Morning, everyone. I'm Wendy Lucas Bull, the Non Executive Independent Chairman of the ShopRite Group. As this is my first results presentation with the group in this role, I wanted to take the time to welcome you all personally or as personally as I could, given the fact that you're on a webcast and I'm recording this from my home office. It's not customary for me as Chair to form part of the results presentations, but I did feel it's appropriate that I recognize and confirm The seamless handover that took place at the end of last year as I succeeded the group's Chair of 40 years, Doctor. Christo Wiese.
Christos was a remarkable tenure as Chair that saw the group grow from 8 to over 2,300 corporate stores And along the way, become what is today South Africa's largest private sector employer and the African continent's largest retailer, providing more than 142,000 people with jobs. And whilst I know Peter always acknowledges the role of every single employee. I would also like to thank all the ShopRite people who in no small part have come together to serve the Group's customers and in so doing produce these results. You will have seen the numbers released earlier this morning. And while I don't want to steal from the proceedings, I would be remiss if I didn't acknowledge The 4.7% sales growth and the 17.8% trading profit growth achieved in circumstances which are far from normal.
This period has really tested management And it's demonstrated the resilience of this group, which is a tribute both to the leadership and the people of ShopRite. Food Retail, as you know, has played a vital role throughout the COVID pandemic with the ShopRite Group forming a significant part of that. In terms of the Board, our focus remains on supporting the management team in their pursuit of growth and operational excellence. And in conclusion, I would like to say to all of you, please stay safe in these crazy times. Thank you.
Peter, over to you.
Thank you, Wendy. I can certainly echo those words, and I would like to take the opportunity to extend a sincere thank you To all the people of Shoprite, Bruce results we will be presenting today. I'll take us through an overview of the last 6 months, Anton will take us through the detailed financials. He'll tell you a little bit of what we're busy with and then there will be time for questions.
So if we look at
the first half, if we exclude the liquor, which is a significant portion of our business, The group managed to grow sales by 6.3%, almost hitting ZAR84 1,000,000,000. Gross profit Hit the ZAR20 1,000,000,000 mark, a combination of improved shrinkage and improved wastage, Also some very smart pricing from the data that we now get out of our rewards program, providing us with increasing better information. And lastly, also the change in the sales mix towards Checkers also contributed to that. Trading profit grew by 18.3%. Important here or a number to note is that the trading margin improved from 5% last year to 5.6% this year.
Adjusted deadline earnings per share grew by 17.1%. That's now excluding the hyperinflation and also exchange rate differences. The dividend per share increased by 22.4%, Partially as a decision from the Board to change from the 2x dividend cover to 1.75 Having due regard of the implications of the IFRS 16 implementation, I'm very proud of the team's ability to have adapted to the current trading environment and all The adjustments that had to be made, in particularly for our international investors, I want to call out That of the challenges, the most significant probably was the liquor and not So much only the liquor trading restriction in the hours, but the practical implications around it, Security, open up, close, secure of expensive stock, expiry of stock And on top of that, the inability to be able to move stock during the ban. So it was not only limited To the direct loss in trade. And as I mentioned, liquor does form a significant part of the group's business.
Not unlike the global trends, we have also seen less visits from customers. In our case, 16.7% customer less visits from customers to store, handsomely made up by the increase in the basket size of 24.9%. At this point, I cannot stress more the importance Of a high level of in stock in a scenario like this, when customers are less frequently in your store and then pick up that additional item. The group has been very fortunate in a way that over time that we are able to leverage our risks And customers' economic conditions and situations over our multiple brands, In that, the ShopRite brand was by far the hardest hit in terms of unemployment, Closing of the hospitality, where people have ability to create income, High dependency on the government grants where low prices has now been more important than ever before, hence Why we accelerated the launch of our extra savings reward program? U Safe has been It's benefited because of the close proximity to home that people could save their transport money and spend it on essential food products.
Chekkers is gaining market share in the more affluent section of the market. And in there, it's been assisted by Us being able to open more FreshX stores and definitely also with the advent of the on demand delivery service. The hyper stores have got a new lease on life, so to speak, As customers prefer to have a one stop shop, that gives them a value offering. The graph on my right It shows that all the brands have over indexed the market, although not all of the brands as high and as much It's the Checkers brand, where our customers are less heart hit by the current economic climate. Supermarkets RSA had a very strong growth.
If we exclude the liquor, sales grew by 7.8% And like for like 5.7%. Of note here, and I think an accolade of What has been done over the last couple of years, the group had uninterrupted market share gain for over 22 months, amounting to a value of ZAR1.3 billion in market share gains in half 1. We all retailers talk about internal inflation. We benchmark ourselves to the national inflation. And Just for clarity, we thought we'd just explain how we at Shoprite calculate our internal inflation.
So the dotted graph you will see there is the national inflation according to stats essay. The red line is That of our internal inflation, as you can see, we mostly track below that with a widened gap in the month of December November, December. And just quickly the difference, stats SA measures 124 static products, which they review every 4 to 5 years. And we at ShopRite measure over 60,000 products based on the current year and then looking towards What the inflation was on those products the previous year, in other words, weighted against the sales of the current year Because that takes into consideration people's differences in buying patterns from pack sizes to multi buys, combos, Different brands. We do believe that is a very accurate way of measure.
We've measured then our internal inflation at 4.3% with the national Inflation at 4.9%, food inflation. And just to analyze it a little bit further is if one looked At the 15 most price sensitive products, in other words, if the price change on that item, people actually stop buying or they move out of their Product set, the inflation was almost flat. Just indicating to you that It's very difficult to have a static set of products and measuring inflation in that way. So we do believe We have a very accurate measure of our internal inflation. Then In our lives, cheap and affordable is not the same.
We have an obsession about affordability. One of those examples I want to call out here is that we've maintained our bread price at ZAR5 for The last 5 years, and as you can see, we are moving to about 270,000,000 loaves of bread that we have subsidized like that over the last 5 years. Now that for our international audience, that equates to About US0.50 dollars just to give us some context. And then We'll make you privy to what will be our latest, as I call it, consumer communication To stress that point, how much obsessed we are about affordability And that cheap doesn't mean affordable.
The constitution of the Republic of South Africa states everyone should have access to sufficient food. So at ShopRite, we made our bread only ZAR5 and kept it there for 5 years. Everyone has the right to a basic education, Yet a third of South African girls miss school because they can't afford sanitary pads. So we created a pack of 8 for just ZAR5. Every citizen has the right to choose their trade, but to work, you need sustenance.
So we make filling meals you can buy for a single coin. We believe lower prices can make a real difference in the lives of all South Africans, and we will always play our part.
So in a sense, just putting our money where our mouths are. And as much as things change, They stay the same. I think the customers have voted and ShopRite was awarded The supermarket brand of the decade still living up to its promise year after year. I mentioned earlier the significance of the liquor shop in the overall performance of the group. In there, there is the number, Liquor down 21.8%.
You can see almost 80 out of 182 days we were not able to trade. And apart from that restricted trade, the silver lining in here is that online sales grew by 80%. Good news is we're back to normal trade now. The supermarkets non RSA Sales declined by 8.4%. Zambia and Ghana showed very good sales in local currency.
Namibia held its own Angola sales declined by almost 40% due to currency devaluation, also a very high inflation in the country currently. And the non RSA remains a tale of devaluing currencies. In terms of our non RSA position, it is still our long term strategy to retain a core Set of non RSA profitable countries. That is still our aim and part of Our long term vision, there was a short term strategy shift. And in that, you are all aware of the Geria sale that we are awaiting now final approval and the closure of the Kineo business.
Business is normal for us is to maintain managing our cost or control costs and limit our capital allocation to that segment. The store base has remained the same in half 1, And we're still on a drive to de dollarize as many of the cost elements as we can. We greatly increased our local procurement twofold because of the currency risk due to the lead times And secondly, the fact that that does assist the countries to be self funding because of the local currency availability. Angola did manage to repatriate $58,800,000 In the last 12 months and currently, our government bills and bonds sits at BRL 1 point DKK6 1,000,000,000 opposed to last year's DKK2.5 billion. Okay Furniture and House and Home, Since reopening and allowing to trade, we have had a fairly good run with sales growth of 15.7 Interestingly, a bit of a surprise almost is the decline in credit sales from 13.7% to 11.8%.
We also closed another 10 loss making stores, leaving the real estate at 432 stores trading. In the other segments, especially CompuTicket and Checkers Food Services Have been affected by the depressed demand in travel hospitality and no live events. And as can be expected, transforming MediRite Was performing quite or did perform quite well with sales up almost 20%. Oke franchise held its own with a growth of 8.1%, Partially also the efficiencies created by that, we now support them through our Shoprite distribution centers have collapsed their individual units. Store base now currently consists of 505 stores.
Then as a business, it's important that we Balance our financial performance with that of our social responsibility and we pride ourselves that we are business with heart. Examples of that would be, we've got a we support 130 sustainable community gardens, 578 home gardens. We serve more than 4,000,000 meals since lockdown, donated 90,000,000 in surplus food And then also playing our part in the green economy extended our dependency on Solar panel and PV installations, we continue to do this. So in a nutshell, that's a roundup of the 6 months. I'm now going to hand you over into the capable hands of CFO, Anton de Brayn, to take you through
Thank you very much, Peter. For ease of reference, we've included again additional slides in the appendix That deals with some of the financial matters in the first half. Part of that will include the sale of the distribution centers and the Equitas transaction. We've highlighted the impact on the income statement, the balance sheet and then also the cash flow statement. We also have included the calculation of the return on invested Capital and also the discontinued operations on Nigeria.
We'll give you further details. You will see that the Nigeria operation Actually showed a profit, but that was as a result of the depreciation. There was no depreciation for the 6 months As well as a profit from lease adjustments or amendments made in terms of IFRS 16. I'm not going to deal with these slides in more detail. If you have any questions, you are very welcome to contact me afterwards.
If we then look at the comparability of our results for the 1st 6 months, we had to restate our December 2019 results as a Back to our discontinued operations in Nigeria. During June, we've already restated the full year results, But as well, we had to do that adjustment as well for the December 2019 numbers and that's why you'll see that impact. And then secondly, there was a psychos circular With regards to how we need to look at lease modifications in terms of IFRS 16, In the past, we showed that as part of our items of capital nature, but in the future, we will show that as part of our trading profit. So we actually increased our base of our diluted HEPS by ZAR0.091 or ZAR72 1,000,000. So for the rest of the presentation, I will talk about continuing operations, except for the CapEx slide and also the cash flow slide That includes the Nigeria results.
So if we then turn to sale of merchandise, we increased by 4.7% to ZAR83.4 billion And I'll unpack that a little bit later. Gross profit increased by 7.3% to ZAR20 1,000,000,000. That represents an increase of 60 basis points to 24%. Peter alluded to already the contribution of checkers. But if we also look at the additional benefits realized through our implementation of the SAP ERP system, the maturity that we now have with regard So KPI dashboard reporting as well as our data analytics.
From a supply chain point of view, we've seen that improvement and focus from our Procurement department as well as our operational teams on our in stock levels as well as our reduction in our stock levels, which had a positive impact on our shrinkage and wastage. Total expenses increased by 4.2%. If we exclude the impact of the COVID cost, that was around 3.7%. Some of the main drivers in our cost growth Whilst our employee benefits that increased by 5.8%. What is important to note is the impact that the currency devaluations that On obviously our performance or the results from our Nigeria, Angola and Zambia operations.
So from a non RSA point of view, we We saw a 9.2% decline. And if we then take out or focus on the RSA piece, that was a 7.6% increase. Depreciation increased by 3.7%. We then unpack it with regards to we saw a 9.8% decline In our depreciation on property, plant and equipment to ZAR1.1 billion. Our increase in our right of use depreciation was around 24.8 percent to ZAR1.5 billion.
And then we saw the decline in the depreciation net hyperinflation asset from ZAR48 1,000,000 in the first six To ZAR35 1,000,000 in this half of the financial year. That reduction in depreciation is driven by the impairments that we've done to date. You will recall that when we initially adopted hyperinflation, we recognized an asset of ZAR2.2 billion through depreciation and impairments. That asset is now at ZAR694 1,000,000 in our current accounts. If we look at other operating expenses increased by 3.4%.
The majority of that was through electricity and water at 2.2%. Again, if we only look at the RSA portion, That was just over 4%, well below 10% increases by NURSA in the previous year. We achieved that excellent growth or cost savings through our projects implemented through our LED light program in our stores as well as our solar panels that we implemented in our operations as well. Our trading profit increased by 18.3 percent to ZAR4.7 billion, now at a very healthy 5.6% trading margin. EBITDA increased by 6.3% to ZAR7 1,000,000,000 and it's now 8.4% of sales.
And if I look at our effective tax rate, we've now reduced it from 31.1% to 29.2% on the back of the sale of our distribution centers That gave a realized a 2% reduction in our effective tax rate for the first half and then also the additional benefits through the That's through the ETI allowances that we got as part of our COVID relief. Diluted EPS increased by 10.4% to CAD 4.18 And our adjusted diluted EPS increased by 17.1 percent to ZAR 416.2. As Peter mentioned, Our adjusted diluted EPS calculation excludes the exchange rates and hyperinflation just for comparability. If we then just unpack the detailed calculation of adjusted EPS and also the restatements. The last time we saw you, we had for the 1st 6 months, we had a diluted HEPS of ZAR3.72, That ZAR0.091 adjustment in terms of that cycle circular, that was ZAR72 1,000,000 adjustment And then the restatement of the discontinued operations gave rise to that 10.4% and then there's the ForEx and the hyperinflation impact with the related income tax, Brings us back to that 17.1% increase.
If we then go into more detail with regards to the sales growth, Supermarkets RSA increased sales by 5.6 percent to DKK65.1 billion on the back of a like for like Sales growth of 4.8% and internal food inflation of 4.3%. During the period, we opened a net new stores of 45, And we plan to open 58 stores in the second half of the year. The strong supermarkets RSA growth was driven by The Checkers and Checkers hyper brand had outperformed the rest of the brands at 11.1%. That was on the back of the 10 additional Fresh X stores that we opened as well as our online delivery 6060 app is now in 157 stores. Shoprite and Usave increased sales by 5.6% with Shoprite at 4.9% and Usave at 9.1%.
And then Iluka Shop had a decline of 21.8% on the back of the lockdown regulations. Prior to the lockdown of March last year, we were growing still growing in that 20% Mark and we also opened a store a week. During the last 12 months, we've managed to open 26 stores, Of which the majority actually occurred in the second half. So we're back to that 1 store a week opening. And obviously, The relaxation of the regulations or lockdown regulations bodes well for our trade in the next 4 months.
If I then turn to Supermarkets Non RSA, minus 8.4% decline, driven by that currency devaluations as Peter referred to. On like for like, we were minus 8.9 percent, but internal pool inflation of 9.1 percent, Angola that 59.5 percent, but then Zambia positive Returned with that constant currency growth of just over 15.8%. Furniture had an increase of 15.7% and getting a Strong comeback through the from the lockdowns that we had up till the end of June. The RSA A portion of the furniture business grew at 16.9% and the non RSAPs or portion of the segment grew at 11.1%. I think one must look at the context of this non RSA furniture business that gave a very strong growth with these currency devaluations.
Other operating segments increased by 10%, driven by the franchise business of just over 8.1% and the Transformer and MediRide business. We then turn to other operating income increased by 4.5% to ZAR1.3 billion. We've spoken about the decline in the commissions received with regards to competition that was impacted by the events and travels. Operating lease income Reduced by 3.1% on the back of property disposals we had during the last 12 to 18 months As well as some of the rental reliefs we gave during the pandemic, premiums driven through our furniture business, We saw that credit participation in that business reducing from that 13.7% to 11.7%. And then our franchise fees increased in the same ratio as our sales.
If I turn to sundry income, Our delivery recoveries through our furniture business as well now our sixty-sixty business forms the majority of that sundry income line That's also insurance claims and initiation fees included. Interest revenue reduced by 5.4% and a majority of that was the interest received on our government bills and bonds That reduced by ZAR26 1,000,000. We've sold or some of the bonds matured during the period and we also reduced our exposure to those bonds. In total, we had ZAR2.5 billion of investments in these bonds and we now reduced it to ZAR1.6 billion And part of that reduction was also as a fact of the currency devaluations that we experienced in Angola. The government have stopped issuing these U.
S. Dollar linked government bonds. And so when we get to the ForEx, I will give you more detail with regards to our strategy on aging ourselves. If I then look in summary of the performances of the various segments with regards trading profit, supermarkets RSA, very strong growth of 12.6 percent to DKK4.2 billion, very healthy trading margin 6.5%, that's really driven through that improvement in our gross margin and also in our excellent expense management. If you look at non RSA, you will recall at the end of June, that segment was loss making.
We've turned it back into profitability, which is very pleasing to management. But there are, however, 3 aspects that we have to take into account. The one is, obviously, the reduction in the interest revenue Of ZAR26 1,000,000 that's included in there. But also in there is a ZAR64 1,000,000 loss on our Kenyan operation, Which in the future or at the end of June, we will also disclose as discontinued operations. So you must take that into account.
And then the last one was a reversal on some of the impairments we had to take on government bonds in the past of ZAR59 1,000,000 Because of those maturity of the government bonds and because we received all our funds, we could reverse that impairment provision. Furniture growth of 56.8 percent on a 17% sales growth, very strong performance. Again, just something to take into account that during the period, we reduced our provision for bad debts that we had at the end of June From a 50% provision to a 47.2% provision, purely on the back of better collections that we had within that segment. Other operating segments increased by 11.9%, very much in line with the sales growth. There is the hyperinflation, the depreciation on the hyperinflation effect as I explained earlier, giving rise to that 18.3% growth to ZAR4.7 billion.
Foreign exchange movements, we had a loss For the 1st 6 months versus the profit in the previous year, driven by improvement in the exchange rate, the rand dollar exchange rate. At the end of June last year, we were sitting at ZAR17.14 to the dollar and at the end of December, we that rate was now ZAR14.60. So obviously, hedging strategies doesn't always provide for a strengthening ramp, which happened in the 1st 6 months. Secondly, we've also reduced our Exposure or our investment in U. S.
Dollar linked bonds from DKK2.2 billion to DKK529 1,000,000. As a result, they matured. We are, however, investing now in treasury bills that gives us a higher yield and also Investing in U. S. Dollar linked bonds that is available on the secondary market.
So I do expect to see a better result in the second half as we get hold and as we buy and invest in these U. S. Dollar linked bonds on the secondary market. During the period, we impaired an additional ZAR687 1,000,000 on nonfinancial assets That was predominantly driven through our impairment of property, plant and equipment of ZAR610 1,000,000 and that was driven Primarily by our Supermarkets non RSA segment where we accounted for impairment of DKK306 1,000,000 and then as I mentioned earlier, further impairment On our hyperinflation asset of ZAR404 1,000,000. The sale of the distribution centers gave ZAR260 1,000,000 profit, that's giving us a net result of items of capital nature loss of ZAR327 1,000,000.
Our net finance cost increased by 13.5% and that was driven by a one soft breakage cost That we had to settle as part of the settlement of the U. S. Dollar debt in Mauritius. If we had to exclude that SEK178 1,000,000, We would have seen a slight decline in our net finance costs, which I do expect to see in the second half of the financial year as well. If I therefore break it down and look at the various components of net finance cost, we would have seen that we had a decline in our interest received, although we've seen that Strong cash flow in the business from ZAR10 1,000,000,000 to ZAR13 1,000,000,000, but as you can see, our rates at which we earn Our interests have reduced from around 7.5% last year to 4.4% in the current year.
Our borrowings and other finance costs reduced by 2.6%, but if we had to add back that DKK178 1,000,000, we would have seen that our Finance costs would actually have reduced by 38.3% and that again was driven by the settlement of that U. S. Dollar debt. Our lease and liability finance charges on the IFRS 16 assets or liabilities increased by 15.2%. That was on the back of those 74 new leases and adjustments we had during the 6 months.
The incremental borrowing rate on our lease liability is around 9%. If we then turn to the balance sheet, again for ease of reference, we've Given you the balance sheet or the assets and compare that to the liability side, The significant events that one has to take into account that caused this restructuring of the balance sheet are predominantly that sale of the distribution centers that gave That reduced our property and plant equipment by ZAR1.9 billion and gave rise to ZAR1.2 billion in cash flow. The working capital, we've seen that ZAR2.9 billion reduction in inventories and we saw an increase in our trade and other payables. Our U. S.
Dollar borrowings, the ZAR350 1,000,000 that we've settled We've caused a close to ZAR7 1,000,000,000 reduction in our borrowings for the period. And then as I mentioned before, some of the government bonds matured And that's why now we're now at ZAR1.6 billion exposure at the end of December, which is very pleasing as our return on invested Capital has improved from 9.6% to 11.2% during the period and there is a detailed calculation at the back in the appendix. If we look at inventory, a reduction of ZAR2.9 billion to ZAR19.6 billion. We're now sitting at a 12.2% Ratio of inventory to sales, at the end of December 2019, that was sitting at around 14.7%. So that was predominantly driven through our improvements in our supermarkets RSA, which is very pleasing to see is that on a like for like basis in the last 8 quarters, We have managed to reduce our food stock holding by more than ZAR2 1,000,000,000 and the other pleasing fact is that we managed to do that Without sacrificing gross margin.
If I look at supermarkets non RSA, also a ZAR1.4 billion reduction in inventory. We've changed our source of supply predominantly to a local source of supply and our exports from South Africa has reduced. If you look at Furniture and the other segments, they're very much in line with the previous year. Our guidance for June is a 12% show of inventory to sales. Our capital spend for the 6 months was ZAR1.6 billion, Now representing 1.9% of sales, that is the improvement from the previous year where we spent ZAR2 1,000,000,000 at 2.4%.
If we look at the way we spend our capital, we can see that we are still spending a huge amount All the lion's share on new stores as well as our refurbishment of current stores. And then Information technology will start playing a bigger role. I think the implementation of that SAP ERP system and the benefits that we are realizing has just shown again That way we need to invest in the future, especially with the data analytics that we can get to improve our business. On property, plant and equipment, we spent another 9.8%. We've kept our strategy investing in strategic land, And we also have currently 3 to 4 developments on the go.
The portion in the previous year relates to the 3 buildings that we completed in Angola. I think what's also important to note is that our capital spend, the majority of that was spent in South Africa, where we spent ZAR1.5 billion of the ZAR1.6 billion. If we look at leverage, Strong net cash position improvement from DKK8 1,000,000,000 to DKK12 1,000,000,000. And then our net cash after borrowings improved from a borrowings position of ZAR3.3 billion to a net cash position of ZAR6.6 billion mostly driven through that settlement of that U. S.
Dollar debt. At the end of June, we said that we our target was to reach around CAD80 1,000,000. That CAD78 1,000,000 that we currently have, We see as working capital and that will continue in the future. We've now reached our short- to medium term debt to equity target of 30%. And if we look at our lease liabilities increased from 23.8% to 26.6% on the back of those new leases.
Just unpacking the cash flow and this is the cash flows for the last 6 months. So in the 6 reporting months, We've managed to improve our net cash position by ZAR2.7 billion. Majority of that obviously was the generation through our operations Of ZAR7 1,000,000,000, we did get a benefit from our changes in working capital. We had that ZAR2.9 billion Reduction in inventory as well as the cutoff on our creditors and trade payables that gave rise to a SEK2.6 billion benefit. All of that together gave us a cash generation from our operating activities of around ZAR10 1,000,000,000.
The proceeds from the PPE relates to the ZAR1.2 billion from the Equitas transaction as well as another ZAR400 1,000,000 From properties that we sold during the reporting period and then at SEK 500,000,000 through the reduction and maturity of some of those government bonds. The positive for me on that is that we were possible it was possible for us to repatriate those funds from non RSA and especially Angola. And our investment in the rest of non RSA was also minimized. If I therefore look at cash flow before The settlement of our debt was an increase of ZAR10.4 billion, taking into account the settlement of the debt gave rise to that strong ZAR2.7 billion Cash flow generation. So in summary, if I then, therefore, just look at our capital structures and how we do our capital Allocations, we focused on various areas during the last 12 to 24 months, of which working capital was 1.
We've spoken about the reduction of that inventory to sales ratio. We believe that there's further benefits that we can realize Within that region and that's why we say from a financial year 'twenty two to 'twenty five, we believe that we can even lower to 11.5% ratio. The borrowings we spoke about for short to medium term, we've now reached our debt to equity target ratios. If we look at our investment in non RSA, the Nigeria transaction is now with the competition commission. We do believe that We will be able to complete this transaction in the second half of the financial year.
We will still have a we will still support that operation Our last Kenya store closed during February, and we as I mentioned earlier, We will treat now Kenya also as a discontinued operation at the end of June. If I then look forward to future projects with regards to non RSA, we do not see any foresee any significant disposals in the short term. On property, plant and equipment, We've done the transaction with Redeo Logistics Fund and our CapEx guidance going forward, we estimate to be around 2.3% of sales. Our capital structure strategy, Peter spoke about the first steps that we've taken with regards to our dividend policy And our change in our payout ratio, we've always looked at organic growth. We're looking at 58 stores.
And obviously, all these organic growth and acquisitions, we always compare that to our internal return on invested capital. And if we look at our surplus cash, we will also look and consider share buybacks going into the future. Thank you very much, Peter. That then concludes my financial part of the presentation.
Thanks, Anton. It's a mouthful. I understand it, but Such an esteemed audience, I know you will understand all of it. We're still finding the resources to understand IFRS 16, quite scarce, but it appears it may. Thanks for that, Anton.
There's a lot of detail that is put in the appendixes. And as we carry on, there's a lot of you that will have 1 on ones with us later where we will unpack more of that. But it will help you, we believe, To prepare you your questions with that regard. 1st and foremost, I just want to say that these results would not have been possible If we over the last few years did not invest in digital and our information technology system. Anton said earlier that the benefits that we're starting to derive from the ERP system and If you will probably do one of our Monday meetings, you will understand what we mean.
Things like inventory margin, Waste shrinkage, the level that one can manage it now compared to a couple of years ago It's really been a game changer for us. So I want to start by saying the results has been greatly assisted by that investment, although it was painful at the time. We've put this slide up, I think now for the 4th time, maybe the 5th time, Just to show to you that we've not deviated from our plan, Shoprite definitely is now a more customer centric And digitally fit company than what we were before. We've made investments To really create what we believe is a smarter Shoprite and our focus remains to optimizing our core retail capabilities in our existing markets. And I'm not going to go through all of those 9, but just calling out what those three blocks mean is the smartest Shoprite It's the terminology that we've been using and I hope to also today help you to understand what we mean by them.
It's our own terminology. So I hope I can put a little bit shed a little bit light on what it is, what we mean by closing the gap that's at middle section, closing the gap In areas where we see more opportunity and then what we say how we're going to win in the long run. So first, customer first culture, one of the things that made it possible for us To launch at such an incredible pace and speed, the ShopRite rewards program It was because of the way that the Checkers Reward program was built and we could leverage on top of that platform, didn't have to start all over. Therefore, at the record time under 12 months, the ShopRite extra savings reward program was launched Totally virtual in 8 25 stores with exceptional response from customers, 2,000,000 sign ups In the 1st week equating to 4.50 sign ups per minute at launch. And We had to accelerate this because as I started out with the ShopRite brand customer, our core customer In particularly being hit very hard with the COVID restrictions and unemployment, that low prices is what they need, Savings is what they need and we have recorded ZAR2.1 billion in savings that we could give back to our customers in half 1 through 9,000 grocery deals every month.
We now have combined between Checkers and Shoprite over 17,000,000 members in our rewards program, making it by far the largest Program of its nature in South Africa. And again, just going back to if we didn't invest in Systems at the time and did it in such a way that it's scalable, this would not have been possible. And last point here maybe is that all of these sign ups have been done digitally. Memories are short. There was COVID.
There was Strixus, I don't know if all of you saw this. I would like to just show you the commercial that we did at the launch Just to show you the excitement that's there in Shoprite, it's still a big portion of our major portion of our business and We give it the attention that we think it requires.
People of South Africa, The ShopRite Rewards card has arrived. And it means the Christmas you wanted is back on. The ShopRite extra savings card gives you up to 40% off instantly on your groceries with every swipe. No points, just extra savings. For prizes, swipe to win a car every day.
And it's free. So put up the tree, set the table and hang
Customer first Culture is not only your experience in store, it most definitely also includes the digital and data science That power personalization to help customers save more. That's what is in our blood It's the low prices, the savings we give our customers. I did reference earlier the DKK2.1 billion that we already gave back to customers since the event of this program. So first, just as by illustration is 53 over 50 EUR 3,000,000 unique personalized offer combinations were sent to customers since March. There's a terminology for it now called snowflakes, Just illustrating that we're communicating to customers with their personal preferences.
First enhancement on that is that to make it real time. So customers can now subscribe to real time Alerts on products that they prefer and at prices that they're prepared to pay for. And just another enhancement on that is now The digital pill slips where customers can follow their saving and also keep their pill slips electronically for guarantee purposes Of products that they've bought. In that over and above that, we've used Our last mover advantage in the digital space to go straight to on demand execution With the launch of the 60, 61 hour on demand fulfillment, where we've now increased the Products on offer from 5,000 to 15,000. I know that our South African audience definitely Doesn't need any introduction to 6060, but for the preference or For our international audience, just a little bit of it.
It's mobile only. It's a 1 hour delivery service. We all know that the most difficult part in e co commerce It's your last mile delivery. It's very expensive. And also to get fresh right.
So with the lockdown rules that came, we had to greatly accelerate this program. And I think Of all the accolades that this have achieved and the acceptance from consumers in this, The most important for me is that it didn't come at the exorbitant cost, capital cost and it is profitable. I think that is the best accolade I can give to the team in the way that they've executed on this. Also just for your reference, this was the creative that supported it And mostly for our international audience that haven't seen it before.
Checker 6060, the delivery app that does the heavy lifting for you. Now is it the best way to get groceries and drinks? Well, that depends. Do you like saving time and money? How about taking the mission out of shopping for Breki, Bruno, good boy.
And getting it fresh in 60 minutes at Checkers' famously low prices. Now who else does that? Nobody. That's right.
So with that, it goes without saying that this program won quite a lot of awards. Why it's relevant to actually mention that it's not one dimensional. It covers quite a wide variety of disciplines. And it's quite unique for a supermarket to win innovation awards. This usually goes to startup tech companies.
So I just put there for reference that it is really something that came at a time when I think nobody expected it. So well done on that. So in the past, I've used this as I think 5 years ago Roughly, I started to use this word precision retail. I do not think Everybody grasp exactly what it is that we're after. So we've put this together, connecting the dots basically, where we illustrate our customer data ecosystem and how we're trying to unlock new value, both operationally and commercially.
So if one just look at that picture, we start with that we serve 25,000,000 customers every month. Of them, SEK 17,000,000 are award members. We sell product, physical product to them, about SEK 7,000,000,000 products With the associated behavior and pricing that goes with it through almost 3,000 physical store outlets, Combined with almost $350,000,000 financial services transactions, which we can cross link to other behavior In 1,000,000,000 transactions annually, we have 20 owned digital channels And currently have 7,500,000 digital visitors to a non sale digital experience. And if we put that into that data lake, if we can call it that, of 6 petabyte of information, our job at the moment is To create that data into usable information, as I referenced earlier, To help us with precision pricing, precision marketing on individual level in real time. And You can also I think you will understand that the drive in this will also open Additional avenues of revenue.
So I thought we just put this picture together to give an illustration of what it is That modern business is driving towards and I don't think it's unique. It's certainly a question of who does it best and Most cost efficient. Just to add to that, as an example, It goes without saying that we will very soon launch our own virtual network. So in order to enhance their customer data even further And I know you all see what the networks are doing and the quality of data that they can derive and that we add to all of those transactions, It goes without saying that we will be doing this next. In the second column that I showed On the first slide, areas where we can where we see opportunity to improve on is our private labels.
We started 4 years ago at around about a 14% participation, now up to 17.7% participation In our private labels, our exclusive brands, 29 of them are now worth more than BRL 100,000,000 in annual sales. And sometimes one must just put context to percentages. Private and exclusive labels in the Shoprite business is in excess of BRL20 1,000,000,000. And So one mustn't just look at the percentages. It is a sizable piece of business.
In the different brands, they perform differently. The U brand in U Safe outgrows the store three times. The ShopRite Wright brand There's a ride brand in 1 out of every 5th basket and in Checkers House brand, 1.5 times volume growth to the total store. We do believe we are winning in the fresh and premium food game, what we set ourselves out to. The Checkers and the Hiper's are still leading our growth with almost 3 times ahead of the rest of the market.
And what we are after is accessibility to quality and value to everybody. And that is paid For us, in that we have managed to gain over ZAR400 1,000,000 of market share in the fresh and perishable in H1. There's still more opportunity, we think, in the share of stomach as people are still doing in home dining, And we've managed to launch 191 new fresh and premium products in the last 6 months, And we will continue to do so. The innovation in this area is definitely not going to stop. And how do we achieve this?
In other, we've opened 2 more Of our Fresh ex flagship stores, Rosebank and Brackenfell, we're now at 38 out of the 80 that we target initially And the fresh in those stores outgrows the store significantly. So then just quickly a little bit on the outlook, what do we see in the next 6 months basically And also some reference of what has happened. So firstly, very happy to say that the liquor trade is back fully according to our license agreements And conditions, supermarkets RSA for the 1st 8 weeks of the second half It's pretty much in line with H1. For your own reference, you know what that means. The internal inflation, Almost a little bit surprisingly have come down from 4.3% to 3.8%.
Hopefully, it will assist the customers To be able to afford the necessities, we do know and we're just alerting you to that again that Checkers, In particular, it's up against a very high base in March last year with the factory loading. We also are noticing some green shoots in the economy, some employment, restaurants opening again, so very positive about that. We still have 39 new stores to open by June. And then I'm saying this in particularly like this is that in addition to our organic market share growth, we still see other opportunities For checkers in the upmarket suburbs where we're underrepresented, we have a smaller Shoprite format There is more light in capital, which we can deploy in smaller catchment areas where we are not represented. And then definitely, I've said a bit about if one look at that ecosystem little graph, we will be leveraging our customer data In terms of product and pricing and individual offers to support our margin and Give the most relevant product to our customers.
We will continue to look at value added and digital products Also through partnerships as we do realize we just cannot do everything ourselves and we will continue to invest Into our digital transformation for our customers, as we know also the high penetration of smartphones in this African market. And then above all, we will maintain our low price leadership position. That's basically on the outlook. I'm looking forward to the next 6 months working with what I believe He's the finest retail management team in the country. And therefore, I'm very bullish and positive that we will be able to maintain the road that we have embarked upon.
So before we go into questions, We would have loved to host you at our Brackenfell store next to our home office here. That couldn't happen. So we thought we'll just show you a little run through very short while you're preparing your questions. Thereafter, we'll go into the questions And answers and I also thought instead of me guiding you through the store, we've actually asked the actual store staff To take you through, so if you think our English is not great here in Brackenfell, bear with us. Those staff are very dedicated, love their store and would love to show you what they have to offer.
So thank you. Thank you very much.
Welcome to our newly revamped Checkers Hyper Supermarket in the Cape Town suburb of Bracken Checkers is always upping its game as we continue to introduce more and more customers to a world class shopping with many unique products and experiences. This is the latest result, and we can't wait to show you around Our new flagship Chickpepper, the primary attraction of the supermarket is the numerous in store departments Offering a variety of specialist products and the strong emphasis on fresh food and convenience is evident throughout the store. Customers will also immediately notice the improved layout with wider aisles and seamless floors that allow trolleys I cannot be prouder of our state of the art Checkers Heidel Brackentell store. I am not alone. The customer's response to our new store has been phenomenal, and I'm confident that Checkers Heiko Brackenthal
The Pucciri, the bakery and the cheese deli Are designed as stores within a store. So this offers our customers an artisanal market experience within the supermarket. We have an abundant coal deli that looks like a European market, complete with cured meats and a meso section. Our fruit and veg section has the best fresh produce Sourced from hundreds of local farms.
Our incredible wine selection comes from over 100 wine We've got more international wines than any other supermarket. We've got authentic French champagne and the widest range of Italian Prosecco. We've got unique digital screens that the customers can use to search all their wines. They can search on price point and food and choose recommendations.
We are constantly improving our range and quality by working with Industry experts. Some of our unique offerings are famous wild Pacific salmon caviar at Esucheba, Delicious hand stretched stone baked pizzas straight from the oven. They had enhanced crafted Chocolate from my sugar as a chocolatier bowl, salads, reds and smoothies from our in store Kauai. We have former Angus cold meat, an important rodizio grow, which slow roasts all your meaty favorites, A food truck which serves preggol rolls, hamburgers and brogolf rolls made with South Africa's number one champion Beautiful pastries and freshly baked coke buyers who are experts in their fields.
This is just some of the innovations to make sure that our customers get exactly We have an in store pharmacy, a dedicated outdoor section, tech products and even a party shop with helium bar and the 1st ever standalone pet shop inside our Checkers store.
We have the tickets department in all our hyper stores, Which ensures that you get value for money. We sell all your favorite brands such as PlayStation, Sony And the Xbox. We also sell affordable entry level tech.
Our dedicated health and wellness section makes it easier for our To find the foods that support their health conscious lifestyle. This includes organic, fresh foods, ready meals and on the go Thanks.
Well, that is the quick tour, but you really need to see the supermarket for yourself to truly appreciate how far Checkers has come In terms of elevating its stores, products and shopping experience, Checkers has, without a doubt, become a major force in the premium
I hope you got a little bit of a glimpse, hopefully not too long and that you had time to prepare your questions. Just before we start, We've decided to just compile a short list for you about what happened regarding COVID Just to assist you in terms of your model, once off event. So if Anton can just quickly take you through that and then we'll go straight into the questions.
Yes. Peter, you will recall that during the Q3, especially around the end of March, we went into that hard lockdown. So obviously, Checkers and Checkers We saw that shift in home dining and we also saw that benefit especially in the U Safe. You will recall that at the end of June we showed that Sales growth is around 16.9%. And then that was also supported by government grants As well as corporate and public aid.
If we look at savings and with regards to especially our cost, We saw a reduction in spend, especially on our market in travel. We did not have any class from training during that period. That is now back on track. And we also got a benefit on that ETI of around BRL100 1,000,000. Furniture, we saw that working from home benefit, Also that retail sector got.
If we look at tailwinds, obviously our liquor shops are now back to trading 7 days a week, so we'll get that benefit during the 4 remaining months. We also had that ZAR327 1,000,000 spend on COVID related costs As well as that DKK324 1,000,000 impairment that we took on the debtors book for Furniture. So yes, I think that's more or less what we have in the second base.
So I don't know if you've got some
Yes, Peter, I think we just need to clarify the statement we made with regards to the sales and the sales growth that we see In the 1st 2 months of the year?
Yes. So I just said that it's in line with H1 and Basically
It's the growth rate, yes. I think the sentence we just didn't clarify is the growth rate that
we saw in the 1st 6 months. The growth rate?
Yes. And then can you maybe just expand a little bit on the extra savings and the benefit it had in Shoprite? Yes.
As I mentioned, the savings that we could give back to customers amounted to DKK2.1 billion. Without That level of information and that precision pricing, it would not be possible To have a combination of 9,000 grocery deals a month to different customers. So I've used this terminology quite often before. A lot of people questioned Me around what does it really mean when we say precision retail. And that is exactly what it means is we understand our customer behavior, we understand when they buy, When they have money to buy, incredible information that we're getting these days, Not to scare anybody.
I mean, it's all protected and confidential. And it's just purely to derive The correct pricing at the correct time for what customers really want to buy. And we are just in the infancy of this really. This is Our first year for Shoprite, we're now year 2 in Checkers. And day by day, we're actually improving the level of that information That we will continue to use to the benefit of our customers.
Okay. Then there was just a question on IT and CapEx allocation. I think from the slides, we show that our capital spend is around 2.3% of sales, of which we spend around 22% on IT. So that should give you indication. And then I think the last question, Peter, is just around when do we see that virtual network being launched?
By the end of the month, yes.
Okay. I think the rest we've dealt with during the presentation. Obviously, some of these questions came through as you were and as we were presenting, so I think we dealt with everything.
Shall we give it another second? Yes, we can. Well, thank you all. Thanks for your attendance. We're always appreciative of the interest that you show in our company.
We certainly hope that we have not disappointed you and we will continue to do our best