Good afternoon, everybody. Thank you for joining us at our half-year results announcement. With me today are my colleagues, Sarah Proudfoot and Emanuel Cristaudo . They are Deputy Joint CEOs. Reon Smit is here. Reon is our Financial Director. The way we're gonna do this is we're gonna try and go through the presentation. If I can do it, I'm gonna try and do it in 35 minutes. We're gonna skip through quite a number of things that we don't think are relevant for presenting it formally to you because you can read it afterwards. It will be published on our website within a few hours of the presentation, you'll be able to go into much more detail, and you can look at it then.
Please also bear in mind, most of you, if not all of you know, we have investor relations email address. You can send those questions to us with pleasure, and then we try as much as we can and as speedy as we can as a panel. There's about five or six of us on the panel. We try and answer the questions within a couple of hours if we possibly can. If you wanna ask any questions during this presentation, please use the tab provided. We won't be referring to the investor relations email address during this presentation. Thank you very much. When it comes to questions, I'm gonna refer a lot of them to my colleagues, but I'm gonna go through the presentation myself as much as I'm able and as speedily as I can.
We've started in an unusual way with the most topical conversation, obviously, which is trade receivables, credit, and that's in Truworths. Most of you who've sat in on our presentations before are familiar with this particular slide, which really tries to summarize our trade receivable and book in as neat as possible format. We've got a couple of slides all about trade receivable, and I'm starting with those because they clearly are the most topical and concerning to shareholders. We've divided... If you look at those arrows in the middle, the first arrows, which is three or four of the lines, relates to the size of the book. The second, the five rows relate to our policies and if or whether they've changed, and I'll explain those to you.
The final six or so relate to the performance. If I take you through it very quickly, the book grew significantly by 19%, and that was because of a particularly good Christmas and Black Friday in November, December. The period really did well, and those sales that we achieved during that couple of month period, obviously, that flows through to the book at the end of December. The end of December book of 19% growth, whereas the year before was only 1% growth is caused by that. The number of active accounts also grew by 6%. That's real growth. Our policy didn't change, but our actual sales as a percentage of total sales, account sales grew because credit did slightly better than cash. The qualifying payments are same.
The number of opened accounts and risk-approved accounts improved. That's not because we opened the taps or did anything by lessening the own-risk nature of our credit risk profile. It's simply because we found techniques and tools at a very low granular level, which enabled us to improve the statistic by opening and allowing people to open accounts at the same level of risk. We did not modify our risk or do anything risky in that form. The performance of the book relates to the bottom square. The active account holders were able to purchase only. Remember, when we say able to purchase, it means they are not in arrears. It's only dropped from 85% to 84%. Overdue, therefore, has grown a little bit, 10% to 11%. Slightly worse.
Net bad debt did grow from 7.7% to 8.1%, net bad debt as a percentage of the receivables as opposed to sales grew by 13.1% to 13.4%. Provision stayed the same at 20.7%. That's the Markov model that we use. It's become pretty much an industry standard to predict the risk in the book and the probability risk going forward. That didn't change in the risk of the book. The trade receivable interest went up for obvious reasons. We've got more people in the book, and interest rates went up. When you summarize the way we see this, of course, your interpretation may be different, but the way we see it is that primarily the health of the book deteriorated slightly. A mild deterioration, completely what we would have expected.
The provision going forward has not changed. It's still at the 20.7%. Therefore, the major cause for the increase in the bad debt relates to the physical size of the book, not the risk of those debtors, because that hasn't changed much. The 20.7% is the same. Because the size of the book has gone up significantly, and then that same 20.7% applied to a higher number, it results in a higher ZAR provision. We'll unpack that a little bit in this graph. Trade receivables grew by the 19% you can see there. The big shocking number that I'm sure analysts got a fright about was the 76%. We are trying to unpack it. Essentially it's saying that the net bad debt and related costs grew by 16%.
Net bad debt before collection and related costs grew by 22%. There was a couple of adjustments. I won't go into them, but the big one, of course, is the change in the expected credit loss allowance, the provision, basically. Whereas last year, actually, we unwound the provision by the ZAR 31 million, and this year we had to add ZAR 232 million, very much because of the size of the book growing. As I said, because of that provision being 20.7%, the ZAR 261 million is primarily or almost exclusively because of the growth in the size of the book. I'll tell you a little bit more about that in a few minutes. We...
Reon and his team have tried to unpack this in a typical, hopefully accounting way that makes it simpler for you guys to understand and read and harder for me. Anyway, it essentially is saying the same thing. It's unpacking the trade receivable cost at the beginning and the trade receivable cost at the end. It's showing again that adjustment of ZAR 232 million upwards in the provision compared to the minus ZAR 31 million of the previous year. You add the two together, you get the ZAR 263 million, which is the extent of the increase in provision, primarily, or I could even say exclusively because of the size of the book growth and not risk. On the other hand, there is income increase because of the increased interest rates. That's how we see it.
Just to spend a little bit more time on this very topical credit issue. We've offered credit since 1950 and I mean, I'm gonna spell it out again. I'm sorry if I'm sounding like I repeat myself, but it is the essence of what we do. In these kind of presentations, it's the right place to talk about it. We offer credit because it gives us ability to access the youthful, fashionable consumers across the South African marketplace with more expensive, more premium product, but at credit. We therefore feel we have to run and own the credit ourselves so we can manage and control the risk.
We use champion challenger strategies on our 51 scorecards continuously, and customers are scored in a number of different manners and with bureau scorecards and a number of different bureaus on a monthly basis, always ongoing. We have also internal score, behavioral scorecards. The credit strategies are then adjusted based on the performance of each and every individual account, what they buy, what their risk profile is, how much they buy, and so on. I believe there's a couple of 100 characteristics that drive that. Therefore, in a sense, the book self-regulates because as customers become more risky or less, the risk score adjusts in terms of all these myriad of scorecards, and then we apply our principles to them. Well, the last paragraph is to us, the most important.
Post festive season in December, the half year book is normally higher than the June year end. That's for obvious reasons. We had a very good November, December period. The book was higher at the end of December. If, and I admit it's a big if, I don't know, I can't tell you, if the risk remains similar at around 20.7% by June and the book size reduces by June 2023, which it always has done for the 20, 30 years I've been involved in it. The ZAR provision, the ZAR provision added into the debt's cost will reduce accordingly by June. I'm not giving you a forecast, I'm giving you an experience from history. Once again, please excuse me for those who feel they've heard this before.
I feel it's important and my colleagues agree to just reinforce it each time. We believe our Truworths business is that we believe that we try and offer on-trend fashion. On-trend meaning the right fashion at the right time. Interpreted for South Africa in the South African context, obviously, Office Shoes in the U.K. by a very sophisticated in-house fashion studio of a couple of 100 people. We offer higher quality fabrics and better construction, sometimes we are more expensive than our competitors. We cover all lifestyles of ladies, men's, and kids. We try and cater for all South African customers. Not the wealthy, not a niche, not poor. We try and cater for all South African customers who choose and want to shop for us.
Our solution to that is that we need to sell on credit, and we want to control the credit because it's so integrally part of our business that we feel if we do not control that credit, if we outsource it, then we are losing control of the risk. We need to work with the risk that we do take in our credit book with the opportunity of selling more goods at the margin of our retail price product. That's how we operate the business, and that's why we continue to self in-house control that risk. We do that through, our model is an interesting one. With Sarah and Emanuel and I were showing some foreign people, our stores recently, and they were commenting.
Experts by the way, very experienced in international retailing but never having visited South Africa before. They found our concept very unusual, they were complimentary about it. I do think that our concept is quite unusual because we've got really a big store in the Truworths side anyway, which is our main driver, a large Truworths store. We call it an emporium. It sometimes is as big as 4,000 square meters. It has a lot of brands in them, there's ladieswear brands, there's menswear brands, there's kids brands. Each and every brand has a lifestyle and a character and a DNA to it. We spend hours and days and weeks defining what each and every brand stands for.
The buying teams who are differentiated and separated understand very, very well what each brand is meant to do to offer this amalgam of brands in our emporium to our many customers who come and shop at us. That uniqueness is what we think is the difference between us and our competitors. Let me just make the point. We own all these brands. Every single brand in our business, with a couple of minor exceptions, we actually own ourselves. We started them ourselves. We incubated them ourselves. We stayed with them through good and bad times, and the outcome has always been very positive for us. All in all, we run our business that way. In summary, what I'm trying to tell you is that we are much more than a fashion business. We don't sell fashion in the way we see it. We...
Through our fashion offering and our image and our brands and our e-commerce and our social media and our behavior of our staff and the look of our staff and the way we behave and the way we communicate, we actually offer our customers aspiration. That's what we feel we are trying to offer them through our merchandise and through all the many things we do. We're sort of obsessed with it. We always talk about, are you offering her or him or the child aspiration to all South Africans with our own unique DNA, all those brands, all the stores, everything else about us, and we enable them to fulfill their feelings and need for aspiration if they can afford it through the use of credit.
If they can't afford it, because we have, we have legal and well as moral, as well as financial reasons for making sure they can afford it. Otherwise, we offer them lay-bys. The United States were saying it, we call it lay-bys, where they buy the product, but it stays in our store until they come and collect it after three or four months. They have to pay it off. If you even find other ways to do it, we sometimes say, "Yes, you can take it away, but you have to pay a big deposit, 50%." That again, depends on their risk. We try very hard to deal with the aspiration of many, most, if not all South Africans who wanna shop at us with this method of offering them alternatives. We feel...
The group had through Truworths and Office strong metrics. Sales were good. The gross margin was pretty consistent. HEPS was good, a lot of that driven by the very successful share buyback program since 2020 where we bought back a lot of shares. We focused on these matters that we've listed over here and I will go through them as we go through our talk for the rest of today. Office primarily has made massive great inroads on the real estate portfolio. Yes, I know we have made it clear that the base of Office is fighting against lockdown and semi-lockdown in the U.K. It has got an advantage which goes away from April.
Some of the other advantages of the subsidies from government have already fallen away. In the business, unrelated to what I've just said, there's a lot of very great work going on there, and it's across the board. We do believe it will perpetuate and continue. In Truworths, we're making some really big inroads as well, and we will explain them to you. This is our business philosophy. We always put it in. I'm not gonna even talk about it. Just to remind you that to us, this is our Bible. This is what we focus on. The key performance drivers in Truworths were a positive front foot approach. We went into a much more positive frame of mind post-COVID, and we tried to focus on product categories. Remember, there are hundreds of product categories.
We can talk about men's socks, that's a product category. We try to focus on product categories where we believe and know factually we are underrepresented. There's a massive project Sarah and her merchandise team are perpetually focused on how to sort of improve our representation of those categories where we believe we are underrepresented. In the credit side, we've improved our predictive capabilities, and you're seeing some of the results coming through with our metrics being a little bit better because that's at the finest, most intricate level, being able to slice and dice the customer behavior in such a way that you can give and take away credit from less or more risky customers. There's a lot going on there.
We have also, as I've sort of alluded to, we have and do still pilot alternative credit products all the time because it's not just credit. We're trying to say, how do we provide you with a tool to shop at us that makes financial sense to us, but also works for you? We are very strong, quick to market, fast fashion, quick response. For that, you need to be local. 50% of our product or roughly 50% is South African-based of our manufacturing, we're talking about Truworths now. Recently, in the last couple of years, we've always had a design center of our own, but we bought our 2 largest design center suppliers in the last couple of years. The last one maybe last less than a year ago, which is Bonwit.
The other one is Barrie Cline. What's quite exciting. Remember, for those of you who don't know, design centre is a creative team of designers who design at detail level. They sort of design patterns, and they design detail of garments. They're separate from the buying teams who they work in collaboration with. What they also do once they've designed it, they work closely with the manufacturing side, then they buy the trims and the fabrics, and they hand it out to local production factories also in Cape Town. What's interesting is these design centres, our own old one or established one, the Truworths one, plus Bonwit, plus Barrie Cline, are now all located in our head office building in the center of Cape Town.
You can just imagine there's a whole lot of seamstresses, almost like a factory environment in our building where the buyers one hand, the designers on the other hand, and the sample set are making the garments and designing them together. We've always wanted to achieve it, and now we've got there, so it's very exciting. That was a major strategic initiative. Our new brands and concepts are actually doing quite well. We're pleasantly surprised that they're doing better than what we consider to be optimistic expectations. Office London, which is Office but in South Africa, we call it Office London, is doing nicely. It's got about 20 stores now. They're doing really well. There's a particularly large one at the V&A Waterfront in Cape Town for those of you who wanna go and look at it.
In a brilliant position, does extremely well. It also sells branded clothing. It's a whole new concept for us, and it's surprisingly doing us better than we expected, and we were already positive. We've got a new ID mega store, which is Identity. Long-established business, nice business, now it's sort of a mini Truworths. It's becoming a bit of a department store, fashion department store with separate entrances, men's, lady, kids, lingerie. We have found in the, like, 10 or so we've done so far, I don't know exactly. It's also a strategic initiative. We found that the sales per square meter of those mega stores are equal to the sales of... per square meter of all the other non-mega store, they're much bigger. It's a real positive thing.
We've got Context, which is really a lot of glamour product, our LTD brand, our Earthaddict brand, it's got a glamour, sophisticated, high-end feeling. We've got some standalones, but they also are going into the Truworths store to add a dimension of elegance and sophistication. Those are doing really nicely. There's these new businesses, ID Kids, Identity Kids, has become a nice, really big business over the last four or five years. Fuel, which is a new menswear business, we told you about it over the last year, doing really nicely. Sync, which is that value business which we adopted, our own brand which we adopted because we came to terms with the previous owner of the other brand. We now have Sync, and Sync has had a really nice summer. We're getting particularly excited about Sync.
Small business. They are small, but they've got lots of legs to carry them into the future. Office continues to focus on the whole thing about Office is the brand relationships, and they're becoming amazing. That brand relationship's always been good with the Office business, female, fashion kind of customer. Then the Offspring business, which is the sort of sneaker-obsessed community. They are really in a great space, those two brands, with the brands, you know, their suppliers. The team are always looking for the latest in-demand brand, whether it's VEJA or whether it's Dr. Martens or whether it's UGG or whether it's a new Nike or a new Adidas. They spend their lives doing that. They've made such good progress on the real estate portfolio.
They closed some of the German stores that were not doing so well. Not all of them, but they've closed or renegotiated poor leases in a lot of cases. There are still some problematic poor leases, but I must say they're doing great how they've dealt with the problems and challenges we had with real estate and making great headway. The business is doing better. Some of the stores that were sort of making losses are now not making losses anymore. They're actually looking a bit better, even though the rent may still be too high. We've started a great program to start remodeling the stores, the ones that need it in the big store. There's one that's going on as we talk in Carnaby Street.
It's our biggest Office, not Offspring, our biggest Office store in terms of sales, that's 50% finished, 50%-60%. Then we just opened on Wednesday, Kings Road, which isn't one of our stores, but we opened it on Wednesday. I'll show you some pictures. New stores are opening months ahead in Battersea. That's an Office store. That's gonna be very exciting. There's a massive head office of one of the big well-known international brands, businesses there. 2,000 people right in that same vicinity, they're all potential customers. Then in Kings Cross, which is also in London, there's a brilliant store we're opening, Offspring. It's gonna be the first big Offspring store outside Selfridges, which is our biggest Offspring store.
Now in Kings Cross, with the support of the major brands, we're opening a wonderful new store, all of these in the next couple of months. We'll continue getting rid of poor stores or changing the leases. We've consolidated the Office warehousing into one facility. The omni-channel, which is, as you know, in the 40% or so of the total business, it's a massive thing in Offspring. They're getting an Office that's getting better and better. They keep on refining it, and we and they, Truworths and the Office people work very collaboratively, so we mutually support one another. There's ongoing global uncertainty. You know it as well as us, in South Africa and the U.K. You can see we've tried to summarize them on this chart. There are some positives in both countries.
I mean, perhaps the big crosses are quite worrying. When we go into the group financial review, again, I'm not gonna spend any time on this because you all know. I'm going to focus, however, on the inventory, where gross finished goods inventory was up 22%, actually. Because it's That excludes fabric. Remember, we just bought that Bonwit business and Barrie Cline. Now we are having to invest in fabric, which we didn't use to invest in. That's why you're seeing the number of inventory, the rand percentage, the rand number and the percentage higher in the financial accounts. If you exclude the fabric, which we monitor very carefully, we won't invest in fabric that we aren't gonna use in the next 12 months or so. The stock is up by 22% end of December.
There was an unusually low base last year. The 22% is completely in line with our requirements, because last year was big supply chain disruption October, November. I'm not gonna tell you anything else about that. The financial performance, I know you guys know it very well, I won't spend time there. The diluted EPS and dividends per share all at the highest they've ever been. Return on equity is pretty much the highest I think it's ever been at 56%. Asset turnover slipped. No, actually, I see it went up a little bit, that's okay. The return on assets dropped from 36% to 35%. That's all very good metrics by international standard.
The actual profit of the group, the ZAR 2.6 billion and ZAR 4.94 per share, EPS cent per share is the highest our group has ever done in its history. We are grateful to Office for the role they played in that. This is our balance sheet, the big ones. Inventory, I've spoken about that 30%. If you leave out the new fabric, which is non-comparable because we didn't have it before, is now 30% up. The book grew by 17%. As I said to you, the true bad debt, the way we sort of analyze it, if you exclude the growth of the book, grew by about 22%, 16, depends which number you use. We, you know, because of the year, the way the half year felt, we paid creditors and we paid tax.
I learned about the tax. We paid creditors in the end of December instead of January. We have bought back 12% of the shares of the company since January 20. Again, most of you know that. There's a bit of information about the funding of our balance sheet. We've declared ZAR 0.032 dividend. We try and stick as close as we can to the 1.5 cover and what we miss out in December, because you don't quite get the exact 1.5 right, we sort of fix by June. That's the dividend policy. Cash flow. Business is highly cash generative, almost ZAR 500 million for the half year. That's despite quite a large increase in working capital that we've just discussed.
We have paid out dividends, a small amount of dividends. The rest gets paid in January. Or sorry, March. Truworths. Here are some Truworths numbers. You know them. The trading profit did fall. This shows it a little bit better here, where you do see that 76%. I mean, the main number is that trade receivable cost of 76% that I have tried to unpack. The reality is, though, that it is a number. I mean, it is true to say that a couple of ZAR 240 million-ZAR 250 million was because of the growth of the book and not because of risk. It still is a cost to the income statement, and therefore, that did affect us badly.
Hopefully, at least some of it, if not a lot of it, will unwind by June. We were pleased with the sales growth. Retail sales growth in ladieswear was particularly good. True, the formal wear smarter areas did well, but some of the casual areas were also good. Men's not quite as well. Kids, not bad at all. Those other areas which are... it's interesting to note how they're now over ZAR 1 billion, and the kids and the other areas are each ZAR 1 billion, which is now the size of menswear. We sort of managed to expand our category offering quite nicely. Identity did pretty well at 12% growth. Trading space, not much happening in extra space, and that's intentional. A lot of things happening within the space.
We are perpetually remodeling, taking brands out, putting brands in. There's a lot of work that happens there, but we are trying and finding it easy, relatively speaking, to do it in existing space. The density, therefore, has gone up to the, I think, the highest ever at 40,000 per sq m . Inflation, yeah, well-No surprises there. We've tried so hard since 2017 to have no inflation. Unfortunately now with the plummeting rand, our inflation is over 13%. Hopefully starting to show a few signs of declining. Gross margin, good. All in track, on track. Stock levels, by the way, all on track end of February. The summer stock carryover will be fine, as it normally is. I don't feel I have to go much through the trading expenses.
I don't want to keep on repeating about the trade receivable. That's the real large one that caused some consternation. The rest is... We describe in more detail on these spreadsheets that follow, on these slides that follow. We sort of unpack it a bit. I mean, for example, occupancy costs. If you exclude non-comparable occupancy costs, it increased by 7%. If you exclude non-comparable stores, rent paid actually increased by 4%. You'll read it in your own time on the website. There's that story again about the trade receivable cost. The blue highlight is the one I want to emphasize that we did increase ZAR 232 million.
The allowance was influenced significantly by the growth in the book, and we expect some of that to unwind by June. I'm not gonna go through that again. We repeated these slides, duplicates, but that's simply because for your convenience when you go through the pack, so you don't have to go back and forth. When you look at Truworths, you can see it here as well at the, at the... I brought it to the front of the presentation because I know it's such a topical and concerning issue to analysts and shareholders, so I wanted to bring it at the front, but we left it in its traditional space. When it comes to profit before finance cost, EBITDA margin, operating margin, they're all very good standard. In all cases, this is influenced a lot by that debtors write-off cost.
Capital expenditure, nothing unusual, but you're noticing the distribution facility, the ZAR 139 million and another ZAR 647 million committed. That's all about. In the end, we will end up spending about ZAR 1 billion on the new distribution center, which will be ready and to trade in about just over two and a bit years. The main reason we've done that is because capacity requirements, in the sense that strategically we wanna increase the proportion of stock that we hold back and only send partially to stores and then replenish quickly to those stores as they sell the product. We don't have enough capacity for that. This new facility will really make a difference. We know from testing it over years, there's between a two and a three and sometimes even a 4% improvement in sales as a result.
This shows you the Truworths cash flow, which as I said before, is very positive. You can unpack it yourselves. Office, a wonderful period. Growth in profit of 39%. Profit before tax, 45%. Growth in sales, 13%, all in GBP. Had a great year. Admittedly, it benefited from the lower base because of the sometimes closed stores during COVID. I have to tell you, when those stores were closed during COVID, we did really well on e-commerce in Office. We mustn't forget that. It's 40-something%. It got to 60% sometimes. And sometimes even 70% and 80% when all the stores were closed. But there were government benefits, there were closed stores, and they were not in this last period. It does change in April. Again, we're feeling quite positive.
Admittedly, we won't have this phenomenal sales growth, we still are feeling that that business is really humming now and looking really good. Here you can see that there is a declining number of stores, about two in Germany and a couple more, I think, in the next few months. I'm not gonna go through the expenses because you can read it in your own time, you can see we try and explain it in the graph and the slides that follow the table. We are starting to see in capital expenditure on store renovation, in Office, it's going down really well. The new stores are looking fantastic. In system, computer infrastructure. We're putting quite a lot of effort there. Office was incredibly cash generative.
I mean, there you can see it generated GBP 12 million in the six-month period. It paid us back GBP 7 million of pounds. It's become a great cash generator business. Account management. Well, I've already dealt with that right up front, I'm not gonna spend much time here. But safe to say that the TransUnion index, which as most of you know, when it's below 50, means there's a kind of decline in the health in the industry in credits because of the economy, above 50 is positive. 58 is in quarter four 2021. That's all about COVID. I wouldn't worry about that. You know, sometimes it goes over 50, 52, 53, we love that because it means the economy is healthier and credit is healthier.
The last two quarters, it has gone below 50. 49 and in Q4, 48, which means there is a slight decline in the overall health of the credit community in South Africa. Our own good to bad credit book is kind of looking okay. Nothing much the trend if you look at that over year. We don't show you all the numbers because for competitive reasons, that graphical illustration shows you that over since 2018, we look at it 2022, you know, the ratios haven't changed enormously in the book. They do go up and down in the cycle way. Then 4+ cycle means these guys are close to going bad. Again, the trend in the cycle is pretty much similar to history. That's all about the quality of the book.
I have told you that we have a slight increase in the risk-approved accounts. Again, that was not a risk-approved because we opened up the taps or changed our risk profile. Simply it was because of technology and strategy. This is also a duplicated slide. I'm gonna skip it. Getting back to the strategic initiatives. We're all about aspirational fashion. I've told you about the world-class design capability in our head office. We have improved market share. Our goal was to, and we've improved market share in some of these categories we've been focusing on from a front foot point of view because we've been more positive. There is more and more refinement in the new brands. Office regional sales has been growing fantastically. In Office we focus on the brand relationships. Supply chain.
I think I've told you everything you need to know about that. On that slide, there's a picture of what the distribution center near the Cape Town International Airport will look like when it's finished. Customers. There's a number of omni-channel initiatives there. A lot of them. We're just showing you a few here that we are focusing on for your interest. There's a whole strategic drive going on with quite a big team in Office and in South Africa, where we work together to try and improve our omni-channel analytics capability and productivity when it comes to how much we spend for the benefit we get. Retail presence. Truworths Kids Emporium is a new concept that we've grown with our kids brands.
Often standalone, otherwise attached to the major Truworths Emporium, the Identity Megastore I've told you about. The Context business I've told you about. There is Sync and Fuel. In Office they are doing a good job in renegotiating the poor leases. There's a picture of what I mentioned, the Context, that one that's got this sort of glamour, smarter, more elegant product in it. You can imagine this in firstly as a standalone. Sometimes in the midst of our Emporium ladies store. It adds a sophisticated dimension to the store. It's very appealing. This is the Identity Megastore in Greenacres. It's just a feeling for it. It's becoming more and more departmental as Truworths did years ago. It's a bigger physical store.
This is a feeling of the major three brands, LTD Kids, Earthchild, and Naartjie kids brands that we bought Mac and Milla in our Kids Emporium store. This is the new sort of significantly sized up Office London in South Africa store at the V&A Waterfront. It's double the size. It's got branded clothing, branded shoes. A really successful store for those of you who can look at it. This now is based on the one I've just shown you, which is the Office London in South Africa store. The Truworths design team, with the Office team in collaboration, we used the South African store as a test store, and then we are rolling it out in the U.K. This is the Battersea Power Station store that I mentioned earlier. This is an artist...
This is what it will look like in the future, which is in two, three months. This is Carnaby Street. Carnaby Street is already half complete because the downstairs, which you see there in the middle there, this is the ground floor, but you walk down this glass steps to the basement. That is already complete. We're now busy with the upstairs. It'll be finished in two, three weeks time, and it's really great. We've managed to increase the size of the store downstairs through incorporation of stock rooms into trading space. It's a lovely store, and it's going to be fantastic. Kings Road, similarly, it was a very old store, and this store opened on Wednesday. As it is, we've also, out of interest, managed to make the store a bit bigger.
Whatever, 20% extra space by incorporating stockroom into the trading space. Because Office holds less stock, they don't need as big stock rooms. This is the new Stratford store, which is gonna be opening. That's an artist's depiction of that. Load shedding, big topic. You all know, 82% of the Truworths sales now are covered by backup power, whether it's a generator or inverter. The other 18% can trade because they're small or they're manual or, you know, it's a lot of light or whatever. A 100% of Truworths can trade. Their 82's gonna be 83 by the end of this month. We adjust. You know, sometimes we put in more lithium batteries to make it longer, we do whatever we need to do.
Energy as a subject is now a strategic subject that is now being dealt with as part of our risk assessment by our main board. Energy generally broader than operational energy is being a critical strategic issue in our business. Environment and Social Governance is a big thing in our lives. It all centers on our business philosophy and how we look after the environment. How do we incorporate environment care in social initiatives into our business philosophy. It's not just an adjunct or it's not a separate silo, it's actually part of how we think and buy. We do a lot of things there. The result of them is that we have maintained a B rating in the climate change review.
From the social side, we've done, I think, a lot of good work. From a governance side, we've made some really good progress. When it came to governance, we were ranked on the FTSE4Good Index. We ranked 5 out of 5. From a governance point of view, and I think in our category, we're one of the highest that you can be in our category compared to other clothing retailers. Sarah and Emanuel were appointed Joint Deputy CEOs during the year as part of our succession process for them to take over from me when I retire. Some of the non-execs who are long-serving have retired. The others who haven't are in the process of next year or two handing over to other younger and new ones.
As usual, we were successful again in being in the top 10 of the EY Excellence in Integrated Reporting Awards for the 15th consecutive year. In fact, since 2003 we've been classified as excellent in their category. We are the only company in South Africa. I don't mean the only retail, we're the only listed company in South Africa that can make that claim. We have now appointed the Deloitte auditors from financial year 2024. When it comes to the outlook, challenging economic environment. Sales did increase by 13.9, but primarily that's 'cause Office had a great period. Load shedding scenario in South Africa. We're very busy with all the things I've told you about. Sales only increased by 5.7% in the first seven weeks.
We'll see what happens over the next couple of months. As I say, we are positive and we are enthusiastic. In Office, it had a fantastic seven weeks, and we do accept that from April things will slow down because the base is completely comparable. We certainly are still very positive and excited about Office. I hope I've put that across. They are working on space decrease, but that's because they're bad stores. That's not for any other reason. In fact, they are opening a few new stores where we strategically need to be. With that, I close the presentation and I will refer to questions. I just have to refresh, so let me see how to do that.
I won't mention your names for your own privacy reasons, the first question is, please comment on the debtors book collection, which looks to have deteriorated versus H1 2022. Is there a migration by some customers to the 12-month facility or is it rather a reflection of slower payment by consumers? Emanuel, would you please answer that? You or Reon, whoever you decide.
Okay. Thank you, Michael. We have seen a slight slowdown in the collections. It is to do with the macroeconomic environment. It's not out of the ordinary. We expected it. It's an environmental issue. We haven't seen an increase in the longer interest-bearing plans, we haven't seen a move from 6 months to 12 months. That hasn't changed. Collections is a little tougher than it was this time last year, but we're okay with it at the moment.
Thanks, Emanuel. The next question is, the H1 2023 period end stock level reflects lower stock turns across both Truworths Africa and Office. What are the key reasons behind this, and what do we think about the future? You know, what's gonna happen to stock turn, inventory situation to look like versus your medium-term targets? The answer to that, I'll give the first part of the answer then perhaps, Reon or Emanuel wants to participate with me or even Sarah. I mean, I know you all have a view on it, but, I think you must bear in mind that stock turns, there was the previous year where we were sort of short of stock in October, November, December because of the supply chain disruption problems.
When we actually ended unusually, for which we don't normally do at the end of December or in that year, we actually had a problem because we had too little stock. That's why the stock turn looks like it's deteriorated. Generally, you can pretty much assume, and I hope I'm right because I hate giving predictions 'cause they're bound to go wrong. My belief is that over the next 6 months and thereafter, our traditional performance on stock turn should not do anything but be what it normally has been. I don't think there'll be a problem. I don't know if Emanuel or Reon or Sarah wants to comment. Reon's saying no, Michael.
I think it's just gone back to normality. I think last year, as you mentioned, it was higher than normal, and it was to do with the lower stock levels.
Thank you. The next question is, what is the outlook for bad debt growth and provisions for bad debt for the remainder of the year? Let me just say this. It's, I can't try and speculate because who knows? In this economic world that we're living in, these things are very difficult to estimate and predict. The one positive thing is the risk score of 20.7 in the provision that remained static December versus last December. That is a positive sign. I do think, however, given the TransUnion report and all the stuff we know, there is a worsening of the health of the consumer generally. We've traditionally been able to manage that.
I have told you that the book is likely to decline by June simply because we won't have that December and November peak in it. The book always declines by ZAR 200 million. I don't know, by ZAR 600 million it will decline, which will unwind the provision if the risk stays the same by June. We by the way that 20.7, we present it to you every 6 months. We do it every month, and we're perpetually looking at that provision as a measure of risk besides the bad debt write-off. I don't know. I'd rather say what I hope. I hope the 20.7 stays very similar by June, and I anticipate that the book hopefully will do what it always has done, which is to decline by June.
I'm hoping that the bad debt will be static and stable from now on. I can't be sure because I can't talk about the future. Gross margin performance in South Africa in light of an elevated year-end stock position. Is this a build-up ahead of a seasonal change or is there some concern for gross margin? No, there shouldn't. The stock level at the end of February will be completely in line. You know, we have that January, February and then again July, August, you have that markdown season and it's going according to plan and our terminal stock target at the end of February and as usual will be reached. I can pretty much guarantee that. No, it should not affect our gross margin. I mean, you can't tell again.
If there was suddenly a collapse in the economy in South Africa and or the U.K., especially in South Africa, then sure, we might end up with too much stock and we would have a problem. That has not been our experience in the past. We've found a way historically to manage our way through the many challenges that come our way. Underlying expense control and outlook for OpEx growth without debtors cost in South Africa. Emanuel, do you wanna talk to that? The real question is, okay, leave out the debtors cost, how are you feeling about costs controlling the company in the next six months and forward?
Okay. I can answer that. I mean, we have a saying in our business where we frugal in good times and frugal in bad times. Our cost containment track history is very good. We focus on it permanently and all the time. We go through rebudget processes regularly. We went through one recently. We normally go through one at half year normally, and we have done that. I think the expenses will be controlled. There are some non-comparatives. For example, we had the rates relief last year, which we haven't got now. There's some utility costs that are going up above normal that we didn't have last year. There's inflation, of course.
We focus on it all the time, and we are quite comfortable that we can contain the costs to a reasonable level.
Thanks, Emanuel. The next question is, the U.K. business is performing well, but are margins sustainable at current levels? They're sort of saying, is that going to collapse? Look, again, it's so hard to predict the future, but I will tell you that we really are feeling positive about that business. Remembering they're working at, there's a very strong cost control culture now, which the team has, and we work very closely with them in that respect. There's lease savings that happen all the time. We're careful with costs in Office and the entryware. Unless something goes wrong, I can't see why the margins are not sustainable. Truworths is the largest credit clothing retailer, even though it's the smallest among the listed retailers. Roughly, what is the Truworths share of clothing credit market?
We don't disclose that. I mean, actually, it's interesting 'cause we know that as do our competitors, we all subscribe to the RLC, the Retailers' Liaison Committee, where we see category percentage of market share. You know, the ladies, I'll tell you, I don't mind if it can. Some of the ladies can be up to 20% or so. Men, slightly lower. Kids, much lower. Yeah. It. Then all the categories are different. That's what Sarah spends her life looking at, saying, "Well, how can I recover or capture market share by improving my merchandise, but staying within the DNA?" What was the average credit book loan tenure and loan amount in this year compared to last year? Reon, do you wanna try and answer that?
Michael, I think it's been very static, and we provide the statistics in our in the credit slides, so one can calculate that out.
Thank you. They're asking, the next question is an interesting one. It's such an interesting question. It says: There's a lot of merger and acquisition activity in the apparel space lately. In terms of capital allocation, how do we feel about share buybacks versus expanding our own business organically or through acquisitions? What is the average price we bought back our shares? Let me start with the easiest one. I think we have just ZAR 48,000 in the last since 2020 or thereabouts. We bought back the shares. We, you know, in COVID when everyone panicked, we were feeling positive, so we used the cash. Share buyback, basically what we do with share buyback is we don't store cash. If we feel we've got excess cash looking forward into the next 12 months or 18 months, then we buy back shares.
We don't do special dividends. We've had many discussions with shareholders. It's always a debate. We pay one and a half cover, roughly dividend, and then we buy back shares if we feel we've got spare cash. We don't feel that much at the moment because we've got this ZAR 1 billion DC that we're spending money on over a two-, three -year period. There's not a lot of cash left or excess cash. Organic or acquisition, external acquisition. We are an organic brand, nurturing, incubating business that gives birth and then lives with them until they're old. We don't give up on our brands, we are organic fundamentally. We bought plenty businesses over the years. We bought Office, we bought Naartjie, we bought Earthchild and Earthaddict. We bought Puzzle. We bought Uzzi. We bought YDE.
When we think that we can get our hands around it, when we think we can manage it, when we think it's linked and aligned with our business philosophy, when we think we can cope, then whether it's international or local, we for sure look at it and we'll venture forth if we see there's something. There are things we look at all the time. Right now we're looking at, but that's almost normal. Yes, we would do acquisitions if they fit our criteria, but it's not our strategy to go seeking acquisitions to compensate for inadequate growth in our existing business. There we believe organic growth is fundamentally our jobs, and acquisitions are reasons to either accelerate that growth or add a dimension that we don't have. We bought Loads of Living.
We were not in the sort of the homeware business, we thought we wanted to be. The business was available, we bought it. We do that kind of opportunistic thing as well. The net bad debt as a percentage of receivable is currently 13.4, which is below the levels of the past. 2019 was 14% and 2018 was 14.8%. What do you think is gonna happen going forward? I don't wanna answer that because it's such a hard question to answer. I mean, our risk sort of methodology, we sit in a thing called State of the Book once every 6, 7 weeks. Emanuel chairs it, there's a whole thing that goes on there. We have about 20 of us there. Sarah is there. I'm there. Reon.
We sit with the risk team, and we spend our lives trying to manage and contain the risk whilst being able to deliver greater revenue. I mean, basically that's what we do. We spend our lives trying to do that. We should over time, over the long term, given that there will be short-term cycles, we should over time be able to improve our level of profitability for sure and contain our bad debt. Remembering, by the way, that we could increase our bad debt. That's a fact. We can see it from our score, our sort of models, and we could increase the bad debt to 14, 15, I don't even know, to 16, and our profit would go up, but we don't want it to go higher than these kind of numbers.
We try and contain it to 13, 14 because it doesn't feel right to start letting it go even higher than that. What is the cost of load shedding and, you know, when they're using backup power, in malls with backup power, do they trade worse or better than without backup power? You see, the way it is cut, 82% of our sales we are covered. The other 18%, the reason we don't have inverters in them is 'cause we don't need them. It's not because we just don't need them, so there's no reason to have them. Otherwise, we would. I can say to you 100% the stores trade as normal whether or not they've got it. There are some disruptions.
The real problem, though, is that load shedding is costing the economy. The governor of the Reserve Bank said that GDP worsened by 2% as a result. That is our real problem. There are, correct, some malls we may have an inverter, but the mall hasn't got a generator and it goes dark. Fortunately, there are less and less of those. The landlords don't want that to happen for obvious reasons. That part of it is getting dealt with. It's more the bigger picture of how's this affecting the economy. We are so integrated into the economy, so large in the sense of we accommodate so many customers that clearly that has a massive impact on us. Would True ever consider with products, Sarah, going down the quick response manufacturing route that has been so successful at our competitor?
I think that's a sort of a misunderstanding of how we work. I tried to cover that earlier on when I was talking about our in-house design centre and 50% of our products local in Cape Town, in Durban. Of course we are quick response. Sarah, do you want to talk about that a bit? Yes. Your expertise.
Yeah, absolutely. Thanks, Michael. I think there is a misunderstanding, potentially in this question because we do have a big focus on quick response. Funny enough, it's something that's been quite inherent in our model for many, many years, almost before quick response was something that retailers really spoke about a lot. I think you can see from our investment in growing our internal design centre that the generation, fast generation and response to new fashion trends and generation of new styles, which we can then feed into stores and respond to rapidly, is a very important part of what we do every day.
We do balance countries of origin because of our broad mix of product, and obviously, there are different opportunities for quick response, and some countries are just more difficult from a quick response perspective because of the sheer distance. Given that 50% of our production is locally based in South Africa, that gives you a good indication of the power of full, quick response and fast fashion that we do have within our business.
Thank you, Sarah. I'm trying to read through these questions because we are at 2:00, and I know some of you will want to end it. For those of you who do end it and leave now, please feel free. We have an investor relations email address. It's well known to, I think, all of you. If you can't find it's on our website. Please send us emails. We genuinely our IR panel, investor relations panel, does look at it seriously, properly. They get copied on it, and we try to collaborate to send a response as quickly as we can. We will meanwhile carry on answering the questions. If you feel they're inadequately asked, answered, or you want new questions to be asked, please don't hesitate to email us. You will get an answer.
This question is all about the Office gross margin. One of them says it exceeds South Africa. Do we have medium-term targets for that region? Reon, do you wanna talk to that?
Yes. Thank you, Michael. We haven't disclosed any separate targets for the Truworths and Office gross profits. We have, of course, as in the past, disclosed medium-term targets for the group. I'm not quite sure where it was understood that the Office gross margin was higher than the Truworths one. I mean, we have
Not any question. I think they might be talking about EBIT margin or it doesn't have to be gross.
Yes. We have disclosed our medium-term targets in our integrated report, which covers our HEPS and all our profit metrics, gross profit margin, and so on.
Thank you, Reon. The next question is: What is the outlook for price inflation for the year? I'll answer that quick. We saw it's looking at 13%, 13.5%, a bit lower. I don't think that's going to change much, Sarah. We bought our winter range already. It's all done and dusted.
Yeah, that's correct. Yeah. We obviously winter is largely wrapped up, not completely on the local front, but it won't. The fabric is bedded down, so there's not likely to be a significant shift there at all.
The next one says: What drove the other income growth of over 100% of Office? I don't know if Reon or Melanie wants to answer that or if you need to think about it. I can't answer that off the top of my head.
I can answer that, Michael. We mentioned that there was a reversal of impairments in the Office business. It was a net GBP 3.5 million impairment reversal. Because of accounting, the way we need to account for it, the impairment portion sits in other operating costs, and the reversal portion sits in other income.
Thank you. The next question is about credit again. It says: What's our appetite to grow the credit book? 'Cause it's now at a peak relative to history. You know, we've got the cash. We can afford to do it as long as it meets our credit criteria, the way I described it earlier on. We'll lend money to customers to shop with us. That is our business model. Of course, it has to meet our credit criteria. The appetite— We see it as a positive thing when we can grow the book, provided it's at the right health. I mean, that's obviously the issue, but there is unlimited appetite.
I'd rather put the money into that and stock that turns quickly than push the boundaries of making an acquisition that we are a little bit not so sure about, as an example. I would even rather do that than buying back shares because I think you expect that of us. I think you say to us, your job is to generate return on equity, return on asset, return on invested capital, more than we can get elsewhere. In order to do that, we have to keep on growing the business, and we do that by growing the book at the risk profile we feel is safe. What is... I, I don't think there's any doubt. Why did we lower inventory provision at the end of H1 2023, Reon? Can you answer that?
Michael, I think if you look at our inventory provisioning, I mean, we do and follow a very consistent methodology over many years, which is aimed at achieving our set targets to clear our stock. Using that same methodology that we've applied, we came to what that stock revision is. I think one must remember that there's a high level of fabric and work in progress in our stock this year as well, so that sits with a different provisioning level. One would have to strip that off to compare, on, you know, to prior periods, but we're comfortable with our provisioning level.
Thanks, Reon. The next question is, the remaining onerous leases in Office, what could we add to profitability if we get out of them? Yeah, that's a moving target because some of the onerous leases that we thought we'd wanna get out of, when they came to renegotiation, they were not onerous anymore. The landlord wanted to keep us there, we came to commercial terms. Plus, the stores are doing better. They're trading so much better, so the viabilities work. There are still some stores that will carry on until 2028 even that have onerous leases. Fewer and fewer of them, but there are some. I can't give you that answer specifically because there's so many variables. Please confirm...
Oh, wait, please can I confirm when Michael Mark may retire and will there then be two CEOs? It's really as simple as this. When I decide to retire or the board wants me to retire, we will announce it instantly in sense because it is a material event. You can assume that decision has not been made because we haven't announced it. I can't predict when it will happen because there's a number of factors that are involved. I actually don't know myself, but I am 70. Let's not forget that. I think I'm an incredibly young 70. Pulling your leg. Some people don't say that. I mean, I feel energetic and Sarah and Emanuel and I and Reon and our team work incredibly closely together.
One day there will be a very seamless transition, whether it's a joint or one of the two of them or even someone else becomes the CEO, that will be decided ultimately by the board. They're not decided by me, and I would never speculate on that. That's as honest as I can be. Why was sales only 5.7% in South Africa after January, another seven weeks? What was inflation? Well, I'm trying to think what would inflation be, because remembering it would be the summer goods. There was inflation there, but then a lot of it's marked down. I'm not sure that's relevant. There wouldn't have been unit growth, that's for sure.
5.7% does mean that January and the first seven weeks were slower than had been before. I can't predict what's gonna happen into the future. There was no specific reason that I could claim caused the 5.7%. I don't wanna speculate about why. Has there been a lot of promotional activity post-period? Did selling price inflation match the upper 13% of what they saw in the interims? They're trying to get a sense again of what volumes did. I think volumes will have posts year-end. They might have increased 'cause we marked down stuff and I don't know really.
I think the first 7 weeks are not predictive of the 6-month period of January to June, because that is the sale season, January and February, the first 7 weeks. You get into winter in South Africa and summer in the U.K. I don't think you can take the first 7 weeks and say, "Well, that's a prediction of what's gonna happen." I know one is tempted to do that, but so many things are at play in that first 6, 7 weeks. Suffice it to say, we've got the right level of stock of carryover post-season. We've got the right level of planning of new stock and sales, we are feeling still cautious but optimistic. A lot of questions about that. They're asking what.
This 5.7%, what's the split between cash and credit? I'm not gonna speculate on that. I'm not prepared to disclose that at this stage. There's no massive change. Believe me, that doesn't change suddenly. The apparel retail sector in South Africa seems overstocked. Can you comment on the freshness and health of the industry in the retail sector? Of course, I can't do that. I don't know that I would classify it as overstocked. I don't know how you can tell. I don't know what our competitor stock levels are on their age stock or not. It's so hard to tell. I myself don't know. I think we're not overstocked. I don't know if they are or not. You'd have to ask them and see.
I think that people are, in South Africa, retailers are very aware of managing stock, excess or not. Therefore, I do think most retailers manage their stock really carefully and well. Yeah. The next one is what's gonna happen with Office? Is that gonna grow as a contributor to the group in the future? Well, I don't. In a strange way, I don't know if I hope so or not. I suppose I hope they both grow. It's. The other thing is the pound-rand, you know. Is it gonna grow because of currency? Is it gonna grow faster than Truworths? All I can tell you is we are really very optimistic about Office. It's looking fantastic. We are just as optimistic about Truworths. It has got a lot of challenges in Truworths, the economy, but so is the U.K.
The best I can say to you is we're optimistic about both. I don't know if Office is gonna grow. I'm hoping they both grow really well. I don't think there are any more questions that I can see here. With that, I am going to end. I'm gonna ask Sarah if she wants to say anything else in conclusion, and then Emanuel.
No, I think thank you very much for joining us today. We are hoping that the months ahead will go really positively with the economy. Who knows? As Michael said, we're feeling optimistic about our product offering and our strategy. I suppose time will tell. Thank you.
Emanuel, would you like to say anything?
Just also thank you for joining us. I hope the insights into the creative space has actually helped. We really see it as a cycle. This is part of the cycle and in a funny way, COVID. Coming out of COVID, the book looked particularly good because it cleaned the book out quite nicely. I think a lot of the KPIs that you're seeing now are really back to normality, you know. We're not stressed out about the book. Of course, Collections would have been nice if collections were a little better. We always want collections to be better. The best collections tool, as we've said before, is actually merchandise. If you have great merchandise, you collect well.
We're feeling positive about that. Generally, we are feeling positive and cautiously optimistic about the business, both businesses here and in the UK. Thanks for joining us. Hope you got some insights.
I'll just conclude. Thank you very much, and thanks to my colleagues, Emanuel, Sarah and Reon, for supporting this. An enormous amount goes into preparing the presentation. Even last minute, when we see a reaction to a share price and comments from the analysts and intermediary reports, we try our best to sort of modify our presentation at the last minute. The main person who bears the brunt of that is Reon and his team, so thank you to them. As I said before, and just before I conclude, please write to us on investor relations email address. We will respond as soon as possible. Thank you and goodbye.