sell and the dividends we received through that entity. Our interest revenue increased by 16.3% to ZAR 314 million, partly as a result of the increase in interest rates, but secondly also through our investments that we have in our income bonds and U.S. dollar-linked bonds, where we now have ZAR 1.8 billion.
A new initiative that we launched during the first half of the financial year was our Credit X business, which we are very excited about, and I will deal with that as part of our trade receivables. Something that I'm very excited about is our share in profit of equity investments, and there we talk about especially our Retail Logistics Fund. During the last two financial years, we've moved or sold some of our distribution centers on the properties into this Retail Logistics Fund. First, partly to unlock value within our business, and secondly also to help us fund our future expansion that Pieter will touch on as part of the strategic outlook. We also invested together with RTT in our last mile distribution for our Sixty60 business, which already delivered in the first half a profit of ZAR 22 million.
In total, our total income increased by 15.6%, ZAR 27.5 billion. If I then turn to expenses, our expense growth was 17.8% to ZAR 21.5 billion. We have listed a few of the anomalies which I will deal with now. Depreciation and amortization increased by 14.9% to ZAR 2.9 billion. That was mainly driven by our 225 store expansion that we saw in the last financial year. Our depreciation on property, plant, and equipment increased by 19.1%, and then our depreciation on our Right-of-Use Asset increased by around 13%.
What is very positive for me is that our depreciation as a percentage to sales remained at 2.8%, which was the guidance we also gave to the market in the past. Employee benefits increased by 15.1% to ZAR 8.3 billion. There's two aspects one has to take into account when analyzing the growth. The first was during the second half of the previous financial year, we launched our Shoprite Employee Trust, which gave rise to ZAR 121 million of expense in the current period. That payment is linked to a, the dividend stream that's generated by the group. Second aspect one has to take into account is the Employment Tax Incentive that we received in the prior year that equates to ZAR 193 million.
Excluding these two aspects, the growth for the employee benefits were around 10.4%. During the current period, we added 3,881 new staff members. One has to take into account for the second half of the financial year, we will also be adding 4,480 employees relating to the Massmart transaction. Electricity and water increased by 30.3% to ZAR 2.3 billion. On the back of diesel expenditure of ZAR 465 million. In our trading update, we did speak about the ZAR 560 million of diesel spend. The ZAR 465 million is additional spend in the current period. Excluding the impact of the additional diesel spend, electricity and water increased by 4.2%.
Other operating expenses increased by 18.4% to ZAR 7.9 billion. Included there is our additional spend as a result of, from an insurance point of view, on covering ourselves for riot insurance. In the prior years, we always relied on Sasria to give us full cover in terms of riot insurance. Our cover that we could get this year from Sasria was limited. Hence, we had to go out to the London market at a cost of around ZAR 180 million additional insurance cost to get the same cover. The ZAR 90 million, therefore, refers to the first half cost relating to that cover. We also saw a 16% increase in advertising spend, which is very much in line with the sales growth that we achieved.
Thirdly, what also gave rise to this expense growth was our cost to maintain our assets. We've seen a spike of around 20% in maintenance costs, and that was really driven by also the additional load shedding that we saw within the first half. In summary, total expenses up by 17.8%, excluding the anomalies, around 14%. In summary, if we look at the trading profit per segment, supermarkets RSA increased trading profit by 7.7% to ZAR 5.4 billion. Very healthy trading margin of 6.3%. Supermarkets non-RSA, strong performance, backed up by the strong sales growth of 58.8% to ZAR 316 million. Very much in line with that full year target, medium target that we set ourselves between ZAR 500 million-ZAR 600 million in the medium term.
Our furniture business showed a decline of 34.2% to ZAR 127 million as a result of first, cost pressures coming through and also margin pressures to increase our sales within that segment. What is encouraging is that we have seen a steady decline in our bad debts provisions that we carry for our furniture business. If we go back to December 2021 and 2020, we were still sitting at 44%. Our provision at the end of December 2022 was sitting at 40.1%. Other operating segments increased profitability by 26.1%. We spoke about the franchise business that had a very good performance, also our MediRite business.
What is also encouraging is that we saw a strong profitability growth within our Computicket business, where we've seen a return of travel in South Africa and internationally, as well as shows being hosted. From total continuing operations, we saw an 8.7% increase to ZAR 6 billion with a trading margin of 5.7%. If we had to exclude the impact of the additional diesel spend, our trading margin would be 6.1%, which is exactly in line with where we were in the previous financial period. We turn to net finance cost. A very positive picture in terms of cash flow generation within the group. Yes, we did get a benefit from interest received as rising interest rates.
If I look at the difference between interest received from our bank accounts as well as our finance cost on borrowings, it's a ZAR 38 million net. For the size of our business, extremely strong performance, which you will also see through our free cash flow slide. Our finance cost relating to our borrowings is at an average rate of about 6.9%, and our finance cost relating to our lease liabilities is 9.3%. If I then turn to the balance sheet, our total net cash was ZAR 8.7 billion at the end of December, an increase of 59.1%. Part of that increase was driven by the positive changes in our working capital. We have seen an increase in our borrowings of ZAR 1.1 billion, and that was twofold.
Firstly, from a liquidity risk point of view, if we look at the volatility within the South African environment. Secondly, we also are using longer term funding to fund our capital growth or our capital investment. What is encouraging is that we have reduced our reliance on U.S. dollar borrowings from $59 million to $35 million. I will speak about net work changes in working capital in the next slide and unpack what is the driving force behind that. Our borrowings to equity ratio is still at below our targeted range of 25%-30%.
We then turn to capital spend, increase of 25.3% to ZAR 3.3 billion, excluding the impact of the replacement capital, with regards to the social unrest and also the assets that we already had to acquire in terms of our proposed takeover of the Massmart stores on the 9th of January. Our CapEx to sales ratio was around 3%, which is very much in line with the guidance that we've given and also in line with prior year. What is extremely important for management is how we actually look at and the returns that we do get from our capital expenditure. That's why that split between expanding the business and maintaining the business for us is extremely important.
The majority of our capital expenditure is spent on expanding the business, which is evident from the aggressive store opening program we saw in the last 12 months. Nearly ZAR 2 billion of our capital was spent on increasing our sales growth and expanding on our footprint. Our margin expense expansion was ZAR 77 million, there we looked at initiatives within our supply chain as well as power-saving initiatives. Digital acceleration, I mean, we talk a lot about that within our ecosystem as well. We spent ZAR 232 million. It's also very important for us to maintain our existing store footprint to remain relevant and also to keep track of what we're currently doing within our new formats, especially with Checkers and Shoprite.
We stand another ZAR 1 billion to also ensure that our stores are maintained. We spend additional ZAR 55 million on IT infrastructure. We turn to working capital inventory. We saw an increase of ZAR 3.6 billion. I will deal with that in more detail in the next slide. We also saw trade and other receivables increase by ZAR 1.3 billion. The reason why I've put this slide together is that one has to take cognizance of the fact that how we look at working capital is going to change in the future. Our investment in inventory was the right decision to take. That was partly the reason why we saw this increase in our sales that we achieved. Obviously, trade and other payables will follow our investment in inventory.
The third part to working capital is our trade and other receivables. During the first half of the financial year, we launched our CredX business. Very excited about what that business will deliver for us in the future. What CredX stands for is our investment in our suppliers, where we give them crucial working capital funding as well as normal capital funding. That credit comes for us at a very low risk because we are currently also the holding of the inventory that they are supplying. In the current period, we have already advanced ZAR 476 million of funding, which we will definitely increase it during the second half. It's also our way of supporting our SMEs going forward. If I turn to inventory, our inventory increased to ZAR 25.4 billion.
Majority of that inventory is within our supermarkets RSA operations, where we saw an increase of ZAR 16.5 billion to ZAR 20.2 billion. We also saw that the supermarkets non-RSA operations inventory remained in line with the prior period. We saw a massive improvement from inventory to sales within that segment from 14.9% to 12.1%. The reason for that was purely exchange rate-driven. Inventory as a percentage of sales within our supermarkets RSA business increased from 11.9% to 12.6%. What was extremely important to note is that within our store operations, we actually achieved an improvement from last year from 9% to 8.8%, which means that the majority of the stock holding is within our distribution centers.
There are a few reasons why we saw this increase within our distribution centers. The first one relates to the additional capacity that we built within our supply chain. We've added 55,000 squares of additional supply chain space during the current period. We also saw double-digit inflationary growth within our inventory during the past period. That capacity also supported our additional safety stock levels that we had to carry as a result of the deterioration of the service levels of the suppliers. Another reason for the increase in our stock holding was also as a result of the increase in our general merchandise as a response to the global supply chain constraints. If we then turn to our free cash flow, very strong result in terms of cash flow generation.
In the past, we spoke about annualized cash flow generation of between ZAR 5 billion-ZAR 6 billion. If I look at the first half, cash flow generation, EBITDA of ZAR 9.1 billion, free cash flow of ZAR 7.1 billion, which was assisted by our positive changes in working capital. What is important to note is that in our June year-end, that position will normalize as our cutoff regarding our trade payables will be part of our financial period. If I look at the various ratios pertaining to our cash flow, all extremely strong, and in that normalized free cash flow sitting at ZAR 7.6 billion. If we then lastly look at the outlook for the second half of the financial year, there are a few items that will have an impact, especially the trading profit performance for the group.
First is the diesel impact. We saw an accelerated diesel expenditure since September of the first half, which means that we can expect an additional cost coming through in the second half. Secondly, we also had expect increase in our maintenance expenditure coming through as a result of the load shedding. Thirdly, what is important to note is also our additional costs with regards to our Sasria cover that I mentioned prior, around that ZAR 90 million. Fourth is also the impact of that Eskom cost coming through the second half. The South African effect tax rate reduced from 28% to 27%. Our effective tax rate in the first half was around 31%. There's no reason why I can see that our effective tax rate will change for the full year.
In terms of our capital allocation model, definitely aligned with our Shoprite strategy, as well as delivering improved shareholder returns. We continue to assess adjacent M&A opportunities within the RSA supermarkets environment. Our full year dividend policy hasn't changed, and it's just a reminder that it's 1.75 times our diluted EPS cover from continuing operations. We plan to open 238 new stores during the second half of the financial year. I've referred to that 94 Massmart stores opening. We are also very excited about the rolling out of our clothing stores during April 2023. I think to estimate inventory as a % of sales is extremely difficult at this stage as a result of the impact on our suppliers.
We normally see a reduced inventory to sales ratio from December to June as a result of the buy-ins of our stationery already in the first half of the financial year, that we are already in position or ready for our launch of our back to school promotions in early January. That's why we normally see that decline from where we are in June, where we are in December to where we are in June. The 12%-12.5% inventory sales ratio does not include any of the Massmart inventory. From a capital point of view, I've given the guidance of ZAR 6.3 billion that we feel is around 3% of our revenue. The business has invested in generators in the prior financial years.
The generators were never meant to run at the number of hours that we expect them to run now. Our expectancy is that we will have to reinvest and start replacing some of those generators that we've implemented in the prior periods. Pieter, that then concludes the financial piece, I hand over you to deal with the strategy.
I think that has clarified quite a number of items on the income statement and balance sheet. If we just quickly look at our strategic priorities, we stayed true to the course over the last six years, uplifting lives every day by pioneering access to the most affordable goods and services for our customers. We definitely have a data-powering customer-first culture. These days, so much is personalized and driven by artificial intelligence and data. For us, it's almost having personalization in your pocket. We have now been able to also share this information with our suppliers, making sure that they can also improve their return on investment in terms of promotions and the activities that they do in association with us. The smarter Shoprite that we're working on every day, we're doing smarter promotions.
We are able to measure them much more scientific and in detail than before. Artificial intelligence is being used to improve our on-shelf availability through forecasting and replenishment, and also same being used to improve or get to a smarter supply chain and logistics. As you can see, some live data monitoring, showing us outliers and being able to intervene immediately. Almost similar to the first point I made is embracing digital. The very well-known Sixty60 by now, and we can see clearly on that graph has been on a exceptional growth trajectory. We're now in 394 locations nationally. The growth of 87% for this year is on top of 250% of last year. What is also meaningful is the fact that since inception, almost 8,000 new job opportunities have been created.
Once again, for us, the whole omnichannel is also integrated with our rewards program, making it a very compelling offer to our customers every day. Hence, the ZAR 7 billion in savings that we were able to give them back in the last six months. We've grown our, what we will like to say, trusted and profitable private labels. If we exclude the liquor, private label contribution has now increased to 20.7%. In our world, it equates to that 93% of all customers in the last six months bought at least one private label product. The point that is easily missed when one talks about private labels is the additional loyalty. In other words, private label customers or people that buy private labels generally are more loyal than non-private label customers.
On the graph, you can see, just pointing out some of the private label brands, that the basket size of those customers or people that buy into that are significantly higher than what the average basket size is. Like before, and like we do every day, we will be investing to win in the long term. I did mention the extra 166 million products that were sold over the last six months. Therefore, we have to invest in additional supply chain space. We have commenced the first of the projects of adding over 200,000 square meter additional space over the next two to three years.
In our continuation of investing to win in the long term, we are expanding our store network to leverage our proximity advantage. Our two main consumer brands, Shoprite and Checkers, enjoys a very high footfall, therefore gives us the opportunity to also invest in adjacent categories where we under-index. Hence our development of new formats for the long term, and outdoor pet shop, MediRite Plus, Little Me, Checkers Foods Stores, where we can now provide a convenience offer where we previously did not compete in. We will deliver 425 new stores this financial year. I'm extremely proud of Team Shoprite. As a continuation further of investing to win in the long term, we will amplify our digital flywheel.
We will double down on our digital investment to maximize the share of wallet and unlock alternate income, which we have spoken of a number of times in the past with reference to Rainmaker and the things that we do with ShopriteX, the personalization, and the data that we now have that we can share with our suppliers. It's very important for me to mention that Shoprite is and remains a responsible corporate citizen. We call it a force for good for people and for the planet. In people, we refer to our own people, our colleagues, our customers, our investors, our partners that help us to deliver, in other, this fantastic set of results over the last six months.
By now, you would be very familiar with this flywheel slide that we use to illustrate how we are thinking and placing building blocks around our core retail supermarket business. That remains at the heart of our decision-making to make sure that we continue to enhance the customer experience and to make sure that we keep on growing. Thank you very much. That concludes our presentation. While we're waiting for your questions, I will just cover a few points in anticipation of what I expect you will ask me in any event.
Thank you again. Just one correction from my side. That combo that I referred to with the, I said 1.8% inflation, it's actually a 1.8% deflation for the clever shopper to be able to reduce your own inflation. Very strong performance from the back to school. Shoprite commands quite a very high market share in back to school, so very pleased with that result. The inflation, I know it's on everybody's agenda, how far, how big. The best I can give you is that January was pretty much in line with what we saw ending the year.
I'm still at that position that I don't expect a complete runaway inflation, but in mid-teens is definitely on the cards. It is so that unfortunately it is people really that can less afford it that are experiencing the higher inflation just because of the commodities in that basket. I did mention that Usave would have or does have substantially higher inflation than what the Checkers brand has got just because of the opportunity of their customer to make different choices. The, the cost we can't ignore, Anton mentioned the ZAR 465 million additional cost of the diesel alone. I did try to just explain that it's not the only cost that one has to cover with. We tend to not to stick to the negative and all the challenges that faces all of us.
It's not only Shoprite. We are daily making plans in terms of how to circumvent and improve on that. Of course, I mentioned something like food waste. Of course, we are aware of it, and we are taking remedy actions to keep that as low as possible. The Massmart stores, that question have come up a couple of times. We are aiming to break that even in financial 2023. In the next year, hoping to get to about a ZAR 5 billion re-revenue contribution. You will remember that we didn't get all the stores that we tried to acquire. That's why the total value of the revenue that we intended to get is a little bit lower than what the initial indications are. The price is not finalized yet.
There's still some outstanding items that has to be reconciled. It will be, of course, less than what we indicated originally, just because there are less stores in the final 94 number than it was originally. Then, yeah, Shoprite will continue to be the price champion for customers. That is what we do every day. It's like thinking of somebody quickly now. It's in the Shoprite DNA that price is what we're about. That's why you can also understand from a cost point of view, for us to still be able to sell a loaf of bread at ZAR 5 since 2016, what we have to subsidize that with at the current pricing of wheat, et cetera.
For me, an important differentiator currently is the high on-shelf availability that the company enjoys. Again, by design, a specific decision made that we cannot disappoint customers that have elected us as their destination. They just can't afford to just take another trip or go to another place. That also has a bearing on the overall stock level. Yeah, and we will continue. I mean, this flywheel that we have here behind us, that is what drives our investment. We will continue to do so. We will continue to invest for the long run to make sure that we remain the growth company that you have now become accustomed to. Anton de Bruyn, I think if we
Yeah.
Can go to the questions.
Paul Steytler , he was first out of the block, so we will look at his questions first. I mean, Pieter, you spoke about the Massmart transaction. I mean, there's obviously a lot of questions. I think just I mean, just to reiterate what you've said, there were 10 stores that were not part of the original transaction that we've acquired, and that's why we added 94 stores. As part of our full year presentation, we will do a full reconciliation as part of the notes to the financials of what was the purchase consideration. It was an asset transaction, which means that obviously the assets that are transferred in terms of PPE will be determined as well as the inventory levels. Full disclosure will be made during the June results.
Pieter, you've given indication around the ZAR 5 billion, I think, Paul, that basically answers that question. Pieter, you also asked, what are we spending on renewable energy? I mean, I think how do you look at that whole space?
Just two things, just under 5% is currently through the PV panels and that, but just bear in mind that we don't own all the buildings. Of course, a lot of landlords are making that investment or installations. The benefit we get is that we actually can get that source of power, but it doesn't belong to us. It's limited to how far we can do it ourselves. That's where we are currently.
That 5% is 5% of electricity costs.
Yes.
-within the group now. Paul, your last question, and Pieter, you're gonna get it a lot today is what is our contribution of total online sales? You can just might as well deal with that.
Okay. Yeah, we don't disclose it. Like in the past, I've said, I don't wanna put it out because it becomes a target, and a target drives a certain behavior, and it may not be the behavior that we currently wanna support while we are still developing and expanding on our total omnichannel deliverable.
Thank you. Murray, you had a question just around the insurance. Yeah, the ZAR 15 million that I spoke about was from the furniture loss of profit point of view. The loss of profit forms part of our trading profit, and then the claim that was settled in terms of the assets we dealt with in previous financial years as part of our items of capital nature. I hope that clarifies your question. Pieter, if we turn to price investment, there's quite a few questions also around what do you see in the second half as part of that price investment strategy that we've had in the first half?
Yes, I did say that we consciously made a decision to invest a bit more in price, hence a slight reduction in the gross margin. In the same token, I just wanna remind everybody again about the growth of other income. We have said before that one has to start looking at those two almost together. It can't be. There we have got the alternate sources of revenue coming in there with the associated costs still embedded, not a reciprocal growth in revenue. Just bear that in mind. In terms of price investment for customers, it is so that we currently just can't pass all of the price increases through the consumer.
We will see across the retailers that we all had to make some form of price investment. Shoprite doesn't get beaten on price, there's certainly that that'll be driven a bit by what the market reactions are. If you ask me guidance into the second part of the year, I think we can maintain, but there is a possibility that there might be a little bit more investment on margin. Currently the margin. We mustn't forget that there's a lot of factors that goes into gross margin. It's not purely the price at till point. I think there we're very consistent.
Hence the ZAR 7 billion of promotional savings that we could give back to consumers, I think is astounding. For us in this environment, to still be able to give customers back ZAR 7 billion in savings is incredible. We will continue to do that. We will manage as much as we can. Of course, anyone knows what the next couple of months are gonna produce in terms of the load shedding and interruption in production. We see a lot of pressure in terms of manufacturers. They just can't produce. There's just not enough time after a downtime to make up what you've lost. What manufacturers are doing is on the different levels of load shedding, they do what we call deprioritize certain items. Your non-KVIs, your non-fast-moving lines, they just don't manufacture. In that, we will still have to balance because we still need to deliver to our consumer.
Yeah.
what we promise to give them.
I think what is just additional, maybe just for everybody to maybe just take note of, is that our gross margins in December, if you look at prior, it was sitting at 24.1%, and for the full year was at 24.5%. We normally see that because of the highly promotional activity within the December and November period, we normally see a decline or a lower gross margin in December than in June. I think basically what you're guiding to is that you'll see the same trends.
Same.
Same trends.
Yes.
Happening in the second half. There's also then a question is around the ESOP and electricity costs. The ESOP cost, we estimate, David, you asked a question around the full year cost. It was ZAR 120 million in the first half, and we estimate also now with the Massmart staff also joining the scheme that we will have another ZAR 110 million-ZAR 120 million expense in the second half. Full year ESOP cost is around, I would estimate around ZAR 240 million for the full year. I mean, electricity we did guide to, and I don't know, Pieter, if you maybe wanna comment around what we see in the second half. I know it's a very difficult question.
Yeah. I actually can. If you take the ZAR 465 million additional spend really started only kicking in from September. It's not the full year, like from June to December, six months. If it's gonna keep on going like this for the next six months, it's gonna be a substantial cost.
Yeah.
It's what we will have to deal with. The things that we can control is we can't control the price of diesel, but we can control the level of maintenance and how well we look after our assets. We have plans to contain the wastage. That what we can control, we will control.
Yeah.
Make sure that we don't have to pass on more of those costs to the consumer.
I think what is just also important to note is that our Excluding the impact of diesel, our electricity costs increased by 4.2%, so it's not a full cost. Part of that obviously would have also been a spend in terms of our electricity costs, so it's not a full flow through cost. Can you maybe just elaborate, Sean Steyn had a question around private label strategy and private label suppliers.
I just want to again, I said it once before that we at Shoprite look at private labels differently, I think, to the rest of market. For us, it's just not more of the same. It needs to fill a certain gap or niche in a market segment. Whether it's a price point, a recipe or a global trend or a consumer trend, that is what we address. We don't just add more of the same because actually, as I mentioned in, on that, the increased loyalty factor of a private label customer, is probably more important than just the margin. A lot of people think private label equals higher margins. In some cases it is, but it's not always the case.
Hence the success of the Simple Truth, the Ubrand in, in Usave is now hitting almost, you know, the 40% mark of contribution, way higher, double than what the group's average is.
Yeah.
We position private label completely different. Once again, that's why we're excluding the liquor. Liquor is very brand conscious, so you've got a lower propensity to penetrate in that market. I think overall, where we've come from, six years, seven years ago at 13% to 20.7% now, that has been a responsible investment. We also with your Cred X, you explained in there, we are using that money to also develop private label suppliers through our SMME project.
Okay. Pieter, there's quite a few questions around trading density. I mean, we don't share that type of detail. I think what will maybe help is just how do you think about the new formats that we're launching especially within the Checkers Foods environment? What do you see? Where there's a growth for that in the future with the other formats?
The first point is a market that we've never served. We just purely didn't have a format to play in that convenience space, which was dominated by a particular competitor. We have a very compelling offer in that space. The early indications of just under 10 stores that we have is very promising.
Yeah.
I see a lot of headroom still in that space. Gives us, opens up, especially on the Checkers brand, a completely different opportunity. We currently now have 15, just under 16% market share in the Checkers brand. Certainly, you would agree with me that there's a lot of headroom still for both brands, Shoprite and Checkers, to increase their market share, and we have the formats to support it.
Yeah. Thank you. I mean, there's a question, there's two questions around trading margin. I think within the foreseeable future, as long as we have these additional costs coming through, especially from the diesel point of view, I think it's unrealistic that we will be not be able to achieve that 6% trading margin in the foreseeable future. That's why if we look at the core income growth vis-à-vis the core expense growth, that's still a very positive sign for us where we are outgrowing our expense growth. To your question, I think that 5.7%-5.8%, if we can achieve that, I think it will be a remarkable result for us.
Just on the dividend, Funeka, you asked around why are we doing our dividend based on total operations. As I said in my slide, it's based on Diluted EPS for a full year, 1.75 times. Our interim dividend policy is linked, a 40-60% split for full year results. I think we are conservative at this stage around what we see happening in the second half, and that's why we guiding to that 6%-6.4% growth on our dividend. Even with our strong cash flow, that impact of the trade payables that I spoke about is between, say, around ZAR 3 billion-ZAR 4 billion, if one takes that into account, that's a more normalized cash flow for the first half. I just need to refresh here.
Mm-hmm.
Pieter, there's one or two questions around, and you did speak about it, but maybe just elaborate more on what trends have you seen from a sales growth point of view in, let's say, the first eight weeks of this half, the second half of the year?
Okay. It's very clear that the consumer is in serious distress. We can't deny that. You can see in the buying patterns that people are changing pack sizes, buying into different brands. There's much less brand loyalty currently in the food space. It's a question of, I don't wanna call it survival, but definitely a question of affordability. Hence why the price coupled to the availability is so crucial for us. You come for price, yeah, sure, but what's the point if after three hours of shopping I don't find what I was looking for?
Yeah.
That's just the beauty of the data that we have. The 26 million customers on the reward program, with a higher than global best practice, usage rate, gives us insight into their data. We can very early pick up as there are changes in the customer's buying behavior. We will react to that.
Yeah. Thank you, Pieter. Steven, you had a question around the Employee Share Trust. Is it a once-off expense? No. We launched that scheme in the second half of the previous financial year. It's an evergreen structure, which means that there are bonus payments or that's linked to the group dividend policy that will be paid to our staff. There are currently more than 85,000 participants to that scheme. That is now in our base and it will now forever be a continuing expense.
On that, Anton, also is, apart from that, we have that as additional payment to staff.
Yeah.
We also have a higher than the national minimum-
Wage.
Minimum wage. You all know that that wage increase is now what? Just over 9.1%. We will still maintain a premium on top of that as a minimum for Shoprite.
Thank you, Pieter. I think that that's the question you've been waiting the whole time for, is what's our plans for apparel now that we're launching a few stores in April?
You know we like to try things. We definitely believe that there is a niche in the market, that we have identified. The first store will be opening the end of the month. Yeah, we're looking forward to it. It's like, I mentioned about the pet, the baby, the outdoor, they all performing very well. It's, for us, it's a long-term view. We, we're not taking a short-term view on this. This is.
Yeah.
This is a long play in categories that we believe, we under-index in, where we can utilize what we have in terms of structures, staff structures, supply chain, and, yes, we're gonna give it our best.
That's it. There's just a question around what do we see as expense growth. I think I would rather guide to what we've said around our income margin that's currently sitting at 25.9% and our expense margin sitting at 20%. That's what we more manage is the margin rather than the expense growth, 'cause the revenue growth is obviously linked to expense growth. I think, rather look from that point of view when you try and model your structures. Pieter, then maybe the last question. Not sure how you're gonna answer that, but when will Bitcoin payments be done for groceries at Shoprite and Checkers?
We wanted to do it. I mean, marketing was rather upset that we didn't launch it. At the time, you know, there was a lot of negativity around these currencies, and we decided not to do it. Let the market settle in terms of those. The fact that we are able to do it.
Yeah.
I can confirm.
Yeah, yeah.
We have decided that is not where we wanna go with all the can I call it noise or the around that as a payment method and the risk associated with it.
Pieter, I will say that there's quite a few comments as well to say that you're doing a great job and well done. I think that's also positive. Maybe David, just from a last point of view, asked about share buybacks. Obviously, we are cognizant of how we apply our capital structures. I think we're very clear on what we do with our cash flow. As we said, we also invest majority of our cash flow to expanding the business. That's our first priority. Second priority, obviously, will be to look at acquisitions. The payment of the Massmart transaction will occur in the second half. That will have an impact on our cash flow. We're obviously driven by increasing shareholder value. I think all those are very clear for us. I think, Pieter, that is...
I don't know if there's any closing remarks, but that basically deals with all the questions.
Yeah. No. Thank you very much. Thanks for all the questions. There's quite a number of the fund managers that we will be seeing one-on-one. We also have the JP Morgan, which we will attend, the one in Sun City. All I can say is, we will continue to do what we do, is to firstly, we think long-term. We're investing in the company and in its people to make sure that we can continue to grow, like we've done in the last couple of years, sticking to our strategy, that has worked for us.
Thank you, Pieter.
Thank you.