Earnings Call: H2 2021

Aug 26, 2021

Good morning, and welcome to our 2021 results presentation. I've been with Woolworths for almost 18 months now. And to say that this period has been eventful would certainly be something of an understatement. None of us could have imagined or contemplated what we've all been through over the last 18 months. I believe that true character really emerges during a time of crisis, when the odds are stacked against you and the pressure is on. Navigating the challenges of COVID and everything that has come with it has given me the opportunity to experience the true character of our organization in a very short space of time, its fundamental strengths, but also some of its vulnerabilities. And what this has done is really reinforce my strong belief in this organization and what we can achieve. The results we're going to share with you today, I think, begin to demonstrate that. I have Riza Isaacs, our Group Financial Director with me and he and I will be taking you through the Group's performance for the 2021 financial year. I'm also looking forward to sharing with you our refreshed Group strategic framework, as well as outlining the progress that we've made against each of our strategic initiatives. Overall, it's been a good year for us and this notwithstanding the continued impacts and disruptions brought about by the pandemic on our trading environments both here in South Africa and Australia. More recently, we've also witnessed the devastating impact of civil unrest in KwaZulu Natal and Gauteng and the traumatic and severe effect that that has had on our country. While these events were outside of our control, how we chose to respond was not. We have prioritized the health and safety of our employees and customers in every instance, as well as the protection of jobs for our employees. During last year's results announcement, I did highlight a number of things that we were going after. Some of these were tactical and in a direct response to the impact of the pandemic, while others were longer term in nature, aimed at reestablishing our financial credentials and positioning the Group for sustainable growth and value creation. Today, I'll share with you our progress against those commitments. And through this, I'd like to demonstrate the importance we at Woolworths place on doing what we say we will do. We are focused relentlessly on trading the business and innovating to better respond to customers' changing expectations. And we're doing this in a way that is far more agile than what we would have done in the past. This is exemplified through the rapid rollout of some of our online initiatives such as our click and collect offer, as well as our on demand offer, Woolies Dash. In addition to that, we've also tried a number of new pop up stores and formats. The successful execution of our capital plan, which has enabled us to separate the David Jones and the Country Road Group covenant arrangement, has unlocked value for both of these businesses and for our group as a whole. We have strengthened our balance sheet and significantly reduced net debt by more than 90% or over ZAR10 1,000,000,000. We have also reprioritized investment towards our digital and data transformation and simplified our organizational structures to reduce complexity and enable more agile ways of working. Additionally, this year we've introduced new sustainability targets for 2025 and beyond. And as a first for a South African retail business, we've secured a sustainability linked loan facility. To intensify our focus on the social and people facets of our good business journey, we have also launched our Inclusive Justice initiative, which I'll touch on later. I'm truly proud of our teams and the strong results we've delivered in a very challenging environment. Here are some of the highlights. For the year, Group sales are up by almost 10%. We grew operating profit by 44% and we doubled earnings. We've delivered improved cash flow, a significantly strengthened balance sheet and achieved demonstrable progress against our strategic initiatives. And pleasingly, we're also resuming dividends. So we have ended the year in a far stronger position and having formulated a refreshed group strategic framework, which I'll share with you a bit later, we're well set up for the year ahead. Clearly, none of this would have been possible were it not for the passion and the commitment of our people. Over the past year, it is fair to say that our resolve as an organization has been tested. COVID-nineteen has had an enduring impact on all of us, both professionally and personally. I would like to take a moment here to acknowledge our 34 colleagues who have succumbed to the virus, loved ones who have been lost, as well as our team members who have suffered illness during this time. The recent unrest in South Africa has also been particularly distressing. Members of the Exco and I recently visited our distribution center and a number of our stores in KZN, which had been impacted by the unrest. And we came away feeling truly humbled by the courage, the resilience and the commitment of our people. The way our teams have come together over the past year to bravely and decisively face the challenges and the trying circumstances has been nothing short of remarkable. I would like to thank our 45,000 employees across the 13 markets in which we operate, and particularly those on the front line, who show up every day and courageously put the needs of their colleagues and our customers ahead of their own and continue to deliver the exceptional service for which we are known. I would also like to thank our suppliers, our partners who are integral to our success for their loyal commitment to our business. Lastly, I'd like to thank our customers for their continued support. It's important to remind ourselves regularly why we do what we do. In the end, it's all for our customers. If I reflect on the time I've spent in our stores over the past year, whether it's directly engaging with our customers or getting feedback from focus groups, I am truly moved to see and experience the love they have for our brands. If we think about it, what is a brand all about? What does it stand for? It's simply a trusted promise kept. And so you can be sure that we'll keep doing what we need to, to safeguard the privilege of that trust. I'd like to now hand over to Riza to take you through the financial results. Thank you, Roy, and good morning all. This year, we are pleased to report a strong recovery in sales, earnings and cash flows, a much stronger balance sheet as well as a resumption of dividends. Group sales was up 9.7%, 5.9 percent in constant currency. Adjusted EBIT was up 44% to ZAR 6,900,000,000 and adjusted diluted HEPs doubled to ZAR 3.41 per share. Free cash flow was up despite the reinvestment in working capital post the cash generation and preservation measures last year. One of the real highlights of the year was that we executed on our capital plan and reduced group borrowings by over ZAR 10,000,000,000. And within that, Australia in a net cash position of about $360,000,000 a significant turnaround from a year ago. The pay down of debt in Australia allowed us to separate the Covenant Group and enables Country Road and David Jones to pursue their own paths. The significant reduction in our borrowings also gives us greater scope in deploying our capital, one of which is resuming dividends, which we are pleased to announce. Our net equity position is up 50% to just under ZAR 10,000,000,000, also very different to where we were a year ago when there was some speculation about the need for us to raise equity. Then looking at sales performance for H2. Here, we graphically show the second half sales trends for the businesses. At the top of the chart, we show the various lockdowns between January June and the graphs reflect growth. The blue line represents growth on 2020 and the red line shows growth on 2019. I'll give you a bit of a moment to orientate. Quite a lot of variability given the disrupted base. Some of the key takeaways, starting with FBH. Sales growth in 2019, the red line, is down 5.7% for the half. Still COVID impacted, but also less space, fewer private labels and lower demand for formalwear. There is strong growth on 2020 at 24%, which is what one would expect, but also non comparable as it was 6 weeks of lockdown in 2020 where we did not trade at all. For Food, growth is partially more or less consistent on 2019, if you look at the shape of the red line, but up a very healthy 17% on 2019, significantly ahead of the market. The growth of 3.2% on 2020, the blue line below, reflects the abnormally high panic buying and stockpiling base last year. The second half was up 13.2% last year, if you can recall. Looking at the H2 sales performance in Australia. 2021 was still a COVID impacted year in Australia. David Jones was 3.2% down in 2019 in the context of less space, no international travel and also far less local tourists. Also a higher proportion of CBD stores, which are disproportionately impacted by the lower footfall, up 16.9% on 2020, but not unexpected given the negatively impacted pace. Country Road was up 39.5% in the second half, also non comparable. Stores were closed for a significant period last year, but a particularly pleasing performance if you compare to 2019, up 2.1% for the half, notwithstanding COVID and a number of stores in airport locations, which show very little activity. The operating profit for each of our businesses in relation to last year. A fairly simple and clear slide. Foods up 4% off the high base last year FPH up 14% Financial Services up 17% David Jones nearly 4 times the earnings last year and Country Road nearly 3 times what we delivered in 2020, with the Group operating profit up 44% to ZAR6.9 billion. We'll unpack the segmental performance a little later, but this is a very good result across the board in the context of a still COVID disrupted and impacted year. The team's focus on trade, managed working capital and CapEx tightly and also continued to focus on cost optimization. Moving on to EPS, HEPs and ADHEPs. A bit of a busy slide. Here, we show the reconciliation of adjusted HEPs to HEPs to EPS, the dark blue bars. Adjusted diluted HEPs more than double last year at CHF 3.41 per share. There are adjustments of CHF 0.42 per share relating to the renegotiation of various leases, mainly in David Jones, which resulted in lease exit and modification gains under IFRS 16. Prior year sales losses were also utilized against the profit on the sale of the buildings, which resulted in deferred tax credits with a net impact of 0 point one five dollars per share. This takes us to HEPs of EUR 3.689 per share. The profit on the sale of the property is EUR 0.087 per share. This is a capital item, so it's excluded from HEPS, but included in EPS along with impairments. The COVID-nineteen impact persists, which again required an assessment of the carrying values of assets, resulting in impairments of approximately CHF 364,000,000 pretax or CHF0.289 per share. Further detail on especially the adjustments is in the appendix in the back of the pack. Moving on to the segmental results, starting with Fashion, Beauty and Home. We show H2 separately like we did last year. This is hopefully helpful to you given the disrupted pace. I covered turnover on the earlier charts, up 3.5% for the year and 24% for the second half. We had a positive start to winter, which was hampered by the onset of the 3rd wave. We also had a strong season in Beauty plus Home. We have made progress on the repositioning of product and assortment, but it is fair to say that the performance of women's outerwear, our largest category, is still not where we want it to be. And we still over index in formalwear, also in men's. We introduced athleisure and brands in the second half of the year. The performance has been encouraging and we've seen good growth, but this is still a small part of the overall business. A few other call outs. Online sales more than doubled and is now 4.1% of total sales. Gross margin at 45.5 percent has improved, but it's not yet at pre COVID levels. And going forward, the focus is on reducing markdowns. Costs are well controlled, up 5.4% for the year due to COVID related costs and also COVID related savings in the base, such as government support and rental concessions, which impacted H2, which was up 21%. Our Everspace was also down by 6.4%. Adjusted EBIT was up 14% to ZAR 1,080,000,000. We are encouraged by the progress made and pleasingly a number of the key indicators are moving in the right direction, but there is still much to do in FPH. Woolworths Food, another outstanding performance in what continues to be a very tough macro environment. Top line grew by 6.9% for the year and 3.2% for the half, 3% above the market on a 12 month moving average basis. GP margin was 40 basis points down on last year, partly due to price investment, but the margin last year also benefited from the high volumes, which saw reduced waste and better distribution cost productivity. Costs were well controlled with positive jaws and overall pre IFRS 16 return on sales was 7.6% for the year with an operating margin of ZAR 3,000,000,000. This is of a strong base and notwithstanding trade restrictions on wine, cafes not operating fully, reduced trading hours and stores not being able to trade as a result of COVID. Another outstanding performance showing remarkable consistent year on year growth. Woolworths Financial Services. Our Financial Services business continues its post COVID recovery despite the tough credit and collections environment, testament to its resilient business model and the quality of its book. The closing book grew just under 1%. Lower interest rates and store traffic affected interest income, transactional revenue and collections. The impairment charge was 5.3% with the book coverage at 25%, a healthy book with the market leading impairment rate. Better revenue in collections delivered an improved result for the year and an ROE of 13.6%. David Jones, also a much improved result over last year. Sales up 2.3% for the year and 17% for the half. CBDs were affected by the lower footfall. And notwithstanding this, Elizabeth Street was also up nearly 17% on 2020. There was the expected shift to online with strong growth in this channel, up 24% and now 17% of total sales, a significant shift in a very short space of time. Gross margin was 2 70 basis points, up on last year with Own Buy up 3 70 basis points. Clearance stock was down by about onethree and stock turn improved to nearly 3x, a much healthier overall stock position. Expenses were marginally up for the year despite the additional rental in respect of Elizabeth Street and Boat Street Mainz. H2 cost growth was up 19% due to this as well as the JobKeeper and rent concessions in the second half of last year. The team delivered another $20,000,000 of annualized cost savings with space also down 6.3%. We had a similar level of COVID support in both years through job keeper benefits and rent concessions. So the year's result is comparable in that sense. Food was a $15,000,000 drag on EBITDA for the period with deliberate actions taken in the half to stem these losses, which Roy will expand on later. Moving on to Country Road. An exceptional performance despite the COVID related lockdowns with full year sales up 13.5% and H2 up 39.5%. A shift to online with the store closures, up 31% and about onethree of sales for the year. Gross margin on a sharply improving trend, up 2 20 basis points. Expenses were down 0.4% for the year despite a high incentive given the stronger performance. H2 growth also impacted by JobKeeper support and rent concessions last year. The focus on space optimization continues with the rent reversions, closure of stores and unproductive space. And outstanding performance despite COVID and the strong momentum being interrupted by the recent lockdowns, which started just before year end. Moving on to CapEx. CapEx was again a focus area for with us pulling back on nonessential spend, but also accelerating investment in areas like online, loyalty and data, especially in the second half as conditions started to improve. Total spend for the year was CHF 1,400,000,000 CHF 1,100,000,000 lower than 2020. The planned CapEx for 2022 is ZAR 2,800,000,000. This is in line with what we spent in 2019. However, a significant part of the spend shifting to online, value chain and data and digital as opposed to bricks and mortar, with $18,000,000 set aside for the consolidation of Bergwesh Men's and Women's Stores. Further detail on spend per business and depreciation is also in the back of the pack. Moving on to net borrowings. One of the highlights of the presentation today is this slide. We have maintained that our levels of debt in Australia were not sustainable and we're single mindedly focused on addressing this. Net gearing at year end is down ZAR 10,500,000,000 on last year. We executed on our capital plan, as I mentioned before. Had about ZAR5.5 billion cash on hand at the end of the period, with the bulk of that in Australia. Esa gearing is at 1.2x, well within the covenant levels and our own internal targets. Esa has a strong track record of generating cash with a strong underpin in the Foods business. We are in a net cash position in Australia, dollars 2 $86,000,000 in David Jones and $71,000,000 in Country Road. And borrowing costs have reduced by 20%. And of course, going forward, the annualized savings will be higher. Overall, a very good gearing and balance sheet story. Cash generated from operations was ZAR 12,000,000,000. We took the decision to suspend dividends and we also cut back on CapEx. Positive working capital movement despite the reinvestment in inventory post the extension and deferral of credit repayments to preserve cash last year. And just on this point, we have demonstrated our ability to pull various levers in the business to generate and also preserve cash when we need to do so. We successfully concluded the sale of the Bouygues Street Men's and Elizabeth Street Buildings, which generated ZAR 7,300,000,000. Dividends and capital structure. As we have said previously, a dividend will be considered in the context of prevailing conditions. Our borrowings are within the targeted ratios of 1.5 times for SA, 1 times for Country Road and no debt in David Jones. We are pleased to announce the resumption of dividends in respect of all South Africa for H2. At a 60% payout ratio, this translates into a payment of 0 $0.66 per share to shareholders. We will also revisit dividends next year in the respect of Country Road and our longer term payout ratio once conditions have stabilized. Then just to end off on the recent trading. This is an extension of the sales slides presented earlier with the post year end 7 week trade figures. The start of the year can fluctuate depending on cutoff and with changes in clearance dates. We have had a good year, but we are still living with COVID with the 3rd wave in South Africa and the stringent lockdowns in Australia. As with most retailers, the recent unrest has been disruptive and we have also had the recent port cyber attack, which impacted stock availability. FH traded up 17% for the 1st 7 weeks of the new year, off of a COVID base and positively impacted by pulling forward the August clearance. We'll also be launching springsummer earlier this year. Food straight up 3% for the 1st 7 weeks, in line with the second half run rate with positive momentum continuing, but still comping a high base. In the case of Australia, very stringent full lockdowns announced of a number of states. A large part of our business is in New South Wales and Victoria, and these two states make up more than 50% of our business in Australia. David Jones was down 26% in the case of Country Road with less concentration in CBDs, down 14% on last year. That brings us to the end of the finance section. An eventful but good year for the group with a recovery in earnings and a restructured balance sheet, which means we end the year in a much better position and with a stronger foundation on which to execute our strategy. On this note, let me hand you back to Roy, who will update you on the progress against our strategic priorities. Over the past year, we have given significant thought to our Group's ambition and strategies. And while some aspects of our strategies have been working really well, others have become less relevant, particularly in our rapidly changing retail landscape. We have developed a new strategic framework that translates right the way across the group. This is to ensure that our divisional and functional strategies support our overarching WHL growth ambition. I'd like to share with you a high level version of this framework, which is really anchored in being a leading purpose driven and truly connected retailer. Our framework centers around 3 strategic themes. The first is to protect and grow our core. This is to ensure that we safeguard the foundation of what truly differentiates us from our competitors. This isn't just about core businesses, but aspects or components within them that are core to our proposition, whether it be core customers and categories or core stores and formats. So in Australia, it's about unlocking value for DJs and Country Road Group. In South Africa, it means maintaining our leadership position in food and also turning around the Woolworths fashion business by focusing on what makes us really great, what sets us apart. So this first theme is really about protecting our platform for growth. The second theme is what we are calling expand for more, how we leverage our platform further by pursuing underdeveloped or new opportunities for growth. So for example, it's how we grow our beauty and home businesses or build the momentum in our margin accretive Africa business, become more accessible in food by trialing new formats or how we expand the reach of some of our COG brands. Integral to this is enhancing the data analytics capabilities of our entire organization. The 3rd theme we've called leading in customer experience. Became a great business by putting our customers at the center of everything we do and this must remain the case as we both protect and grow our core business and expand for more. While our customer databases provide us with great insights, there is much more we can do to integrate and leverage these insights into our decision making processes and to drive engagement and loyalty in a more proactive and effective manner. So this last theme is really about ensuring that everything we do intersects and resonates in the customer's world. These 3 strategic themes are supported by a range of enabling initiatives across operational excellence, our people and our good business journey. Within each of these strategic themes and enablers are a series of initiatives. Now many of these will sound familiar to you as we began sharing our progress against some of them in our last results presentation. But what you'll see now is how they flow from and knit back into a consolidated framework that translates across the Group to support our growth ambition. I'd now like to share with you some specifics around how we've unlocked and created value in Australia and New Zealand. As you know, our primary focus during the year was the restructuring of our balance sheet, which I'm very pleased we have concluded. You will recall, we successfully executed the sale of our Burke Street, menswear and Elizabeth Street buildings and used these proceeds to pay down debt, enabling us to split the covenant group that existed between DJs and CRG. This unlocked value for both entities and for the group as a whole. And as I previously committed to you, no further funds have flowed to Australia. With both David Jones and Country Road Group now set up independent of each other, we can now focus on improving the underlying operational and financial performance, particularly in the case of David Jones. We have developed a revised strategy for David Jones with a new merchandise focus being the mainstay. This will include the expansion of our premium and emerging brands to drive a more relevant and differentiated product proposition. In doing so, we'll improve intake margins, we'll reduce markdowns and reverse the declining trend we've had in our GP margins for some time now. In fact, we've begun to see the benefit of this already with our GP margin for the year improving by 2.2 percentage points. The start of the new financial year unfortunately again has been disrupted by lockdowns affecting the majority of our store base in Australia. But we've been here before and we know what to focus on. And so as soon as trading restrictions lift, we'll quickly return to our margin improvement initiatives. Key to improving our financial performance is optimizing the shape of our real estate footprint. Over the past year, we have reduced David Jones' footprint by over 6% and Country Roads' footprint by almost 3%. And we now have a clear pathway to reduce occupancy costs in both of those businesses. We're also very pleased to be nearing the completion of a value accretive agreement with 1 of our major landlords, which will enable us to reduce the David Jones footprint by a further 50,000 square meters. And this will come through a reduction in store size and some closures where it makes sense. In line with our network strategy, this will meaningfully reduce occupancy cost to sale across all of these stores. While this is clearly an important step, we're by no means out of the woods, but it is a step towards us delivering what we said we would. And it does pave the way for further negotiations with landlords to keep improving the financial feasibility and flexibility of our lease portfolio. In line with our commitment to you, we've taken decisive action to stem the losses in our DJ's Foods business. We have now closed smaller format loss making food stores and have brought a concession partner into our 2 flagship stores and are in the process of exiting from our trial with BP. Turning to CRG, the Country Road brand performed exceptionally well in the current year, achieving double digit growth of a pre COVID base. This is really the outcome of a repositioning journey, which we started over 2 years ago, going back to the core of what makes this brand great. And I wanted to share a little bit of this with you. Hello, I'm Al Roseby, Managing Director of Country Road. 3 years ago, we started a journey to realign our business. We went back to our archives to recreate the aspiration, the craftsmanship and the quality of the garments we were known and loved for. We obsess about our core products, reimagining them as well made everyday practical items, making them the best they can be. Distinguishing them with quality fibers, including verified Australian wool and cotton, enabling us to scientifically trace every fiber to Australian farms. Today, these core lines across women's, men's, kids and home represent 50% of our business compared to 20% 3 years ago, selling at the rate of 1 per minute. Our iconic heritage sweat not only generates 10% of our sales, but also supports a biodiversity partnership with LandCare Australia, helping farmers to foster a sustainable approach to LandCare management and enhancing natural habitat restoration. Our first 5 star Green Star design rated flagship store opened in 2019, a first for Australian fashion retail. And with its success, we've continued to refresh our store network with a solid rollout plan. With our online channels now representing over 30% of our sales, we've also invested in our digital brand experience. Today, over 70% of our sales are from our loyalty customers. Our commitment to data led decision making allows us to respond quickly to our customer. This test and learn model informs everything we do. We celebrate the people, the places and occasions that enrich each day and the effortless Australian style we can bring to each moment. Country acknowledges a base and a strong desire to create products authentically and responsibly. Road is the way forward. I think there's a lot here to be really excited about and for us to learn from. It takes a little while to reposition any business, particularly a fashion business. But in going back to the basics, listening to what our customers are saying, bringing back the quality of our brand and products and continuing to test and learn in everything we do, we have fundamentally shifted the trajectory of this business. While we will keep driving the momentum in Country Road, we also need to improve the performance of the other brands in the portfolio, particularly Witchery and Politics, which were brands that were more directly impacted by the shift into casual as a result of the pandemic. We are also exploring new growth opportunities and have recently partnered with the iconic, the leading online marketplace for fashion in Australia and New Zealand, the early results of which are very encouraging. Through the use of our customer data, we have been able to curate more localized offerings and test low cost and low risk pop up stores. These have all exceeded our expectations with trading densities well above the brand average and we're excited to explore this growth opportunity even further in the year ahead. Whilst talking about unlocking value in Australia, I think it's fitting to welcome our new CEO of the Country Road Group, Raju Vupalappati. We are looking forward to the contribution he'll bring to our group. Moving to FBH, we are clear that turning around our fashion business represents the single biggest opportunity to reset the value of the group. And to make that happen, we're going to go back to the basic principles of what makes a great apparel retailer, not dissimilar in fact to what we've done at Country Road. One of the central principles is in fact developing a deep appreciation and understanding of who your customer is. In our last results presentation, we shared with you a more holistic and granular understanding of our customer. When you segment the market, you need to define where your opportunities are and where you want to play. You can't be all things to all people. You don't want to be a broad church. You want to identify where specific opportunities lie and more importantly, where they intersect with who you are as a brand. We've now done this work and as a result are focusing on 2 core segments. The graph you see now talks to the overall apparel market in South Africa by segmenting customers along 2 axes. The horizontal axis plots the spectrum of customers' preferences in terms of comfort versus style and the vertical axis customer preferences for quality versus price. Our primary segment is what we have defined as the savvy customer, someone who is pressed for time, values quality and well cut, well made clothing that embodies understated style. Our secondary segment is what we've called the trend spotter, someone who values quality basics and essentials, but looks to express their style with bold, unique on trend fashion. Together, these two segments represent just under half of the total apparel market, of which our share is less than 10%, and this clearly presents a meaningful opportunity for us. These target customer segments also overlap with a common need for quality basics, essentials and convenience. This is in fact who we are and what we stand for. We are anchored in our wardrobe essentials, everyday wear for the family and what we call our beautiful basics, which is essentially our core proposition, our men's chinos and golfers, our women's tees and knitwear, our baby rompers, all of which are underpinned by strong sustainability credentials. These insights are being integrated into our product design and development processes, and you will start to see their influence in the upcoming springsummer assortment with full implementation by autumnwinter next year. With these insights informing our thinking, we are refining our product offering by reducing the proliferation in private label brands, color and styles. We're also selectively introducing guest brands that authenticate specific categories such as Sunglass Hut, Birkenstock and Levi's. We've exited from our Studio W and W collection clothing brands and are now proudly anchored in our Heartland Woolworths brand. What you'll also notice in our stores is that we're increasing our mix of casual offerings, part of which includes a stronger at leisure range. We're also simplifying our trend and color messaging. And by way of an example, we had previously made use of up to 48 individual color palettes in a typical season. However, this upcoming spring and summer, our collection will see us use only 6 complementary palettes. In fact, this is also a great example of how we're sharing learnings across the group. Here we are leveraging Country Roads expertise in color direction. By curating our ranges in this way, we'll enhance and simplify the shopping experience for our customers. While turning around our fashion business is clearly critical to protecting our core, the growth in Beauty and Home provides us with the opportunity to expand for more. We are building our beauty business as a destination category and we're doing this through extending our offering to more doors, adding new brands, some of which are going to be exclusive to us and growing our online presence. During the year, we launched our virtual beauty consultations and virtual try ons, the first for a South African retailer and have been very pleased with the impact that this has had on conversion and sell through rates. There is also a real opportunity to grow our market share of the home business, both in terms of our physical footprint as well as online. And in the coming months we'll open the first of our Food Plus Home Stores, which leverages the cross shop potential we see in the Foods customer. I've said to you before that our propositions in fashion have become too expensive. And so over the past year, we have invested ZAR250 1,000,000 into price in specific areas. This has really resonated with customers and these targeted lines are now up over 20% year on year. From here, we will now focus on right price first time. This is to drive increased full price sales, reduce our time spent being on sale and reduce our markdown. This last point is a particular opportunity for us. As you'll see in the chart on the screen, our markdown has grown significantly over the last several years and addressing this is a key lever in improving our underlying profitability. We are also investing in transforming our value chain to be more agile and future fit. To be very candid, we have not invested in our supply chain technologies to the extent that we should have, and that's impacted on our ability to deliver. Whilst product is central to the success of any apparel business, it's not the only thing. It's the entire ecosystem around it that makes the difference. It's how we get the right product at the right price to the right place at the right time. We're really good at doing this in our Foods business, but these back end capabilities aren't as strong in our Fashion business. So we've begun what will be a 2 to 3 year process to fundamentally upgrade our value chain from supplier right through to the store by relooking at all of our planning systems and processes and logistics, all of which are pivotal to a sustainable turnaround of our fashion business. We have also reviewed our people structures and processes. All our FBA structures have now been simplified with fewer management layers to speed up decision making and instill a greater ownership and accountability. We have also increased our speed to market by upwards of 30 days in certain categories, and we will continue to look for opportunities to drive further efficiencies. As we streamline our brand and product portfolio, as we rationalize our physical footprint and simplify our structures and processes, we are editing to amplify. We are doing more with less. I want to make a point here. We are not simply chasing market share in the aggregate over the short term. Our immediate and overarching priority is to restore the underlying financial health of our FPH business. And central to this is our approach of driving quality over quantity through increasing full price sales, lowering markdown and improving trading densities to support an improving return on sales percentage. We're beginning to deliver on this already. Riza has given you the key highlights in the P and L, but driving the uptick in our FPH EBIT margin was in fact an increase in full price sales, improved trading densities and lower markdowns. Clearly, there's a lot to do. No repositioning of this magnitude takes place overnight. It is early days. There is more to come and more that must come. But I believe that we're doing the right things to establish a solid foundation from which we will then be able to drive sustainable profitable market share gains for this business. Turning to our Foods business, sustaining the momentum of our Foods business is key to our success. Critical to this is a deep understanding of our customer and our ability to deliver a world class experience for them. All of this is not only underpinned by our commitment to quality and sustainability, but also to critical back end capabilities such as innovation, new product development, our superior cold chain and our long standing partnerships with suppliers, many of which go back over 50 years. These competitive advantages of our remarkable foods business have in fact supported over 10 consecutive years of market share gains. Over the past year, we have responded to our customers' evolving wants and needs by introducing over 2,000 new or upgraded product lines. We've also invested over $250,000,000 into pricing. Notwithstanding this, there is still scope for us to further grow our share of customers and share of wallet by remaining aspirational whilst at the same time becoming more accessible, whether it be in terms of price, format or channel. In this regard, we are now working closely with our suppliers to follow through on our intended investment of ZAR750 1,000,000 into price over the next 2 to 3 years. We are also focused on how we deliver our offering to our customers through easy and accessible channels and formats, both online and in store. This includes the continued growth of our click and collect offer, which is now available in almost 80 stores and the full launch of our on demand delivery service, Woolies Dash, which will soon come out of trial and be rolled out further. At the same time, we're still making smaller stores bigger where it makes sense to do so and trialing new formats such as our reinvented Now Now concept store, which is opening next month and our 1st standalone W Cellar wine and liquor store in Gauteng, which has really received strong customer endorsement and something that we're really excited about and look to expand further. Another strategic focus area is our digital transformation, which has the potential to become a real game changer for us. As I've mentioned to you before, we have a lot of data at our disposal, in part as a result of our various loyalty programs, but there is certainly more we can do to leverage the insights we get from that data with greater speed and agility. Over the past year, we have improved our advanced analytics capabilities and we've also introduced a new point of sale system. With this now in place, we will refresh the loyalty proposition across all of our businesses to enable greater differentiation and personalization as a driver of incremental spend and engagement. We are also establishing a new data and analytics team, tasked with accelerating the implementation of our digital transformation strategy. Aligned with our ambition to be a leading truly connected omnichannel retailer, we are continuing to fast track the building of our online capability to provide our customers with a seamless quality shopping experience regardless of the channels they choose to shop in. In South Africa, we are pursuing an ambitious plan to grow the online contribution of food to the upper single digits and FPH into the double digits. We are well aware that while the online channel in DJ's, COG and FPH is in fact margin accretive for us, this is not the case for us in food. So as we continue to grow our online penetration in food, we are very mindful of needing to achieve an appropriate balance between meeting our customers' needs and the trade off of margin dilution as a result of the shift in channels. To achieve this goal, improving the profitability of online through scale, channel mix and channel efficiency is a key focus for us in the year ahead. You would have seen from Reza's earlier slides that we're shifting our operational and CapEx spend towards our digital transformation. We've also begun the implementation of a new operating model to not only fast track the building of our capabilities in the space, but fundamentally change our processes and ways of working so that we can innovate at speed and build at scale. To support this, we've appointed a Chief Technology Officer and a Head of Digital to ensure that we build capability and resource in a synergized and holistic way. Turning to cost efficiency and operational excellence. The impact of COVID-nineteen has certainly shown the importance of adaptability in times of sales volatility. And so we're ratcheting up our focus on all costs across the group. Part of this is about driving appropriate levels of discipline around spend and achieving greater flexibility in our overheads, but it's also about ensuring that where we are spending is directed in pursuit and support of our strategic growth ambitions. Our people are critical to the successful execution of our strategies. As I've mentioned before, whilst we are a big group, we've tended to operate very much in silos. We have both economies of scale and skill across our business. But if we are truly to derive the benefits from this, we need to better leverage our scale and diversity. So we are delayering our organization internally to reduce complexity and to enable more responsiveness and agile ways of working to ensure that we drive effective execution of our strategies. One of the reasons I joined Woolworths was because it is so much more than simply a business. It has real purpose and it plays a crucial role in positively impacting the lives of our employees, their families and the communities in which we operate. We are deeply committed to our vision of being one of the world's most responsible retailers. Many of you are already familiar with our pioneering good business journey or GBJ, having delivered substantial achievements against our 2020 GBJ goals. We are now stretching and challenging ourselves even further into exciting sustainability territory with the launch of our new sustainability targets that stretch beyond 2025. We are specifically emphasizing 4 industry leading sustainability goals. Firstly, fully transparent and traceable supply chains by 2025. Secondly, all our private label fashion and home products designed to be reused, repaired, repurposed or recycled by 2025. Thirdly, all our energy to be sourced from renewable sources by 2,030. And finally, to achieve net zero carbon emissions by 2,040 as a group. The pandemic has undoubtedly had a catastrophic impact on humanity and we have therefore deliberately reconsidered and elevated the people aspects of our sustainability strategy. As mentioned earlier, we are on a journey which we have called the Inclusive Justice Initiative. The IJI has been developed to acknowledge and address systemic inequality and ensure inclusive growth for all our people. This important initiative addresses issues of diversity and inclusivity and has a strong focus on racism, gender based violence and the advancement of women across our group. Now many companies and industries across the globe recognize the sustainability imperative, but it is not enough for companies to simply talk about it or to just set targets and to think that these alone will get us to where we need to be. We have to move from plans to action if we're to hold ourselves accountable. And this is exactly what we intend to do. The business imperative is overwhelming. In fact, I really believe that it is the only way to ensure long term business continuity and success. This brings us to the outlook for the year ahead. South Africa's recovery from COVID has been impacted by the 3rd wave of infections and consequential lockdown restrictions, and we expect this to further constrain consumer confidence and spend. We've all witnessed the devastating civil unrest in July and the widespread destruction of property, which has impacted many communities and the effects of this will be felt for some time to come. In the case of Australia, more than half of the population is now in hard lockdown and current restrictions significantly impact our ability to trade our stores. Whilst we are clear that these restrictions will not last forever, they do place significant pressure on consumption expenditure, certainly at least in the short term. And this brings me to our medium term or 3 year margin targets. Note that these are on a post IFRS 16 basis. We are targeting a 7% to 8% EBIT margin in Food. Where we land from year to year may vary slightly, depending on whether we're investing in growth or consolidating our efforts, but we're confident either way in our ability to maintain an industry leading margin in this range. So with regards to FBH and CRG, we are targeting double digit EBIT margin. While our CRG margin is likely to be in the lower teens, our FPH business does in fact have the potential to go after a bit more. That said, our number one priority is restoring its financial health and this does require some balancing between making what we have more efficient, but also investing in areas like our value chain, as I've mentioned, and our online offering to drive our business forward. Once we're a little further progressed on this journey, we'll provide you with more explicit guidance. We are not providing any specific margin targets in respect of David Jones at this stage. As mentioned, there are a number of initiatives underway, which Scott and the team are working on and these need to be further progressed for us to provide definitive guidance. The new financial year is likely to call on our resolve once again, but I think we've proven we're up to the challenge and we've got the benefit of a far stronger foundation than we had this time last year. I want to recap on our commitments to you so that you know what to expect from us. We will improve the operational and financial health of our apparel businesses, specifically FPH and DJs. We will protect and grow our market leading food business. We'll accelerate our digital and data transformation and we'll become more efficient and effective in terms of our structures, processes and ways of working. And we'll do all of this as we continue to drive sustainability in everything we do. There are no doubt headwinds that we need to continue to navigate. But as I've said before, our challenges are not insurmountable. We've demonstrated that success will come if we as an organization focus on controlling what is within our control. So you can expect us to keep showing real progress against our strategic initiatives. In closing, I would like to say a final thanks again to our teams for their collective passion, their determination and commitment for what we have accomplished over the past year. I see significant opportunity for us as an organization to be more externally focused, to sharpen our competitive edge, dial up our sense of urgency and drive real accountability. I personally am truly excited about the opportunities that lie ahead. We are on track to rebuild our financial credentials, drive long term value creation and restore our business to its rightful place in the hearts and minds of all our stakeholders. And with that, I'd like to open up for questions. Good morning and thank you. We've had quite a few questions come through over the webcast already. We'll do our best to get through as many of them as we can. And what we don't have time to cover, we'll come back to you either over e mail or in our subsequent one on ones. Our first question, could you please give more details on the 50,000 square meter reduction in space in David Jones as regards timing and rental reduction? Thanks, Roy. Yes. Thank you. Thanks, Jeanine. I mean, you'll know that we've been talking about the fact that we've been overstored with David Jones in Australia for some time now. And we have a lot of excess space. And we recently put out a commitment around reducing our footprint by 20% over the next 2 to 3 years. This last year, we've obviously made some really good progress. We've sort of progressed towards that target by about a third, 6% to 7% space reduction. And that work continues. I think as we sort of talk about this 50,000 square meter opportunity, I can't really provide you too many details on it specifically now, but obviously that will become more evident later. But it will actually obviously progress us by potentially another 50% in terms of getting to our target. So very significant move. And it's really a combination of both space combination of both space reduction in existing stores, making some of our bigger stores smaller and refurbishing and remodeling those, closing certain stores where it makes sense and also just overall rent reductions in terms of the negotiations with our landlords. So making some good progress there and we should expect to see this coming through within the next 2 to 3 years. Thank you. Our next question, what actions does the ZAR750 1,000,000 price reduction investment entail? Roy, I think that's obviously specific to the food business. Yes. No, thanks for the question. Again, we've communicated that we're making this investment really across both apparel and food business. But the ZAR750 1,000,000 specifically allocated to foods is really being targeted against certain categories that we've identified provide us with opportunity to make our proposition more accessible, while staying aspirational, but more accessible to more of our customers. We've leveraged off our data analytics capabilities to really identify that in the course of the last year, we specifically went off to poultry and looked at where we could sort of bring price down, make it more affordable. That clearly has had a pretty remarkable impact on our poultry performance, not only driving unitary growth, but also share gains in that space. And when you bring consumers or customers into your store to buy into a category like that, they will suspend on a number of other categories. There's a big halo impact here as well. But through this process, we've also been able to improve the penetration of our existing customer base in terms of poultry purchases as well, which has obviously led to some of the upside. So we'll continue to look for very specific opportunities around price investment, but it's likely that going forward, we'll apply that type of analytic and execution to a much broader range across the basket. Thanks, Roy. Riza, probably a question for you. Can you elaborate on the expected annual cost savings as a result of the reduced debt? To what extent would you expect the finance charge of circa SEK 2,500,000,000 to decline in FY 'twenty two? Thanks, Janine. Important to note the SEK 2,500,000,000 includes the finance costs on leases in respect of IFRS 16. So the finance costs in respect of borrowings in SA is expected to reduce by about SEK 80,000,000 given the reduced or the reduction in base rates. And we shared that detail in one of the slides in the pack. And obviously, in Australia, we have cash on hand. So a positive balance on which we expect to earn interest, albeit at reduced rates, minimal rates. Thanks, Theresa. Does the disposal of Elizabeth Street and Burke Street mean we've exchanged current headroom in exchange for future problems? Yes. I mean, I think it is true to say that we did exchange financial leverage for operating leverage. And that does mean we're going to have to ensure that our operations run much more efficiently going forward. But based on the outlook for David Jones, assuming a normalized market, we think these increased rentals will in fact be affordable. I think it's just important to be reminded that this time last year, we were in a net borrowing position in Australia. And without selling the buildings, it would not have been possible to pay down the debt and decouple the Australian borrowing group that we had in place. And frankly, if we hadn't done that, we would be navigating through a very different situation today given the current context. But that certainly has provided us with significant additional breathing space on our balance sheet. So we do recognize the increased strain of future operating cash flows, but we are comfortable with this and the right course of action given the current situation is what we basically executed upon. Thanks, Roy. Riza, perhaps a follow on question to that. Can you provide some guidance on the step up in lease or rental costs in FY 'twenty two post the sale of Bouk Street and Elizabeth Street Stores? Sure. So with regard to Bouygues Street Men's, so first thing to note is that last year essentially represents a full year of rental given that we disposed of that building effectively. We see the proceeds in August last year and that's about $3,500,000 That lease is for 2 years with an option to renew for another year. We start with that refurbishment quite soon, as I mentioned earlier. And we do expect to complete it within FY 'twenty two. So that rental effectively falls away. In the case of Elizabeth Street, we disclosed the annual rental in the sense on the 21st December. I think it was $25,500,000 giving us a yield of 5% on the purchase or the proceeds. And we incurred about a quarter of that this past year. So another step up of about $18,000,000 in respect of Elizabeth Street. Thanks, Theresa. Understandably, the group's focus over the past few years has been internally focused. In your closing comments, Roy, you mentioned a shift to focus more externally and specifically to sharpen WHL's competitive edge. What actions would that entail? Yes. That's a great question. I think it's fair to say that for various reasons, we have been perhaps a little disproportionately internally focused in certain parts of our business for sure. One of the observations I've had in coming in and working with the teams is that we do spend perhaps a little bit more time than we should sort of talking about things that impact how we work internally and perhaps dialing up a little bit more focus on what's going on outside the business because that's really the reality of why we exist and how we need to respond to it. And so certainly understanding not only the landscape, the changing landscape and the implications for that on our strategies and what we do in the business, but in particular, looking at what our competitors are doing, not obsessing about them, but certainly taking them on. I mean, we do see in certain markets that share growth is going to be a key source of future growth. And so understanding where you're going to get that from and how you want to play that is going to be important. But also importantly, just sort of understanding, frankly, our customers and putting a bigger focus on the organization at scale, appreciating what more we can do around our customers. It's an organization that has always had the customer. We are an organization that has always had the customer at the center of everything we do, but it's important to keep refining, reminding ourselves about that and ensuring that we are coming up with the best propositions that continues to earn what I've talked about, the privilege and trust that we have in this brand, which is certainly something that we're very, very proud of. So there's quite a lot we'd like to do in terms of really shifting more of an organizational perspective to external a little bit more than it is internal for some of the reasons that I've mentioned. I do feel too that just on the competitive point, we do have a phenomenal proposition out there. And I've said this before, we're mindful that when you are market leaders in a space, you do have this so called target on your back. And we're very aware of that. And we don't take for granted for 1 minute our preeminence in the particularly in the premium food space. And our encouragement and it didn't need a lot of encouragement, to be honest, but our Foods team in particular are obsessed about retaining the performance that we've seen in the Foods business over the last several years. Thanks, Roy. Does the WHL Group provide any guarantees to lenders and other creditors in your Australian operations? I'll quickly take it, Ruiz. I mean, the simple answer is no, we don't. Okay. Thank you. Roy, how long will it take before you expect to start regaining market share in your FBH business? Yes. Clearly for us, FBH, as I've said, is probably the single biggest opportunity for us in terms of resetting value for the group. We've had a particularly challenged starting point, but I'm quite pleased with the progress we've made in formulating the way forward and in fact beginning to execute on a number of the initiatives we've called out. It's fair to say, I think that historically, market share has been a bit of an obsession and to hold on to share. We've done a lot of things that perhaps in hindsight, we may not have wanted to do. But we have chased market share and sometimes very much at the expense and the cost of really building a fundamentally sustainable profitable business. Our primary focus as far as FPH is concerned is the financial health of the business. We're not chasing market share in the aggregate. And clearly, market share remains important, but more important in certain specific categories, the categories we've called out that really will underpin our turnaround. So there's certain categories within womenswear, certainly in menswear, kids, etcetera, that we've identified. And it's within those categories, absolutely, we're obsessing about market share. But market share in the aggregate is less of a focus for us. What is the primary focus is in fact the financial health of the business. And frankly, if we lose a little bit of momentum on the top line, but improve our financials and the financial health of the business, that's where we need to get to. So I guess specifically to your point around how long it's going to take, I mean, an apparel business of this nature will always take a couple of seasons to really get right and for it to start humming. We should start to see as we go into this next half, some of the evidence of the strategic choices we've made starting to play through. And we can talk a little bit about that at some point in more detail. But for us, we've called out very specific milestones that we are tracking the strategic implementation against. And for the most part, we're hitting those milestones as we go. So I think once we've established the financial base health base that I've referenced, we'll then look at how we can expand into profitable share growth from there. Thank you, Roy. Please can you provide more detail on the announcement you made earlier this week on Zaida stepping off the WHL Board? Yes, of course. I mean, I think there's been various sort of perspectives on that and some people have interpreted that in interesting ways that just sometimes are somewhat confounding. But the truth of the matter here is that, I mean, Zaida has had a particularly tough set of challenges over the last 18 months and had made the decision to go into early retirement. And it's a decision I fully respect. Obviously, that precipitated the thinking around our new operating model and the implementation of that, which Zaida and I have been working on together with the rest of the Exco for some time now. And through that process, I'm really pleased that I was being able to convince Zaida to stay on and lead our food business. You all know Zaida and you know her credentials. She is the preeminent food retailer in the country. And there would be no one better placed to be able to take the Woolworths Foods business forward. In fact, you will also know that she was quite central to the architecture of the current strategy that's delivering now 10 years of consecutive growth, sort of pretty much all under her watch. So she's really passionate. This is something that's really close to her heart. And I think it's a real one for us to secure in the capacity of doing that. And I'm very pleased about that. Obviously, the changes in the leadership structure that we are referring to here give me an opportunity to get much closer into the businesses. But it also allows us to set up a sort of a singular strategy around Woolworths South Africa, but with very discrete execution approaches, which I think will drive even further agility responsiveness. So very excited about the overall move, but in particular pleased that Zaida has agreed to defer her early retirement and take up the leading this position, which as you know is fundamentally the engine room of the group and it can be in no better hands. Thanks, Roy. Our next question, are the Australian businesses receiving any government support or rental relief during the current lockdowns? So our businesses are not and in fact we're not requesting any support either. I think through the first couple of phases of lockdowns that we experienced last year, the government did put out a sort of systemic sort of support for employees of our businesses or employees of all businesses. And we took advantage of that by executing on that and actually channeling through that support to the employees themselves, which precluded us from having to sort of stand down any of our employees. This time around, it is a little bit different. The support from government is not as systemic across businesses. And in fact, the employees that get stood down do have the opportunity to apply through a different process for government support and they're clearly doing that. But beyond that, there is very little support coming through. There's no doubt that the current sort of lockdowns are having quite a, I'd say, significant impact on our businesses. More than 70% of our stores are closed as we speak. And that clearly puts a lot of pressure on this year's performance. There's been a big spike again into online. What is really pleasing those where businesses open where we are open for business, we're seeing very buoyant trade. So whilst the focus currently is very much on dealing with the impacts of lockdown, clearly, we've been here before. So we're sort of executing on all our cash preservation generation initiatives and the team are doing a phenomenal job in doing that. But at the same time, we do have our eye on when we emerge from lockdowns here because we want to capitalize on the bounce that comes with that. We've seen after every lockdown in Australia, there's a bit of pent up demand and it actually does bounce back. The size of the bounce will be different, but we want to make sure we're there to capture the opportunities. And we're anticipating that ahead of the big selling season, Black Friday going into Christmas, December, etcetera, that vaccination rates will have accelerated to the point where these lockdowns are lifted and we can resume where we sort of left off. You'll know that we had quite a fair amount of momentum across our businesses in Australia coming into the back end of the second half. And then we hit the speed bump of lockdowns. But those businesses, particularly Country Roads and David Jones for that matter, the execution of these initiatives that we've been putting in place, we're really delivering really positive results and we want to sort of quickly pick up on that when the opportunity presents itself. Thanks, Roy. Maybe a final question. Given the cash on the balance sheet at the end of the year, why didn't you pay a dividend in respect to the full year? Riza, do you want to take that one? Okay. I'll take that. One. Good question. Obviously, our balance sheet in a much stronger position, very, very different to where we were last year, as I mentioned earlier, within targeted gearing ratios, 1.5 for WSA, 1 for Country Road and no debt in David Jones. We're very, very pleased about that. However, we have taken a bit more of a measured approach to dividends in respect of this the FY 'twenty one. Given the context, the ongoing COVID context in South Africa, the talk of a 4th wave in December and obviously, the lockdowns currently within Australia. So and then of course, we ramp up our planned CapEx for next year to ZAR 2,800,000,000. So and I don't think most of you would have expected a dividend of ZAR0.66 a share. So hopefully, that is a bit of a positive surprise, but a bit more of a measured approach, Janine. Riza, thank you. That pretty much brings our FY 'twenty one results presentation to close. Thank you for joining us today. Roy, any sort of closing remarks? Thank you. Thanks, Janine. No, just to say thank you very much for your time today and giving us the opportunity to share with you where we stand. I mean, we do believe we've made a lot of progress over the last year, but really super excited about where we're going to take this business and what's to come. So really appreciate your time and look forward to engaging with many of you in a little bit more detail over the next couple of days. So thank you very much. Have a good day.