Good day, everybody, and welcome to our 2023 results presentation. With me in the Zoom room is Sarah Proudfoot and Manny Cristaudo. Most of you know them, our Joint Deputy CEOs. Then Reon Smit is our Financial Director. We are going to do this, but I'll do the first part of the presentation, which I'm hoping will be for, I'm hoping 30-35 minutes. Then we'll deal with questions, and I'll refer some of them to my colleagues. The presentation therefore has got many more slides than I'm going to talk to, and in many of the slides, I'm just gonna be very brief and only refer to one or two notes on them. Obviously, that's for you to look through in your own time, if you want to.
So I'll start off with the presentation, and we say that the Truworths shareholder vision, and we're gonna talk a bit about that. Our vision for our shareholders is to execute innovative strategies which deliver significant value over time. We are wanting shareholders to think that about us, and therefore we measure our success through long-term wealth creation. Now, I do do this each time, and I talk you through our business philosophy. I'm going to do it slightly differently this time to try and explain how we use this philosophy, which drives everything in our business, as many of you know. We guide it by it and use it through good and bad times. We start with our purpose, which really says, why does Truworths Africa exist? And we define that very specifically. Then we also say the same thing about Office, why does it exist?
It's really outward-focused. What do we do in the marketplace? What's our role in the marketplace? Then how do we go about doing that? We define that. We put it in every integrated report for years. Then once we've done our purpose, we say, "What is our values? How are we gonna live?" And the values, we call it sequenced in a conditional way, meaning the one in the middle there that says in our values, innovation and passion. It means we primarily focus on that first when we're hiring someone, when we're assessing someone, when we're looking at short-term and long-term incentives, primarily, we start with innovation and passion.
Why we call it sequence conditionalities, because after that, once you have, for example, gone through a process of trying to recruit someone or setting up a short-term incentive, we'll say, firstly, the condition is: have they satisfied the condition of innovation and passion? If yes, the next thing is: are they contribution-focused? They wanna contribute. Then if that condition is satisfied, are they willing to invest in future potential of themselves and of others around them? And then are they, and do we encourage them to learn and share? That is all about receptivity. So these are all sequential, the one has to happen before the other. And then a new one, which we've put in recently, a few months ago, because we do this with our board and they have to approve it, is we embrace the power of inclusivity, of inclusive teams.
We, we realize more and more in the modern world that if our people are not diverse and yet inclusive, meaning we accept all types of people, irrespective of what their beliefs are, who they are, what they are, it's really about whether they live and behave according to our values, that counts, and that's all in sequence. And finally, with all that in mind, we, if all of those conditions are satisfied, we celebrate and reward excellence in their contribution. Why this is so important is if the board had to, for example, decide they want to change the sequence, and, you could take any example. They, they wanted to embrace the power of inclusive diversity teams as the primary issue, then that would have to change.
They'd have to brief us, and we'd have to change it in the middle and say, "The first thing we look for is not innovation and passion. The first thing is, are we getting enough diverse and inclusive teams?" If the answer to that is yes, now we've hired a diverse and inclusive team. Then the second thing is innovation and passion, if that's what we agreed. So we run it like that. It's a sort of a live document that we live by in all of our behaviors. So what I've defined for you now is our purpose, why we feel we exist to the outside world, our values, why we, how we feel we should behave.
And then we say, "If we were doing our purpose and fulfilling it, and if we were behaving according to our values, what do we think our stakeholders would say about us?" Well, we say, well, our customers would say what it says there in the document on the right, and our Office customers would say something similar. And then at the bottom in orange, we say our, our employees would say something, and then our shareholders would say... And I'll focus on the shareholder one, because right now I'm talking not so much to shareholders, I'm talking to analysts and fund holders and, guest financial reporters, who advise and feed information to shareholders and who the shareholders trust and depend on.
So we also do, and we say we would like them to say we are long-term investors in Truworths because we trust in management's capacity to execute innovative strategies which deliver, and then I've said, significant value, but over time. It's a long-term issue. Now, then what we do is we periodically, and it's at least every three months. We go and look at this, and then at least once a year, we have a spread session, and we go and look at what our stakeholders do actually say about us. And of course, the interesting thing is they never say what we want them to. They always say something different. Shareholders might say what you know they'd say. "They've got the wrong credit model, the CEO's been there too long," and all the other stuff.
Customers might say, "I don't know if their fashion is great. They're supposed to have better fashion," or whatever it might be. You know, we do the surveys. You can ask people, and it's not hard to do it because shareholders tell you what they think. Customers tell you what they think because they shop or not, and you can hear, and so do staff. So when we've got all that clear, then we create strategies on how to put that back on track. And interestingly enough, if I talk about the shareholder one, I'll give you that as an example all the way through, because our strategy is how do we fix what we think they are saying or hear they're saying differently from what we wish they would say?
Our business philosophy and our values are based on some really important principles, and they are these that I'm showing you now. Firstly, we really believe you must contribute in our business more than you consume. You must put in more than you take out, and we believe and we try and practice that. Very similar to messages you give your children or your family, and we try and practice that. It doesn't mean you can't take out a lot if people are ambitious and they want to, but the principle is you must contribute more than you take out and before you. It's about an entitlement culture or not. Secondly, we always say in our business, it's, again, that long-term thing, it's a marathon, not a sprint. Then we always say, "Focus on what you can do, not what others should do.
Be the best you can be." In other words, if shareholders or customers or staff are not saying what we want them to and expect them to say, if we're delivering on our purpose and our values, then what are we doing wrong? What, what, what can we do to fix it? You can't blame them. You can't say it's their fault. They've got good reason for what they've decided to do. What are we doing wrong, and how do we fix it? That's all about the strategy. And then we always say, "It's not what people say, it's what they do." Our values are not about aligning everybody's values to be the same. That can never be the case. Our values are all about how people behave in our business. It doesn't matter what their beliefs are and their core values.
It's really, is their behavior consistent with what we think is important in our business? We always say, and I've said it to you many times, "Don't buy growth in market share at the expense of profit." We never do that. Be frugal in good times, but also be frugal in bad times. Don't, when it's good, suddenly go celebrating and spend the money. You always need to be frugal because you, as you guys well know, you can't tell what the future's gonna bring. You can think it's good because you're doing well, and then it turns a corner instantly. So we always have to be frugal, but never at the expense of our business philosophy. Our Emporium always comes first. We've got a choice between one store and another, Emporium takes precedence. We don't mind people making mistakes. They're encouraged to make mistakes, but don't repeat them.
Learn from the mistake. A problem in one area, we always say, "It's probably broader, so fix the broader problem, not the one area only." Our business is called Golden Goose. We talk about that to our staff. We do in the UK and in South Africa, we say, "The fable of the Golden Goose is what we believe in." It's all about contributing to the business and expecting something in return, but not more than you contribute, and so you've got to nurture and protect the Golden Goose. That is our sort of way we behave according to our values, and we try and practice that. We think in the last few years we've done pretty well. We think our ratios and metrics have been very good.
For example, if we look at the medium-term targets, excuse me, that we established in the integrated report, we're within the range or above all of them. The three ring there are the ones where we're either at the cusp of the top level or we were above. So return on equity, 48%, and return on assets, 30%. Return on assets, EBIT divided by total assets, is our primary productive measure of management ability to use the assets in the business at the operating level, Truworths and Office. Obviously, the way we finance the business above return on assets, up to return on equity, and all the way through to share price, the way we do that is a corporate responsibility, Truworths International. So we sort of separate it that way, but either way, our metrics are well above the local benchmark.
We measure that very carefully. I'm not gonna disclose to you who we use on the benchmark. One would like to think it's obvious. Similarly, the international benchmark, we look at what we think are appropriate benchmarks, and we use them, and you can see that, for example, when it comes to gross margin, we are slightly lower than the international benchmark of the ones we've nominated, but we're way above the others in all the other metrics. Surprisingly, we're even better in our asset turn and remembering we finance our own book. So in our assets, there is also debtors, which some of the international competitors do not have. Excuse me. Just to give you a little bit more of a flavor of how we see our business philosophy and use it. This is...
We keep a record of consensus versus actual in arrears. So we, we'll say, for example, in 2023, what were analysts' consensus in August last year when they had just had the results like now, and what was it? And then when August is finished, we say, "How far behind were they?" And you can see in this year, the analyst trend forecast was 26% below what it turned out to be. But in 2022, it was 14, in 2021, it was 46. Average 14. That average is wrong, by the way, but anyway, so it says 26, 14, 46. Excuse the average. And then, in November, what did they say when they were looking at it, and in February, after half year results, and then in June, just before the results come out?
You can see basically this year, 25%, a year ago, underestimate our results, and in February of half year, 15%, and in June, 14%. So now we can say now, this is not analysts' fault. We also are conservative. We also don't know, and we also make mistakes. So what are we doing wrong here? Is it that we ourselves are being too conservative, in our strategic discussion, and we are not giving our message properly, or is it because we are doing something wrong? So we have a strategy, and part of the strategy conclusion is, if I look at this one, it's... Well, it's gone from 46 to 40 to 26. That's not bad. That means something is working better.
We wouldn't like analysts to forecast higher than we end up being, because under-promise and over-deliver is part of our values, so it's improving. Now, that means we are improving in the way perhaps that we're communicating, because we were probably not spelling the message out properly before, and also we are performing, so analysts are rewarding us by saying, "Okay, you're getting a bit better. We'll trust you a little bit more, and we'll be a little bit more optimistic." And then we ourselves are being conservative. We don't know what the numbers are gonna be, and I would guess our own numbers, ourselves, of our own forecasts are also lower, certainly the conservative one, than it turns out to be.
The point I'm trying to make is when we do strategy and we decide on things, we look internally first, and we say, "What can we do better in terms of what we're supposed to do?" As an example, the reason I'm doing this now, and I'm going through this presentation in this way, is because what we concluded last time is we're not presenting our message to shareholders properly, and we're not explaining ourself well enough, and so I'm trying to do that better now. I realize, of course, shareholders will always make their own decision, and who knows what the future brings, and our role is really to be transparent as much as I'm trying to be now. So over the last couple of years, we repurchased 52 million shares. You all know about that.
That was also, if you think about it, at the time, we were probably nowhere near what we thought. Our own forecasts of what we did were probably lower than we actually achieved ourselves. Never mind analysts, we ourselves were lower, but we still saw there was opportunity, so we were aggressive in share buybacks, and that turned out well, as it turned out. We maintained our dividend cover, as you know, right throughout COVID and since then. We have acquired... We looked at lots of different opportunities, but we just don't want to overpay. So, hopefully, we're not being mean about it. We really use professionals to value it fairly, and we are not overly flexible about how much we'll pay for a business, and probably we miss out that way, but we are very aware of return on investment.
We acquired, however, in-house design capability by buying two businesses, and they are now fully functional, operating in our head office. The design centers, which are seamstresses and sample sets, and all the things you'd expect in manufacturing. We have spent a lot of effort and time in protecting our local manufacturing sector. We haven't solved the power problem. You can't solve the load-shedding problem in South Africa, but we've protected ourselves to the current extent of load-shedding, meaning 87% of our stores are protected with alternative power, and the others don't need to be because they don't have problems. But that doesn't mean we can solve a problem if there's a power out for three days.
So we are aware of that risk, and we are trying in our own minds to find mitigating strategies in that awful event, if it ever happens. Not that that's easy, and I'm not saying we found it. We have invested in a new distribution capability. We, we're halfway there. It's still gonna only come of age, operating fully in January 2025, but we will by then have spent ZAR 1 billion, and it's been spread over three years. And, you know, Office, superb team in Office. Highly experienced, competent people, and they have become, over the last couple of years, fully aligned with what we consider to be best-in-class retail practice.
So you've got a combination of best-in-class retail practice with extraordinary competence in their field, and competent, committed people. I can only describe them as excellent, and that's all why that business is doing so well. As I say all the time, we sell aspiration, so we focus on quality, aspirational fashion, better end. So if our board wanted us to change... Please excuse me. If our board wanted us to change our purpose and say, "Listen, a whole lot of people are saying you must go into the value space. Your model is not right, and you must stop selling on credit, and you must enter the value space." We'd have to change our whole purpose and why we exist.
And as you all know, to change the DNA of a business is like changing the DNA of a human being. It's very difficult. So that's why our board never has asked us and wanted us to do that. We spent a lot of time, and we're very busy with that at the moment, focused on opportunities and merchandise where we know we're underrepresented in the marketplace. I'm not gonna say what they are, but they're categories of product. And I'm not talking about price. Price could be the reason, but we're not talking about price. I'm talking about product categories where we know we are massively underrepresented, and there's an opportunity there internally to improve. And if we get it right, there's a lot of money in that, and that's a big part of our future endeavor in Truworths specifically.
We have expanded our brand portfolio with Fuel and Sync, and they're both doing nicely. It's early stages. We refined and grew our Identity Kids business. We've already got a fantastic Truworths LTD Naartjie Earthchild, but now the Identity Kids is becoming a lovely business since 2019. We've developed, and we've actually started to roll out our new store formats. Truworths Reimagined, we call it. The first one's been launched in the Waterfront in Cape Town, and a whole lot of others are gonna be soon. Identity Megastore, trying to make Identity go the journey Truworths did. Small store, getting bigger, separate entrances for men's and ladies, departmental kids, departmental lingerie, so it's becoming a bigger store. Tends to have higher sales per square meter as it gets bigger, which of course, is wonderful.
Identity Megastore is proving to be just the same as Truworths was in that stage. We've launched our kids emporiums with all of our brands in one, other than Identity. Context is, I think, six or seven stores going really nicely now. That's Earthchild, Earthchild Direct and LTD and some glamour product in a really upmarket aspirational format, which is some standalone, but mainly in an emporium store to elevate it. And then you know about Sync, which is the discount value, but still aspirational fashion business. Fuel, which is a bit street, young guy, and Office London in South Africa, which is different from the Office in the UK. Those are all going according to plan and nicely. There's significant expansion planned in the Office UK retail, with a few new formats that have been successfully tested in the UK.
There's quite a few that have been tested, and there's plenty of low-hanging fruit there going forward. It's all been identified, and we're on a mission to take advantage of the low-hanging fruit with our new successful formats in the UK. Online, of course, we work on... UK is about 40%, South Africa is only 3.5%. But South Africa, nowadays, the online experience is probably much bigger, I think, than our biggest three stores added together. So it's growing 30%, 40% a year, so it's nice, steady growth from a small base. And credit is an enabler. That is our lives. That's how we think. If you look at the shareholder return and creation of wealth, if you look at it between 2020 to 2023, current share price, it says...
I think it says there, I can't see it properly. But anyway, the growth, the compounded growth in shareholder return is 36.2% compounded, if you include dividends. The share price has gone from ZAR 34.28 to ZAR 72.46. That's the current price, I think, on the 31st of August. And there's the change in share price, and then there's the dividends, which is how you move to the 86. So we believe in the last three years anyway, we have generated great returns. Now for three consecutive years, the return on invested capital has been at least double the weighted average cost of capital. We hope to continue that.
There were many years before that, we always did that, and then we had a few bad years, 2018, 2019 and 2020, where we were below that. But for the last three years, we've more than doubled the way. If we look at the group financial results on this, I know you guys know, and you don't need me to go through it. Many in the room are experts, and they can help you with questions afterwards or subsequent to this presentation. But we delivered 12% growth in the diluted EPS and 11% in merchandise from a group point of view. Sorry, I'm just getting my pictures out of the way there.
If you look at the very right-hand column, the change on prior period, 52 weeks, but excluding the tax matter, and on a 52-week pro forma, so it's the most comparable. 13% in sales and 9% in headline earnings. We've shown you the progression for that. You can see the dividend and headline earnings per share growth on the very left, and how the dividends and the headline earnings per share and dividends per share have gone up consistently since 2020. And return on equity, return on capital is also excellent, although return on capital is the same as it was two years ago in June 2022. You've got to leave out the gray one, which is non-comparable, 'cause it's got 53 weeks.
What's also pleasing is our asset turnover and return on assets is also doing, as you saw earlier on, above the benchmark. So our results have been pretty acceptable the last couple of years. And there it is again, post-Office acquisition on the right, and since 2019, and then the COVID period, and then the last three years have been much better. There's a statement of our balance sheet. I suppose the notable points are: inventory is up by 23%. That's Office and Truworths. Partially, it's because Office is doing so well, there's a lot of stock in the system. The cash can get offset a lot by the interest-bearing borrowings.
There's about a net of about ZAR 900 million debt, and that's including the ZAR 350 million or ZAR 400 million we've paid so far for the warehouse distribution center. So the balance sheet's very strong. Share buybacks, I have mentioned it already. We're talking to... really talking to our capital structure, and our facilities are ZAR 3.5 billion, of which we've used ZAR 2.3 billion. And we've got a GBP 20 million RCF in the UK, but we've got a lot of cash in the UK. And then the dividend you know about. Looking at cash flow, the business, the group generated ZAR 1.4 billion, paid dividends of ZAR 1.9 billion. There were some share buybacks, very small, because we now have the DC to worry about, the distribution center.
And we did increase borrowings, mainly as a, as a result of working capital expansion. Truworths, pretty good performance, slowing in H2. Load shedding is a problem, not because we can't cope, but because load shedding affects consumers' behavior. There's been a large growth in the book. There, there's significant growth in credit losses, but the provision seems to be stabilizing. And we think that's, that's a very good sign. It's not, it's not dramatically improving. It's, it's, it's stabilizing, but we, we are a little bit getting a little bit more optimistic than we were, although I don't want to overstate that. That might still take time. Stock control is good, and about 45-50% is made in South Africa for the South African business, and that's very good because we have the quick response capability that way.
Income statement, if you're familiar with that. On the right, it shows that the change in sales was 9, but the profit before finance costs actually climbed by 1%, and you can see it stands out a mile, the 49% growth in trade receivable costs. And if you look at our whole group structure, actually, that single number, the trade receivable cost, is what's containing Truworths and even the group. So that is our target for this year, and that's why you can imagine it's a massive focus of ours. This includes the impact of this indirect tax matter. I don't want to talk much about that. That really is self-explanatory, but it doesn't matter. I mean, that's a one-off, and once it's done, it's done. The...
What was particularly pleasing about this last year was that our ladies division, which has tended to struggle because ladieswear in the marketplace is more difficult and much more competitive, and we've had the... This was the star of the show, really, besides the other. So we were very happy with the ladieswear. Men's has got some challenges, but we think we're on top of that now. And kids has been nice, steady, lovely business, become ZAR 1.5 billion. And that's without the Identity Kids, by the way. And you can see Identity, we started it ourselves from scratch, ZAR 2.4 billion business nowadays.
Store space, the last year we shrunk by 0.2%, and this, the year we've just been through, we grew by 1.4% with the highest ever trading density, sales per square meter of the trading space. So at store level, things are going pretty well. The bad debt is our big thing, on the debtors book. There was about 12.6% inflation for the year, for the financial period. For the questions that are gonna get asked, I think it's gonna be less than that, hopefully just below 10% for the next, period. Gross margin, slightly lower, but when you look at it over the long term, it's pretty consistent. Lower than last year, but last year was higher than normal. So if you look at it, it's kind of average, the gross margin. Trading expense is up.
Again, I don't have to keep on repeating it. It's all about the trade receivable costs. I'm gonna whip through these. You can look at them in your own time. We put a bit more effort into defining the trade receivable cost. I think the big thing here is that the bad debt actually increased by 31%. Due to the higher bad debt, up to 60%, and there were lower recoveries, bad debt recoveries. That all speaks to the tough economic climate in South Africa. The ECL allowance at 20.6%, compared to 20.9% last year, is very similar. But then the actual book has grown, which is what causes the allowance to go up in rands.
Profitability, as we said right up front, Truworths and the group, the profit before finance costs, EBITDA, operating margin, all way above anything else you'll find. This shows you our CapEx, ZAR 310 million spent. I was wrong earlier on. I said it's more than that. ZAR 310 million has been spent so far. It will end up being ZAR 1 billion. So this current year we're in probably will be another ZAR 400 million, I'm thinking or guessing, and then another ZAR 300 million in the final year. So, so that's how the money's made up. The rest is pretty more normal, although we did spend more on store renovations than we normally do, but not much more than ZAR 300 million. That's obviously due for keeping us up to date and improving our stores.
Cash flow in Truworths were pretty good. We generated ZAR 1.4 billion, paid a lot of, all the dividends were actually paid from Truworths, as it turned out. We never knew what's gonna happen in Office. There's expansion and perhaps opportunities in the UK for us to take advantage of, and so the money so far has been paid out of the Truworths cash flow. Looking at Office quickly, very strong performance in Office. We're very excited. We closed all the German stores that were not doing well, but we opened our first new store in the UK in three years, which is really exciting, and it's doing well. We remodeled two stores in key locations, and there's a further four renovations or extensions and five new stores planned for this financial year, all with really attractive payback periods.
Great new store concept, which is working well, so that all, all goes really well for the future. And, the positioning, I've spoken about before, you understand it, but the net result of all of that is 18% growth in sales and 31% in profit, which is, we think, an outstanding performance of an amazingly competent team. With our support in the UK, they've done a great job, and we think there's more to come. Geography-wise, they had 92 stores, now they've got 81, which includes 11 concessions. That's mainly because of the close of the German stores. Office trading expenses, I'm not going to spend a lot of time on that. Depreciation is explained there. The right-of-use asset...
Right-of-Use Asset in the formula has changed, and Reon can explain that more if anyone wants to know. Occupancy costs have gone up because a lot of the rent relief and rate relief was all normalized. So all the benefits have gone now. Now, this was a real year where there was no more rent relief and rate relief and all those things that come. And despite that, our results were as good as we... Better than we could have hoped. And as a result now, EBITDA margin and operating margin are from a low 7, 8, 9%, leaving out our COVID, right up to as good as you get. CapEx is store renovation. You see it there, but you already see ZAR 3.8 million committed for the coming year.
In my opinion, it'll be quite a lot more than that. I'm guessing it'll be more than double that figure because of what I've said already. Cash flow. Office generated great cash, GBP 16 million. We paid, repaid borrowings of GBP 7 million, so it was a really great cash generative year. Managing credit, I'm not gonna speak about this first slide. You know what it is. It's, it's our—it's, it's fundamental to our DNA. We operate with the opportunity to use whatever medium you want, your own credit card, cash, lay-by. I know there's layaway and pay for it later. We offer every alternative you can imagine to pay, but one of which is we finance credit on our own book because it empowers us properly. The credit market's under pressure.
I think you all know that in South Africa, it's a tough market, but there's a strong demand for our accounts. I mean, you'll see in a slide later that over 5 million applications received, the highest ever, and, and about 840,000 actually were approved because they qualified. So most get missed. We then call them loyalty customers, and we start a relationship. But still, at 5 million applying to have an account is an all-time record. It's been growing and growing, and, and that... A new account was also a record. But collections have been difficult. I mean, it's a tough market out there. People are struggling, and then the TransUnion index, which we use as a guideline, when it gets below 50, it means it's declining the health, and when it's above 50, it means improving. Look how it's gone. 49, okay, neutral.
43, declining. 39, worst it's been for a long time. So the state of the economy when it comes to credit, as measured by the TransUnion index, is not good when you look at that. On the other hand, they do say in the highlighted orange in the middle, "The effect will gradually work out of the CCI over H2, suggesting this might be the low tide mark." Okay, so I don't know. We hope, and it's a possibility. Certainly, our own predictive scorecard into the future has stabilized, so I don't know if it's gonna improve, but they are forecasting that. And then Reon and his team have built a nice model to show you the bridge between trade receivable costs last year to trade receivable costs this year. So you can see all the components nicely laid out there.
The gross bad debt went up by ZAR 260 million. There was a decrease in recoveries. Then we released provision, both periods and the impact of that, and the increase in income of interest, which of course, is a benefit, but that's... You'd expect it. We give credit. Of course, we charge interest, so those are meant to offset each other. And the, and the, the gross bad debt actually went up by 26%. Slightly low recoveries, but then the book has gotten bigger. This also talks a bit to the health of the book, and, and, the number of active accounts has grown, and the book has grown, but it used to be 82% of the book were active, now only 80%. It means some of them are not shopping, or, or they're not allowed to because they're in arrears.
Overdue accounts has gone from 14 to 16, and you see the bad debts going from 6.8 to 9.3 over account sales. So, so that definitely is showing this is our biggest challenge at the moment. We hope it will stabilize. Of course, you can imagine we've got tons of strategies, and we work with consultants, and we, we never just accept these things. We are very busy on trying to use innovative strategies to manage this. It doesn't change our appetite for it, because as I keep on saying, this is our DNA. Interest went up. Our market share of accounts is the highest it's been in 5 years. Some of you might not like that we are proud of that. That is what we're happy with.
But, I can tell you we are being more conservative than we ever have been in issuing new credit. The late-stage portfolio, this is the ones who are more in arrears, four-plus cycles. They, they're badly in arrears. It's seeing a similar pattern for May and June, slightly higher levels, you see. So it is deteriorating the late stage. It's not great. It's... You know, over a long period of time, it looks like this, but the last since February 2023, it's declining. But the up-to-date book, the newer ones, is surprisingly good. Up-to-date book is actually improving at the moment, and that is unusual. So you've got. There's two things happening in tandem. The bad book is deteriorating. The new book or the old bad is deteriorating.
The new book is actually looking like it's improving, which is, as I say, hopefully we are at a turning point. This refers to our risk approved, but as you can see, there has been improvement in the volumes. 5 million last year applied this year, 5.3 million, and the number of approved and then the number of ended up opening has also improved over the year, which is great. Just for interest, some of you worry about how old the customer is. 46%, I think it's saying, customers are under 29 years old. 18- 24 is 20% and another 26 %, 18- 24. One in four people who applies to open account is 18-24, and then one in five is 25-29. So half of the customers are under 30 that apply.
Our strategy, aspirational fashion, we've already mentioned this. This is group now because it includes our made-to-order in Office U.K. It hasn't been doing well. It's been battling. It still is a key part of our strategy. We've taken new steps, and very early signs are that it's looking better. Of course, we like that for a number of reasons. But Office is doing very well. Supply chain, you know about our new DC, so, it'll be operational in January 2025. And we also are busy reengineering our warehouse in Kilmarnock, which is in Scotland, which caters for the U.K. This is our new DC near the airport. It's a complex near the airport. That's what it looks like. It's been built. This is what you will see, and that's the current state of it.
So it's actually taken. It's sort of a live pace at the moment. When it comes to customers, omnichannel, we're very busy in the U.K. and South Africa with omnichannel. We're working on e-commerce, loyalty, retention, new technology. Office is doing really well with e-commerce, particularly shop in the store or at home, using e-commerce if you want to, or using the technology, delivered to your home or collected store. Truworths and Office both doing nicely. Truworths, as I said, small base, but growing well. That shows the contribution from Truworths and Office in 2019 to 2023. It's grown from 9% to 12% of our total group. We're always working on our customer predictive scorecards. That's part of our lives.
But there's a lot of work going on at the moment, all about managing and trying to get better at managing the risk from a profitability point of view. So giving enough credit to drive additional profit instead of not. These are some of the new stores. This is this reimagined, brand-new one in the Waterfront, Cape Town that was launched about a week ago or two weeks ago. It's been great. That's what it looks like. It's got two entrances, one in the front, one in the back. This is the backside. It's got the LTD Kids and the men's on this side and ladies on the other side, and that's some pictures of the inside. Beautiful store. It really looks fantastic with great wide inviting entrances and fantastic merchandise.
This is our first new store in the U.K. in three years and a new concept in Battersea Power Station in London. It's the same Battersea Mall, if you want to call it that, which it is. It's a mall. The head office of Apple is in that shopping center. It's a small shopping center. We're the only sneaker business in the center, and this store is doing really well. It's doing better than we expected by quite a long way. Beautiful store. Those are some slides. This is our Carnaby Street store. We also refinished, remodeling this. Been around a long time. It is our biggest Office stores.
There are Offspring stores that are larger, especially in Selfridges, but this is our biggest Office store, and even though it was always our biggest and still is our biggest, it's performed remarkably well since the transformation, and this is what it looks like. At the entrance upstairs, you go downstairs. By the way, that back part there used to be a stock room, so we were able to expand it in existing space trading. That's because our stock management is better. ESG, there's a lot of work going on there, and I'm actually not gonna go through that because we're short of time. Our ESG is all-encompassing. We've tried to show some slides here that tell you about a flavor of what we do, but, I mean, you, it's best you read through it yourself, and I can assure you it's just a flavor.
I mean, there's an enormous amount of thinking going on, on ESG in our business, and in this coming year, it's actually going to be included in our strategic targets for our short-term and long-term incentives, both in Office and in Truworths, because it's becoming so critical in the world. We've aligned ourselves to the United Nations Sustainable Development Goals. There are 12 of them. We've identified 7 that our charitable and internal work should focus on, and these are they. You can look at them in your own time, but we have got now assignments and projects to how we are going to intervene in our own small way in each of these. This is some more information of the work we're busy doing and how we support our own people. We...
Of course, you can't only look externally, you have to look at your own people, many of whom have a tough life and a tough time. Our job is to support our own people, very much in alignment with the society in which we live. Our charitable trusts, which are no longer owned by Truworths, but we influence them significantly, they now have ZAR 260 million in assets. So we distribute adequate amount to support our endeavors, and we wanna make sure that that ZAR 260 million keeps on growing, so it's long-term sustainable. We focus on all these things we've mentioned below there: health, education, social development, and the empowerment of women. We are a woman-focused business, so the empowerment of women and the protection of women is critical to our lives, and we are very active there.
As you saw in the previous slides, that's all covered in our thinking and our program. We're so proud of this. We say it because we really are proud. We are now the only company on the Johannesburg Stock Exchange that has been in the top 10 of the EY Excellence in Integrated Reporting Awards for 16 consecutive years. Actually, since the awards were developed. At first, they used to talk about excellent category, and then they went to top 10. Since 2003, we've either been excellent every year when that's all we could be, and in the top 10. We are, I think for a few years now, the only company that has been there every single year. Deloitte is now our new auditor in terms of audit rotation.
Group sales so far, 5.3% up in Truworths, 19.5% in Office. Going well at the moment. I know Truworths looks a little constrained, but right now it's looking quite promising. Trading space, you can see there are plans, it's projected to increase 2% for the year in Truworths, but 10% in Office. Macro environment, you know it. You know it better than me. It's tough in South Africa. It's challenging in the UK. Our job is to not accept that, but to say: How do we live within the context of that? And that, again, is my old song. We live according to our business philosophy, which has stood us in good stead to help us through these tough and good times. We're positive about Office, well, who wouldn't be?
I mean, it's going so nicely, and it's doing so well, and its positioning is more, more firm than it ever has been. So with that, I'm going to stop the presentation now, and I'm going to ask you for questions, and I'm going to refer these to my colleagues. I don't know... While I do that, Manny or Sarah, would you like to say a few words?
Yeah, I think, Michael, thanks for the presentation. I just think it's been an exciting year in terms of the performance, obviously in Office, but we are encouraged by the performance in Truworths, and from the merchandise side, seeing a lot of opportunities that we can take forward into the new year. So that's exciting. Manny?
Yeah, I agree with you, Sarah, and you can see from the presentation that the focus in our business is fundamentally on the business philosophy, and we don't waver from that. And over the long term, it's proved to be good for our business. And although the times are not as good, I suppose, as we'd like because of the macro issues that we have, we somehow manage to navigate through these, and we deliver, I think, good performance relative to the macro conditions. If you look at this last year, our Office was a little slow in the first half, although very good and much stronger in the second. Although they were fighting some quite tough sort of performance in the previous year.
And then Truworths was the opposite, had a good first half and then a slightly tougher second half. And so they've sort of balanced each other out in a way. But we are feeling quite optimistic, or let's say cautiously optimistic about this next year coming. I think it could be a decent year for us.
Well, we don't know, but we pray, and we won't depend on prayer. We do the best we can. So I'm gonna go through some of the questions. The first one, please talk to the revenue growth in Truworths Africa, the first eight weeks. Was this relatively low growth rate driven by higher than normal promotional activity or not? No, I would say it's normal activity. You know, that at that time of the year, of course, in July and August, you're clearing out your January to June excess stock. We always have terminal stock targets. You can pretty much take it as given that we will always make them, and our stock will always be clean, and it was normal-ish. Our activity was pretty normal as I'd see it in Office and in Truworths.
And I think you should therefore, the way to judge it is from our gross margin, because if you think about it, we make sure our stock's clean always to the target. And to get there, you either have to somehow cancel the stock or have a markdown. So the fact that our gross margin is what it is, slightly down on last year, but pretty normal, that's why I'm saying it's normal. What is your view for provisions for bad debt and the debtors book for next year? Have you peaked? Do I think, and does Manny think they've peaked? Well, I have to say to you, I think I tried to explain as best we could there. We've...
Our view and our view of our risk department is that we are hoping that it is now stabilized, and over the next 18 months will start to decline. But I genuinely do not know. We're not assuming that. We are working on it as if it's tough and it's gonna continue to be. Another question is: Congratulations on the results. What is your anticipated product inflation? This one I'll give you, Sarah. And please could you further expand on promotional activity? Let me just read this. It's quite a long one. It's also all about, promotional activity, so I'll answer that. Bad debts, also the same question on bad debts. Yeah. This question is slightly different, so I'm gonna offer one to Sarah, inflation, and the second one to Manny.
This question is sort of saying, Manny, how come your provision seems to have stabilized, but your bad debt is so bad? So it's kind of like, is that consistent? Why is your provision sort of static or slightly better when your bad debt is so bad? So first, Sarah, on inflation, then, Manny, you might want to talk to the bad debt story and provision.
Thanks, Michael. Yeah, so, on the inflation number, obviously, this is always slightly difficult to predict because a lot of it depends on fluctuation in the currency. I think the point is, in South Africa, we're used to dealing with that, and we have various mitigating strategies that we have in our toolbox to hopefully deal with that. So I would say we're looking at probably the upper single digits inflation going forward, which is slightly down from where we've been in the last half. But that's where it's looking at the moment, and yeah, the next six months is harder to predict.
Manny?
Okay. Thanks, Michael. They, they're really two different numbers. So, I mean, the one is backward-looking of what's happened, and the other one is forward-looking of what we think might happen, so you can't really compare them. I mean, I can say our methodology for calculating provision has not changed. So we look at historical performance, we look at the macro indicators, so we have models that predict those. And we look at the loss given default to see what our recovery rates will be on the gross bad debt. Those have been consistent with the past, and, and this is what the number's coming out at. So it's really a forward-looking, it's a forward-looking item, as opposed to backward-looking, which is what you see in terms of the net bad debt.
And then the next one is: One of our competitors is rolling out standalone kids stores. Do we see this as a threat for Identity Kids or the target market's different? Look, every competitor is a competitor, so, if you are a value-based business, you might be in a different target market in the sense that you're cheap and we are aspirational, but you're still a competitor. So, you know, it's part of our community of life. Every single, competitor that enters the market is still a competitor. The way we deal with that, whether it's ladies, men's, or kids, is always the same. According to our business philosophy, we sell aspirational products with great fashion and the best quality and with the best brands, and we own them all. So that's how we deal with the competition side.
There's another thing, question about... I think I'm able to say the name Shein. Is it having any effect on us? Because they're in a different space, but are they affecting us? I don't really know the answer to that. I mean, there's a lot of talk in the press about Shein and about how duties are changed and so on. You know, it's the same as the former question. If it's Shein or if it's, a local new entrant, or it's a foreigner that comes and trades in retail stores, it happens all the time, and it always has happened. Our role is to deal with it and accept that that is how, free enterprise works. Yeah, this question is an interesting one.
It says: If Office is doing so well, and you're saying there's low-hanging fruit, do we think at some point that it contributes, the earnings of Office might exceed Truworths Africa? So I don't know how to answer that, because in a way, I would say if Truworths Africa does really fantastically in the next couple of years, then I hope the answer is yes. So it sort of depends on how each does. I would hate it if it happened that way because Truworths was doing badly in Office Wear. So my real answer is, our plan is to deal with whatever we need to deal with, with Truworths Africa, which there is low-hanging fruit we've identified, and there are opportunities, but admittedly, it's a tough environment.
If the credit comes right in the next two years, you will see a quite a big change in my opinion. Office, on the other hand, has tons of low-hanging fruit. Will that continue forever? I don't know. I hope so. So I can't really answer that properly. I don't actually have a direct answer for that. Let me see the next one. Yeah, the next one's the same thing about Truworths. It's all about this thing of saying, "Well, your profit didn't really do well in Truworths. It was only neutral, 1% or whatever." So, so what do you see? And all I can say to you is what I've been saying all along, the bad debt is the big issue, and the state of the credit economy is the issue.
South Africa has shown over so many years and so many decades that these things are cyclical. The economy tends not to boom at 6, 7, 8%. It also tends not to go in serious recession for long. It tends to hover between 1% growth or half percent and 3%, and that's the space we operate in. Right now, it's constrained. It's likely over time, in my personal opinion, I'm not an expert, but that's my opinion, to change, and then the credit side of this economy will improve as things do improve, which they do. South Africa is resilient, the population is resilient, and I do believe, therefore, this is cyclical, and Truworths will, recover over the next 2, 3 years, and please, I hope, surprise you again.
This next question is, you're generating the best EBIT margins of a shoe company that this person's aware of in the UK. Why do you think that is? Are you worried that the margins will go towards the mean in the medium term? Well, you've seen with Truworths, these practices we adopt seem to work well in South Africa. And then now we're applying them in the UK, and the metrics are looking good. You know, we ask ourselves, we live to our business philosophy, why would we accept a norm as being what we must target? It doesn't make sense to us. We must target what we think we can achieve.
So, yes, my answer to you is if we carry on running Office well, frugal in good and bad times, and yet adherence and never being frugal when it comes to application of our business philosophy, which is great product and beautiful stores with great people, and pay them and reward them properly according to our values. If we carry on living to that mantra in the UK, I cannot see why the margins should be average. To me, we should be better than average, as we have been in South Africa. So that's the best I can do to that. Sarah, we know womenswear growth is now about kids wear growth. What's helping womenswear other than higher credit sales?
So I don't think that-
Is it just because of credit-
Yeah.
-or is it something else, you know?
Okay, so I think the credit sales apply obviously across the board. So I think we've seen some nice initiatives that we started in the womenswear space in terms of some missed opportunities paying off and some of the focus areas that we've had on elevating our product and differentiating it. We believe that in a way that is unique to the Truworths brands, I think has helped that has helped that area to perform better this year, which we, we're very pleased about.
Unfortunately, I can't ask if the person's happy with that answer, but in all these answers, I'm interjecting a little bit here. Please feel free if you don't get your questions answered or you've got others or you want more clarification, just write to our Truworths Investor Relations email address. The panel of the people sitting here and three or four others look at that instantly. We debate it, and we respond with great fervor and as accurately as we can. So please don't hesitate to ask us any questions you want. What happened in menswear? This is quite a good question, so what are you gonna do about it, Sarah, if it didn't do so well?
Yeah, thanks for that. The men's space, yes, we did have some challenges in the men's space, and I think the strategy that I mentioned in terms of the approach to womenswear, we will be taking similar approach now in a more intensified way with menswear. So in other words, the differentiation and elevation of our brands is an opportunity and continuing to look at spaces, as Michael mentioned, where we feel we've got opportunity to grow into certain product types, where we maybe have strength but are still relatively small in the market. So we'll be focusing on that and really the utilization of our brands, because we really believe we've got fantastic men's brands, Uzzi, Daniel Hechter, Fuel, and our Truworths Man brands. And so we're actually feeling quite positive about the opportunities in the menswear space.
Thank you, Sarah. Reon, on this one I'm giving you, it's a really good question because I asked that myself. It says, "If we did so well..." Let me find the question again now. Excuse me. We had a... I think the return on assets or return on equity. One of the returns was 48%, and the target's only 30-something%. So why is it so different?
... Yes. Thank you, Michael. Good afternoon, everyone. Good question. I mean, we, we've had a very good year, Michael, obviously. Look, these targets are set once a year. We do revisit them, and they are forward-looking. So we look three years into the future based on the information that we have available at hand. You know, we don't know what the future holds, so we take a stab at it. But one thing to also keep in mind is that over time, equity in the business grows. So there will be, as equity grows, there will be a reduction in return on equity. But we had a very good year, so that's part of the explanation.
Okay, thanks, Smit. So the next question here, I'm sort of trying to scroll through, and every time I update, they get a bit mixed up, so I hope I'm not missing too many. How else should we think about branded players in the U.K. going direct to consumer? And is it accurate to believe that branded players like Nike are reverting to push stock back through the remaining key distributors? So it's a very good question. I mean, so if you, if you get to understand the market in the U.K. when it comes to sneakers, but it's the world market. Essentially, a lot of the famous brands are going direct to consumer with their own websites and their own stores. Definitely, they all are. They see it as an opportunity to enhance their brand. That means they're cutting back significantly on their intermediary distribution.
So we are fortunate there, but we're on the line, we have to deliver. Our fortune is that Office is seen to be a female fashion business that attracts female fashion customers, that they do not normally attract in their own website, in their own stores, and in fact, in many of our competitors. So our attraction is the uniqueness of our profile, and they therefore almost spoil us because we are the target they are trying to build. And because of the diversity of product we have in our store, no one can really emulate us. We have brands, and we have sneakers, they're different, and we have our own MTO. So our mix is what appeals to them.
So this trend is accurate that you are asking about, but it plays to our favor as long as we can carry on delivering, and that's why we're doing all these new stores and all this other stuff. They then spoil us. When it comes to your second part of the question: do we, do we think it's gonna continue to be like that? Well, Offspring is a different business, say, because that's the other one we own. Offspring is not, because that's massive as well in our lives. It's underestimated how big it is. It's separate from Office. Offspring is sneakerheads. In other words, that is female, male sneakerheads, obsessed with sneakers as a culture, and there we really are preeminent.
We are the sort of lead player, and in fact, so much so that it's very big in Selfridges, but we also have a couple of other smaller stores that do nicely. But we're opening up a real great big store. I don't know, I don't mind saying it's gonna be in Kings Cross, in London, called an Offspring neighborhood store, and that's going to be happening in the next 6-9 months. So, but these two niches that are not mainstream, and somehow they protect us in that market. Truworths' appetite for acquisitions in the next 12-24 months, what funding capacity is available for these buyers? You know, our appetite's there. Last 12 months, next 12 months, UK and South Africa, we look at plenty businesses.
We get quite far advanced offshore and locally, even recently in negotiation on price, after we've decided on alignment to business philosophy in the UK and South Africa. It seems to come and stuck often on the price side and the value, and we're comfortable with that. You know, we get quite clear on. It's not our capacity because the banks and our shareholders are sort of encouraging it, and we've got a lot of cash, potentially. It's more to do with whether or not we should take shareholder funds and invest them in a way that we think, in our opinion anyway, is unwise. If we look at the prospects of the business and the value that they are asking for, and that's why it doesn't happen. But yes, appetite for sure, and some we get quite close.
Bearing in mind, at the same time, in Office, we're looking for internal opportunities. So, Office, low hanging—a lot of low-hanging fruit with these new stores. And it costs a lot of money, very high generated returns from that money. And in Truworths, I, I can't say much more than saying in Truworths there's a lot of work at the moment on investing in stock and creativity, in product categories that we perhaps are under—we, we're not doing what we should. Manny, this one you can love. Do you... Because Manny loves this subject: Do Truworths have initiatives to use AI in the operations, call centers, collections?
Okay, that's an interesting question, and I think quite pertinent. So we are looking at AI. We haven't actually launched anything AI-wise at the moment, but we're looking at it across a number of areas, including the call center, collections, and a couple of other areas of the business. So something we're investigating, and hopefully, we can do something fairly soon on it.
Then, Sarah, this one's for you. It's about beauty. This person knows the RLC numbers. They say it's growing, the beauty in South Africa. They say it grows by 15%. That's why I know that I can give this to Sarah. She runs an internal project in our business to identify these sort of opportunities. More than a normal job, this is a strategy. How do we find these opportunity areas? We have ways to do that, and therefore, beauty, this is how we do on beauty.
... Yeah. So thanks, Michael. So yeah, we've been happy with the performance of the beauty area. In the last year, we have seen some growth, which has been exciting. I think in our business, we always have priority for our brands, but we're very, the cosmetics and beauty component is obviously a critical part of fashion, and so a very important part of our total Emporium offering. So it has been very nice to see that growth, and obviously, we'll look to capitalize on improving that growth and that market share in the year ahead.
The next one is quite interesting. It's, This is addressed to me personally, and it's very polite, so I'm gonna do the best to answer it, because it's a very pertinent and valid question. It says: "Well done on the consistency of the Truworths message. Could you please elaborate on your own," I assume it's mine, "day-to-day functions in the business, indicating where you," and I think I'm being addressed personally, "have no direct impact and where you have a great impact, focusing on the buying and selling of merchandise. Thank you." I think the question, if I'm going to understand it properly, is saying, to what extent do I personally influence the merchandise on the buying? And I would say that... I mean, it's an interesting thing how we work. Sarah is... That's her baby. She's responsible for it. She manages all of it.
My role is supportive of Sarah in the sense that I'm involved in the strategic decisions. Operationally, we interact a lot. Sarah is quite capable of continuing to do what she does without my involvement. Hopefully, I make a contribution by my activity with her. But in the end, Sarah and her team run the buying and make the decisions. I do attend a lot of merchandise sessions, and I have a say, and I contribute, but that's because that's my role, I contribute, but I'm not the decision-maker, Sarah and her team are. And, and it's an interesting thing because under Sarah, there are a couple of directors who've been with us for 15, 20 years. In fact, we had a dinner last night with the non-execs, and I think there were 25 execs there of ours, all in their 40s, some low 50s.
We exclude me and one or two others, of course. It's interesting because I think the longest-serving employee had been 12 years. We did a kind of a thing. Most are 18 and 19. They all have experience in merchandise and merchandise planning, and Sarah runs that team. They can operate independently. If Sarah's off, they'll also carry on. If I'm not around, they carry on. But yes, I for sure contribute. Of course, if I wasn't here, they'd carry on without me. It's the best I can answer. Thank you for the question. What happened with the taxi strike? Sarah, you tell us. Taxi strike, what about... How do we deal with it? Because give us some color on what impact there was in Cape Town and how you approach the compensation of employees in events like this.
Okay. So, yeah, the taxi strike, I think fortunately, in some ways, obviously, it was Cape Town, you know, limited to the Cape Town area and ended up not being a particularly long period of time. But obviously, it did, it did cause disruption, during that period, with the factories and the DC, and obviously people getting to and from work. From a logistics perspective, I think we were able to recover very quickly. So our suppliers and our DC were quickly able to work overtime, and we were back to normal within a matter of days, so there was no significant impact. And I think in the same way, while there were challenges for the staff getting to work, you know, because the period was short and we did whatever we could to make it, easier for...
Where we could make it easy for them to get to work, we did so. But the reality is, in some instances, there was an inability for people to get to work over that period, and I think that's unfortunate, but there's not really much we can do to control that part of it.
I'm gonna try and wrap up because we're way past 2:00 P.M. So I've got two more questions I'm gonna try and answer. I don't think I've missed any, but please, as I said before, if you feel I have, then just send us a note on investor relations. But this... The one is: Share repurchase reduced. Is this a function of the high CapEx of the DC only, or was the view that the share is so, is now becoming less attractive for buybacks? So just to answer you with that, we always have a very conservative approach to cash flow. We...
I don't like debts, and our board is understanding of the fact that in a retail business, to get into debt, it might be good for balance sheet ratios, but it, but it's got risks that you don't want to have in a retail business. We, we don't want to have. So, so the fact is, we, we're in debt, and we're going to still be a bit because of the DC and the credit. The collections haven't come in the way we wanted, so I think we're ZAR 800 million in debt, but, I mean, that will get wiped out in the next year or two. But, so we don't buy back shares because we haven't got excess cash.
But I can assure you, if we got excess cash, we'll still buy back shares, even if the share price is ZAR 100, because our role is not to sit and nurture cash. It's to do something with it or give it back to shareholders. Yes, when the share price is ZAR 30 because everyone's negative about it, and we think it's an opportunity, and we've got spare cash, then we were more aggressive. But, we don't stop because the share price is high. We don't play the market. And then the last question that I'm gonna put to you is, Manny and Sarah both have the ability to answer this. What do we think about Office? There's a lot of questions about Office trade. The first 8 weeks are so good at 19%. Why?
You know, it doesn't make sense in the marketplace. What's so unique about Office? Well, I've sort of answered that before, but they seem to want flavor of why Office is doing so well in a market that it shouldn't be doing so well. So I think both Manny and Sarah, you might want to comment because you're both, you know, we're so involved in Office. The Office team and our team work so well together. We have a great relationship, so Manny and Sarah, and Reon for that matter, and many of our execs work very closely with the Office equivalent execs. They help us, we help them, and we don't call it them and us anyway. So Manny, you might have a view, and Sarah.
Should I go, Sarah?
Yeah.
So, I mean, I think what we've seen over time and time again is that the sneaker market is actually very resilient to macro headwinds, if I can call it that. People tend to want to complement their look with a sneaker, and for some reason, it stays resilient, and we tend to get the right product in our stores. We're well supported by the major brands, and that makes a massive difference to our business there. Sarah, I don't know if you want to add anything.
Yeah, and I think, I think from my side, just to, to say, you know, in the, in the, latter half or, or the latter second half of last year, we came up against, a strong base, in Office. But... And so we, we were imagining there might be slightly tougher time this year, the 2023 year. But the, the nature of the product, as Manny has said, has shown resilience, so that the strong sales that we saw in the second half of the year continued into the weeks of the, the new financial year. And I really think it's as the, the, store base has been reduced, but in the reduction, the quality of the, the base has become much better.
And so the strength of the relationship with the brands is getting better and better, and that's assisting us in putting together a really nice range of sneakers.
Thank you. So, and I said that was the end of it, but then I see here we have three new questions or four new questions have all come back with the same theme. So I'm gonna answer that, then I'm gonna end. It's all about stock and our stock levels and, and, whether we're happy with the stock levels in Office and Truworths are assumed together, and, what portion of stock sourced locally and the government, the, the comment is: To what extent is this threat considered lack of support by government regarding duties on imports from Madagascar and Lesotho, for example? So what I'm gonna say to you is about 40%-50%, 40%-50% of our stock is sourced locally. We are very invested in the local market.
Of course, it's a good thing to be invested in the local market because the country needs employment. But we put a lot of effort into that. As I said before, we've got basically a factory now in the heart of us, but we also own a factory. But besides that, it's all about quick response and the ability to be fast fashion and turn on stock quickly and speedily, which you can do with local. So this is not about government duties and subsidies and the government gonna support us. They were trying. I mean, it's a difficult situation. They haven't got loads of money, and how do they do it? So they do collaborate with us. They do have a master plan.
We do talk to them frequently, us through the NCRF, National Clothing Retail Federation, and we try our best, and I think they do. But our reason, primarily for having a local manufacturing base, is 'cause it suits us for quick response and fast fashion, and we spend more and more time on it, and I'm sure that won't change. Yes, our stock level is a little high, if I'm honest with you. Our Truworths is fine. I still think we can do better in Office. We've improved it a lot over the years, and it's quite hard to manage when they're doing so well. They want to buy more stock, and how do you manage it?
It's not easy with the brands because you can't just turn on stock if it's not your own stock in the same way as you do with MTO and our own brands. But I do think we can, and we will, over the next two years, probably improve the stock turn in Office even a little bit more. But generally, I'm pretty happy with it, I would say. So, that's, I'm afraid, the best I can do under... We haven't got a lot of time, and we've already gone way over the time. So I'm gonna thank everyone and my colleagues for participating and finally invite you once again to send us any notes you want, and we'll respond quickly and, if necessary, see you if you have any queries. So thank you very much for taking the time to join us.