Good morning and welcome to our 2025 Annual Results Presentation. We'll begin this morning with a high-level overview of our performance for the past 12 months, after which I'll hand over to Zaid, our Group Financial Director, who will take you through the financial results for the year in more detail. Following that, I'll provide an update on our strategic priorities, and importantly, how we see these evolving into FY 2026 and beyond, and share some thoughts on the outlook before moving on. Starting with the year, FY 2025 proved to be more challenging than we'd expected. I think we're all au fait with the persistent macroeconomic headwinds across our geographies and the significant uncertainty in global trade relations, and that was never going to make it easy from a trading conditions perspective.
To be candid, our financial performance has been more symptomatic of where we have found ourselves as a group in the midst of significant transformation, particularly within our apparel businesses. A transformation, I'm very pleased to say, we've now completed. Within this context, group sales increased by almost 7%. Adjusted EBIT, however, was down 10.9% and ADHEPS down 19%. From a divisional perspective, our Foods business remains the standout performer, delivering another excellent result. Month-on-month share gains and positive underlying volume growth were underpinned by increased customer visits and basket sizes. Clear evidence of the strength of our brand and the compelling quality, innovation, and value we offer our customers. Importantly, even as we continue to make significant investments in future growth, our return on capital remains industry-leading. In Fashion, Beauty, and Home, it was very much a tale of two halves.
As you may recall, in the first half, operational challenges with our new DC technology, combined with late supplier deliveries, constrained product availability, particularly during our peak trading period. We moved swiftly to address these issues, and I'm encouraged that the second half told a very different story. FBH gained market share and delivered the strongest like-for-like sales growth in the sector. Our Financial Services business, WFS, continues to perform well, delivering a strong underlying result and consistently the healthiest impairment ratio in the industry. That resilience remains a key differentiator for us. Woolworths Ventures, our recently launched strategic growth accelerator, delivered mid-teens sales growth and profit growth of over 20%, notwithstanding the investments we are making. It's early days, but it's already proving the strength of our innovation pipeline.
In summary, looking at the combined performance of our South African business, which includes our growing African markets, I think Woolworths delivered a reasonable performance for the full year, being a combination of a weak first half but a much improved and pretty solid second half, where we grew sales by 10% and, in fact, when adjusting for non-cash effects of our increased CapEx, we grew EBITDA by 10% as well. That, I believe, is a much fairer reflection of what we are capable of delivering in the longer term. Turning to Australia, there is no denying the performance of Country Road Group has been very disappointing. Unquestionably, the macro headwinds in the first half remained a factor throughout the second half. To be frank, our financial performance is primarily the result of deliberate decisions we took to restructure the business following the sale and separation from David Jones.
Any restructuring of this magnitude, undertaken in an accelerated timeframe and in the context of a tough and highly promotional trading environment, inevitably creates disruption. All of that weighed on the short-term results of the business and, in turn, on our group's overall performance. To be clear, I'm not at all happy with this outcome. It is well short of our plans and our potential. Importantly, the upshot is that the complexity and knock-on effects of this transformation are now behind us. The David Jones chapter is finally closed. We won't talk about this again. From here, the trading momentum is already improving, and we will be building back our profit from this year onwards.
Looking back over the past few years, we've done the heavy lifting, putting in place the structures, the processes, and the capabilities our group needed across our business, particularly in apparel, where, to be frank, underinvestment over a lengthy period had left us exposed. There were setbacks along the way, like our DC transition in the first half. The decisions we took were deliberate and sound, and I can say with confidence that not only will we no longer refer to David Jones again, we will also no longer talk about turnarounds. Both our apparel businesses are now fundamentally transformed, and from here, our focus is squarely on how we trade our business and drive long-term profitable and sustainable growth, now that we have the fundamental wherewithal to do so. Before I hand over to Zaid, I'd like to spend a minute on our Woolworths brand.
Whilst the various transformative initiatives we've undertaken over the past few years are essential for lasting success, the most fundamental asset is one which cannot be quickly bought or built. It is our strongest asset, a loved and trusted brand established over decades and anchored in market-leading quality, innovation, and sustainability, which we are so deeply entrenched with across all aspects of our group. I was very proud to see this recognized externally too, when Woolworths won the Grand Prix Award for the Most Admired South African Brand at the recent Brand Africa Awards, where we were recognized for purpose-led excellence, a steadfast commitment to sustainability, social impact, and building a better Africa. We were also recognized in the 2024 Sunday Times Gen Next Awards as the coolest grocery store in South Africa, and we were ranked in the top five in the coolest online beauty and loyalty program categories.
We were named the top three brands overall, but the top retailer most likely to be recommended by South Africans. We've been acknowledged by Newsweek as one of the world's most trustworthy companies. Whilst we do what we do for our customers, not for awards, these accolades are powerful testaments to the strength of our brand and the loyalty of our customers. These recognitions are also an acknowledgement of our continued commitment to sustainability through our Good Business Journey, or what we call GBJ, which, as you know, is not a separate initiative, but the very way we run our business. It's about making a real positive difference to our planet, our communities, and of course, our people. Whilst we have always led the way in sustainability on all fronts, we are especially committed to making a difference in the lives of our employees.
One of the ways we are doing this is by introducing private day-to-day Medicare, effectively health insurance, to over 24,000 of our people, most of whom work in our stores and supply chain. This is not only a first for them, but a first-of-its-kind benefits package in South African retail, and something we're incredibly proud of. It's not just about our own people. We're equally committed to making a difference to the lives and livelihoods in the communities we serve. You've heard me talk about our approach to social justice, and I'm very pleased to share the recent launch of our Inclusive Justice Institute. This institute houses two nonprofit companies. The first focusing on social impact programs that address food security and contribute to quality basic education, with the goal of driving community resilience and economic inclusion.
The second focused on enterprise development, ensuring that small businesses continue to receive mentorship and financial support to grow and become sustainable Woolworths suppliers. To date, ZAR 300 million has already been committed, and I firmly believe that the institute will be an engine room for sustainable economic impact and inclusive growth at scale, igniting meaningful change in our country. We have made a meaningful difference to our broader communities too. We've increased procurement spend on micro, small, and medium enterprise development by over 40%. We've contributed ZAR 7 billion to the revenues of Black and Black woman-owned suppliers, and we've donated almost ZAR 820 million worth of our premium quality surplus food to under-resourced communities and charities, and uplifting young entrepreneurs through our second annual Youth Makers competition.
This initiative not only provides small business owners with mentorship and funding to help build their brand and market their products to Woolies customers in our stores, it also creates a pipeline for future employment too. This is a vital step towards building a more inclusive future for young South Africans and growing not only just our business, but also our communities and our country for good. With that, let me hand over to Zaid, who will take you through the detailed financial results.
Thank you, Roy. Hello everyone, and welcome again to our annual results presentation. Today, I will walk you through our 2025 financial year-end results and provide some insights on our performance and key financial metrics. Since we have already covered the first half during the interim results presentation, I will spend more time on the second half. In the outlook, I will also share our sales for the first seven weeks of the new financial year. At the outset, I think it's important to note that our statutory results are not comparable to last year. 2024 was a 53-week reporting period, while this financial year is a normal 52-week period. In this presentation, all my commentary is on a comparable 52-week basis. Before I get into the numbers, I would like to start with a summary of the year.
Woolworths South Africa delivered a creditable performance with positive trading momentum in the second half and strong like-for-like sales growth for both Food and Fashion, Beauty, and Home. In the Country Road Group, it was a very disappointing year. A combination of significant organizational change and tough trading conditions resulted in an operating loss. This underperformance has resulted in a reassessment and write-down in the carrying value of the underperforming brands within the Country Road Group. On a positive note, the reconfiguration of Country Road Group's operating model was completed during the period, and this has enabled us to fully address the stranded and dyssynergy costs following the separation from David Jones and effectively reset the cost base of the business. We believe that the Country Road Group is now well positioned with a stronger foundation going into the new financial year.
By focusing on what was within our control, we exercised strict cost discipline across all businesses, even with heightened strategic OpEx costs impacting near-term profitability and return metrics. We have made significant investments as part of our capital plan, which positions us well for future growth and value delivery. Net debt levels were held steady year on year, supported by the sale of the Berg Street property in Australia, which also enabled us to continue investments in our strategic growth drivers. During the year, we returned ZAR 2 billion of dividends to shareholders. Looking at the key financial metrics of the group, we generated turnover and concession sales of ZAR 81 billion, an increase of over 6% for the year. Within this, Woolworths South Africa increased sales by 9.4%, which is commendable in a tough environment.
From an earnings perspective, the group adjusted EBITDA of ZAR 8.7 billion was 3.8% lower than last year, while adjusted EBIT of ZAR 5.2 billion was down 10.9%. I will cover this in more detail shortly. Group earnings were impacted by the negative operating leverage of our apparel businesses, as well as a 4.9% increase in finance costs. Consequently, adjusted diluted HEPS of ZAR 3.03 per share declined by 19%. Our total dividend for the year is ZAR 1.88 per share, in accordance with our dividend policy of a payout ratio of 70% of headline earnings. Our balance sheet remains healthy with net borrowings of ZAR 5.6 billion, which is in line with our net debt position at the end of last year.
We remain comfortable with our level of borrowings with net debt to EBITDA of 1.46 x, including lease liabilities, which is well within our internal limit and bank covenants. A healthy balance sheet has enabled us to continue investing in maintaining our core assets and in future growth opportunities, while withstanding internal and external pressures. Our return on capital employed of 16.4% remains well above our cost of capital. Moving on to segmental earnings for the year, the group reported adjusted EBIT of ZAR 5.2 billion, which is 10.9% below last year, while adjusted EBITDA is down a lesser 3.8%. The gap between the EBIT and the EBITDA performance reflects the impact of increased capital investments. The adjusted EBITDA for Woolworths South Africa, which includes the Food, FBH, and Financial Services, was up 6.8% on last year, with adjusted EBIT increasing by 1.5%.
Food EBIT at ZAR 3.6 billion is up by 7.4%, while FBH is 9.1% lower at ZAR 1.6 billion. However, FBH reported positive EBIT growth in the second half, up 0.5%. Woolworths Financial Services underlying profit after tax increased by 26%, excluding the one-off IFRS 17 adjustment in the prior period. As is evident, the Country Road Group performance had a material negative impact on the overall group performance, with an operating loss of AUD 18 million. I will now cover the Woolworths South Africa business, providing some macro context, as well as a deep dive into each of our business units, and thereafter look at the Australian environment and the performance of the Country Road Group. As always, it's important to frame our performance within the operating context, and this should be quite, quite, quite familiar to most.
In South Africa, the weak GDP growth and lack of job creation remains concerning. Real disposable incomes have remained under pressure, particularly for South Africa's middle class, despite interest rate cuts and easing inflation. The impact of U.S. trade tariffs remains uncertain and is expected to be negative for the overall economy. Considering this economic backdrop, Woolworths South Africa delivered a commendable result. Our sales increased by 9.4% for the year and by 9.8% in the second half. Our Food business had an excellent year, with sales growth of 11% and sector-leading like-for-like growth of 7.7%. We achieved this by further improving availability, reinforcing product innovation, and enhancing our customer proposition. Internal price inflation moderated to 5.3% for the year and by 4.2% in the second half, which supported the positive underlying volume growth. Notably, Woolworths Dash sales grew by over 40%.
In Fashion, Beauty, and Home, sales increased by 4.7% and grew by 7% in the second half, a strong recovery from the first half. FBH also saw positive volume growth with very low price movement of 2.2% and 0.4% in fashion. Our beauty business had another outstanding performance and increased by almost 15% on the back of a 16% increase last year, reaffirming Woolies as the number one beauty shopping destination in South Africa. Our Home business also had a pleasing performance, especially in the second half, with 9.5% growth and online grew by 23%, now contributing 6.6% to FBH sales. Our other markets in Africa also contributed positively to growth, despite the disruption we experienced in some countries. Before we deep dive into our Woolworths businesses, I want to take a moment to reflect on the performance in the second half.
We had a vastly improved second half in Woolworths South Africa, owing to a recovery in FBH, which had been impacted by stock flow issues over the festive season in the first half. Total Woolworths South Africa sales of ZAR 34.9 billion was up almost 10% in H2, while EBITDA increased by 11%. Let's now turn to the segmental results for Food, FBH, and Financial Services. I will talk to the key highlights, and you can find the detail in the appendix to the presentation pack. Starting with our ood business, once again, Food delivered an outstanding result with consistently strong top-line growth and gross profit margin improvement, as well as best-in-class return metrics. This is a testament to the strength of our brand and our leading customer proposition.
Gross profit margin increased to 24.9%, which was up 20 basis points, and this was driven by more effective promotions, as well as value chain efficiencies, which offset the diluted impact of increased online sales. Our investments in growth initiatives, together with the inclusion of Absolute Pets, which annualized in the fourth quarter, as well as the absorption of group stranded costs, resulted in expense growth of 14.5%. EBIT increased by 7.4% to ZAR 3.6 billion, with an EBIT margin of 6.9% and 7% in the second half. Importantly, EBITDA is up almost 12%, and our return on capital employed remains best-in-class at 41%. Turning to FBH, we continue to make significant progress to improve the foundational capabilities of this business to enable us to deliver a more consistent performance. In particular, the improvement in availability has underpinned the second half result.
Gross profit margin reduced by 1.2 percentage points to 47.3% due to the higher supply chain costs associated with the distribution center transformation, a higher promotional contribution to sales, and a growing beauty contribution, which is margin dilutive. Expense growth was contained to 5.7%. This was supported by space rationalization, partially offsetting the increased cost from investments in strategic projects. The improved second half performance resulted in EBITDA growth of 7.6% and EBIT growth of 0.5%, returning a second half EBIT margin of 11%. Our return on capital for FBH was 16.1% and remains above our cost of capital. Woolworths Financial Services has continued to contribute positively to the group. We closed the year with a book of ZAR 15 billion, which is 0.5% up, excluding the sale of part of the legal book of ZAR 1.6 billion.
Net interest income declined by 3.5% primarily due to successive decreases in the repo rate and was maintained at 12.2% of the book. The impairment rate of 6.1% remains sector-leading, as we have been quite deliberate in containing our risk exposure. Profit after tax of ZAR 216 million was 26.3% up on last year, when excluding this FY 2017 adjustment in the prior period. The return on equity of 18.4% is very pleasing given the tough macro environment. Turning to Australia, the prolonged high cost of living and elevated levels of household debt persisted throughout the reporting period, contributing to GDP per capita declining sharply. The pressure on the consumer has resulted in the retail sector becoming heavily promotional, causing a shift in consumer behavior towards value. Moving on to Country Road Group, sales of over AUD 1 billion declined by 5.4% on the prior year.
Encouragingly, fourth quarter sales were almost flat on last year, with positive growth in June. It's important to note that the Country Road and Fenrir brands have traded ahead of the other Country Road Group brands, and CRG sales in South Africa were ahead of last year. CRG was also impacted by the internal disruption arising from the significant organizational restructuring that was undertaken and completed during the year. We acknowledge that the Country Road Group performance for the year, and especially in the second half, was extremely disappointing. As we responded to the weak trading environment, our promotional activity also intensified as we sought to clear stock and reduce inventory levels. This, coupled with the weaker Australian dollar, compressed our gross profit margin by 390 basis points to 56.4%.
The organizational restructure I referred to earlier resulted in reduced operational costs, which in effect offset the stranded and dissynergy costs arising from the separation from David Jones. The full benefit of this will be evident in the following year. Costs therefore declined by 1.5% for the period. Given the negative operating leverage from the very weak top line and the gross profit margin erosion, CRG incurred an operating loss of AUD 18 million for the year. Adjusted EBITDA of AUD 103.9 million was down 41%. As previously mentioned, we impaired the value of our underperforming brands, namely Witchery, Mimco, and Politix, by AUD 78 million. Let's have a look at our capital expenditure, balance sheet, and cash flow. The 2025 financial year is the second year of our heightened CapEx investment plan in our strategic journey that we previously shared with you.
We spent ZAR 3 billion in CapEx during the period, and some of our major strategic initiatives are multi-year programs, including our Midrand DC expansion and the value chain transformation, which will be completed in FY 2026. Our plan for FY 2026 includes CapEx of ZAR 2.7 billion. The investments that we have made are fully aligned with our strategies to drive long-term growth and value. This involves building capacity, enhancing capability, and customer experiences through our next-generation stores and formats, data and analytics, AI, digital and online, as well as loyalty. Our balance sheet remains healthy and was bolstered by the sale of the property in Australia. We covered this in detail at the half. Net borrowings for the group were held at ZAR 5.6 billion, and gearing metrics remain well within our targeted range and bank covenants. Inventory levels have increased by 20% year on year.
In FBH, this was as a result of the stock flow challenges in H1, coupled with the investment in key categories. The CRG increase was due to softer trade, despite efforts to clear excess stock. We expect inventory levels to normalize going forward. Our return on capital employed for the year was 16.4% and remains well ahead of our cost of capital. The decline from the prior period was a result of the lower earnings of the group, particularly the Country Road Group, and by the increased capital spent on long-term investments. In terms of cash flow, we generated ZAR 8.4 billion of cash from trading and free cash flow of ZAR 1.9 billion. The higher working capital investment has been driven by inventory, as mentioned earlier.
The Berg Street sale proceeds assisted in funding strategic CapEx, working capital investment, and share scheme purchases, enabling net debt to remain in line with last year. We paid ZAR 2 billion of dividends to our shareholders out of operating cash flows and purchased shares off-market for purposes of our employee share plan of approximately ZAR 550 million. Lastly, and importantly, the group remains very cash generative with a healthy cash conversion rate of 83%. I want to end with an update on recent trading for the first seven weeks of the new financial year, as well as sharing with you our expectations of price movement and space growth. The sales growth for Food continues to be strong at 6.9%. This remains well above our price inflation, which is expected to average between 4.5%- 5.5% in H1, while net space is expected to grow by almost 3%.
In FBH, the seven-week trade has maintained its momentum and is up 8.3%. Similar to Food, we expect the price movement in H1 to average between 4.5%- 5.5%. For the Country Road Group, while trading conditions remain tough, CRG sales are up 1.2%. In both FBH and CRG, we plan to reduce unproductive space by approximately 1.4%. In closing, while it's been a tough year and a disappointing group result, we are pleased with the strength and resilience of Woolworths South Africa, particularly in the second half, and acknowledge the challenging year we had in Australia. We have good businesses with strong brands, which we are confident will perform to their potential through clear strategies and focused execution. We will continue to invest responsibly in our growth drivers, using our capital allocation framework, and have a healthy balance sheet to enable that. Thank you again for joining us today. Over to you, Roy, for the strategic update.
Thank you, Zaid. You may recall from our FY 2024 annual results presentation, I shared this slide with you, highlighting how far we've progressed in our multi-step strategic journey. Over the past year, I'm very pleased to say that we've largely completed what we called our fix, strengthen, and reposition phase. Whilst our overarching strategies have not changed and we will continually improve and strengthen our foundations, I am particularly excited that we can now double down on the optimize, invest, and growth phase. This is where the energy shifts and where our focus turns fully to growth. As we continue to differentiate ourselves in our respective markets, our drivers of growth are clear. Firstly, we remain firmly committed to protecting and growing what we are already known and loved for: our core businesses that consistently deliver innovative, high-quality, and sustainable products that customers trust.
At the same time, we are going beyond our core, what we describe as expanding for more, be it through focusing on growth in adjacent categories, new formats, or strategic market opportunities. All of this is anchored in leading customer experience across all channels, through our new loyalty program, and perhaps more importantly, by continuing to provide the best in-store service in the country. Starting with CR G, I'd like to take a moment to remind you of the deliberate actions we have implemented with regards to our Australian business, and importantly, the sequence in which we undertook those. To recap, our first priority was to successfully separate the financial arrangement which bound C R G to David Jones. Having turned David Jones around, we proceeded to divest of the business itself, a transaction which was not only very well timed, but more crucially transformational for our group.
The third step involved extensive work to untangle the deeply integrated shared services between CR G and David Jones, enabling CR G to enter FY 2025 free from David Jones, but with a compromised business model wholly unsuited for a standalone business. This brings us to the fourth and final phase of our plan, which has been the business's primary focus throughout the last financial year, reconfiguring our operating model and setting up CR G as a standalone business with the ability and capabilities it needs to execute on its strategic potential. The restructuring was complex and comprehensive, as it effectively reshaped our entire end-to-end operating model, optimizing structures, processes, and ways of working to drive the efficiency, the flexibility, and scale needed to support a true house of brands strategy. This was the most significant transformation in CR G's history.
Over 80% of non-store roles were impacted in some way or another through streamlining, role changes, or new positions, and all of this was completed in just 10 months. We committed to getting this done by our financial year-end, and we did that. Yes, a protracted approach may have meant less business disruption and less impact on short-term financials, but it would have compromised how quickly CR G would take to realize its longer-term potential. That is now firmly underway. Today, CR G enters FY 2026 with a fit-for-purpose operating model, leaner, ahgile, and efficient, and critically, greater levels of accountability, all aligned to a true house of brands strategy. A house of brands is only as strong as the brands themselves.
We have done a lot of work here, driving clarity and distinction between the brands so that each of them has its own distinct market position, unique style, aesthetic, and clear strategic direction. In our interim results presentation, we shared the really positive outcomes of Tenery's repositioning. We also said we expected Witchery to start delivering an improving performance from this winter, which is exactly what we've seen. Witchery is now delivering double-digit growth and over the past few months has been the top-performing brand, not only in our business, but also throughout the department store channel. We expect this momentum to continue building through FY 2026.
Geographically, we are also growing our wholesale presence in Australia and New Zealand, which has enabled us to hold our market share, notwithstanding the disruption we have faced over the past year. We are also leveraging our unique and market-leading position in South Africa, where we generate over ZAR 1 billion in sales. All three regions offer discrete opportunities and significant runway for growth, and we will continue to expand our presence in these areas, in addition to growing our core business. Lastly, I'm very pleased to announce that from the beginning of July, Steven Cook has been appointed as the CEO of Country Road Group. Steven is a highly accomplished retail executive with over 30 years of global experience and is a results-driven, people-focused leader. Make no mistake, CRG is a great business, deeply ingrained in Australian retail and society.
Yes, the results aren't what we would have liked for the reasons I've just explained, but it will return to the stature and the financial outcomes that can be expected from it. We're already starting to see some traction, and with a solid foundation we've now established, both structurally and strategically, and with new leadership in place, we have what it takes to deliver a much improved result from FY 2026 onwards. Turning now to FBH, where we have spent the past couple of years fundamentally fixing and repositioning our fashion business under a very deliberate two-phase approach. You'd recall that phase one was all about getting more and more of the product right, essentially product design and buying. We've made really good progress in this regard. Our products now truly provide our customers with the trusted value, the quality, and the difference they expect from Woolies.
We are constantly pushing ourselves to raise the bar, and you'll see shortly in our quality reset program what that's all about. With this stronger foundation, we shifted our focus to the next phase in our turnaround by addressing inventory management and product availability. We've been quite candid about the legacy issues we faced here and the extent of historic underinvestment, and that overcoming these issues required not only substantial investment, ZAR 1.5 billion , in fact, but a fundamental transformation of our systems and processes across planning, logistics, and inventory management, the science behind successful apparel retailing, to get our right product to the right stores in the right quantities and sizes at the right time. Let me be clear, our turnaround is now complete, and we can see this demonstrated in the key indicators we've tracked over time as we've edited to amplify.
We've rationalized unproductive space by more than 15%. We've improved SKU productivity. Our full price sales now are consistently over 80%. We've reduced markdowns by close on 10 percentage points. Availability is now north of 90%, and we've increased our trading densities by almost 40%. A large focus of the turnaround was our value chain transformation, or what we call VCT, something we've spoken about at length. I'd like to take a moment to update you on the progress we've made in this regard. Through VCT, we've increased our DC capacity by 40%. We've completed our transport optimization program, leading to more frequent deliveries and efficiency gains. We've also reconfigured our operating model, establishing both a supplier-facing and a customer-facing center of excellence. We have further consolidated our supplier base, and we've increased our levels of local production.
We have also now fully completed the rollout of RFID, reducing stockouts and increasing product availability on the sales floor. I have long said that improving our availability was our biggest commercial opportunity, and we're now seeing the benefits of that. Our fourth quarter saw double-digit growth in our winter merchandise, with underlying volume growth of 7% across the broader F B H business. We've gained market share on both a three-month and six-month moving average basis, now that our product is where it needs to be, delivering the strongest like-for-like sales growth in the sector and momentum continuing to build into the new financial year. This is further evidence that we've fixed and repositioned our F B H business. This is the last time we're going to be referencing a turnaround when we talk about F B H.
From here, we are shifting our focus to relentlessly executing against our various growth and growth-enabling initiatives. It's all about execution. Key to protecting and growing our core business is providing the most wanted, best-in-class, quality essential, and stylish go-to pieces for everyday living. We're investing behind our quality reset, which embraces all aspects of quality throughout the value chain and our customers' experience, from fabric and fit to in-store execution and service, effectively reclaiming our position as the undisputed end-to-end quality authority in the market.
Our purpose is adding quality to life. Quality is at the apex of our brand promise, and it must be at the center of everything we do in Fashion, Beauty, and Home. To ensure we meet our customers' expectations, we use the brand filter framework, asking key questions. Is it a quality item? Does it fit well and feel comfortable? Is it trend-relevant and appealing to our savvy customer? Is it worth the price, delivering real value? Our quality reset is about amplifying our obsession with quality. This will enable us to tackle root causes across our value chain and ensure we continue to meet and exceed customer expectations. To guide us, we've developed a quality blueprint, defining what quality means to us, the principles that drive our evolution, and the key strategies that ensure quality excellence. Our customers must be delighted, not just by our product, but by their entire experience with us.
We are also amplifying our focus on our sharply defined must-win categories with targeted price investments and range enhancements. This will ensure that we remain relevant and competitive and that we deepen our presence where it matters most to our customers. For example, we're now offering the same Woolies quality at more compelling price points across essential kidswear items. This not only reestablishes our presence and our leadership in kidswear, it enhances our competitiveness in the category, and it leverages the halo effect across our broader business. We know that customers who shop kidswear spend on average six times more across the FBH business than customers that don't. We are doing a lot more with this category in a far more deliberate way, given the role it plays in driving overall basket size and category penetration. That's how we protect and grow our core, but also expand for more. Our Africa business represents a great expand-for-more opportunity for us. These are markets where we already operate, so we have deep local knowledge, and importantly, our brand is well recognized and trusted by customers there.
We also see exciting white space opportunity in our newer smaller format W Edit stores, which I'll come back to later. Turning to beauty, a category in which we continue to take significant market share. We expanded space in more than 30 doors this past year, with another 40 planned for expansion and upgrade in FY 2026, confirming our position as the beauty shopping destination in the South African market. We've also expanded in Africa, taking branded beauty to more of our stores and our W Beauty range to 40 of them. We're on track to have tripled the size of this business in just a few years. Why? Because we have a significant competitive advantage in this space, given the frequency of footfall driven by our Foods business, a strong beauty online offering, and a loyal customer base.
In fact, we now have over 1 million loyal beauty customers shopping with us. That is a remarkable milestone and clear evidence of the power of Woolworths to lead and win in this space. What's more, whilst we are increasingly regarded as the destination of choice for aspirational beauty brands and houses, what really differentiates us is our W Beauty private label range, accounting for a quarter of our total beauty turnover. Like we have in our Food space, it's the quality, innovation, and sustainability credentials of our private label offering that really sets us apart, supported by the recent opening of our Green Leaf W Beauty factory. A winning formula of both private label and third-party brands, exceptional service, and a world-class experience is clearly visible in our recently opened Tyger Valley store.
I look forward to sharing a video of this with you a little later in the presentation. Another business where we see great growth potential is in home, which we expect to double in the next few years. This division delivered 10% growth in the past half, and like beauty, it holds distinctive competitive advantages in driving greater levels of cross-shop with our loyal food customer. We are expanding both our range and our in-store space allocation to provide our customers with an inspiring lifestyle destination, bringing the Woolies difference to all aspects of their lives and homes. We've also made a leadership change in FBH. Marnie has led this business for the past five years, during which time we have not only fixed and repositioned our business, but I believe firmly turned it around.
With our shifting focus, I'm very pleased to welcome [Newholt Hoserman] as the new CEO of FBH. [Newholt] brings a wealth of global retail and brand-building experience to our group and a strong track record of delivering performance across diverse markets and channels. His deep appreciation for customers and brands and a strong focus on execution will be invaluable as we increasingly turn our attention towards growth. The high-potential growth categories we're pursuing, particularly beauty, kids, and baby, are inherently lower GP margin categories. Beauty, in fact, has a GP margin easily 10%- 15% below that of Fashion. Within Fashion, kids and baby trade at a much lower margin than you would typically find in core women's and menswear. We're seeing greater opportunity than we did even a year or two ago to expand our market share, our authority in some of these key areas.
As these categories become an even bigger part of our overall FBH business, they obviously have an impact on our aggregate margin. In other words, whilst the category margins themselves remain unchanged, the overall mix evolves, and that has a dilutionary impact on the blended FBH GP margin and, in turn, the blended EBIT margin. To reflect the impact of the shifting mix, we're moderating the EBIT margin target for our overall FBH business, from what we had, greater than 14% to greater than 12%. Again, let me clarify, this does not reflect any moderation in the outlook for our FBH business.
To the contrary, it is because of our confidence in the potential of beauty, kids, and baby that we are growing our range and space allocations in these areas, effectively growing a bigger overall FBH business in rand terms, albeit with a different blend from a margin mix perspective. Turning now to what is effectively the engine room of our group, our market-leading food business. I am very proud of the performance we've delivered this year. This business didn't miss a beat, notwithstanding the leadership transition to Sam, who is firmly in the saddle, but supported by more than 100 cumulative years of Woolies food-specific experience amongst our Foods top team. What truly makes us leaders in this space goes well beyond short-term financial results. It's the exceptionally strong foundation we've built over decades, underpinned by fundamentals that not only differentiate us, but are incredibly difficult to authentically replicate.
From our unmatched expertise in food science and technology to our best-in-class cold chain, our obsession with quality, our unrivaled innovation capabilities, and our sustainability credentials, these are the qualities that I've spoken about before and which truly set our food business apart. That's the simple truth. Let's take a look. What you've seen is what sets our food business apart. While we liken it to the Holy Grail, the enviable sweet spot, which balances giving our customers the best offer in every sense in the market, whilst at the same time delivering shareholders the highest return on capital in the sector. We'll continue to do just that. In fact, you are going to be seeing a lot more from our food business as we keep raising the bar.
First, let me remind you of what we've done and what we'll continue to do to protect and grow our core business. We have further improved our on-shelf availability through a more elevated and sophisticated approach to inventory management and demand planning. We have fundamentally shifted our value perception by investing in price and amplifying our trusted value proposition, the Woolies difference in quality at the best possible price. We've really dialed up our marketplace presence. This goes beyond space growth and online expansion. It is also about our share of voice, what we communicate to our customers, and how we go about doing that. Whether it be through conventional advertising, social media, or in-store messaging, we've become more deliberate and effective in sharing our stories with our customers. It is, after all, what they love about our products and our brand.
That said, it is also, of course, how we grow our footprint across our channels. This year, we opened our 100th forecourt. We partnered with Uber Eats to launch Woolies After Dark, which is now live in over 70 food stops, offering customers the best of our curated Woolies assortment, conveniently delivered until midnight. We've continued to build the momentum of our on-demand Dash platform, which has not only grown by over 40%, but has done so profitably. What's more, 5% of Dash customers are brand new to the Woolies business. We are rolling out our best-in-class next-generation stores, which I'll share more with you later. Whilst we've increased our presence, our consistent month-on-month market share gains haven't been reliant on indiscriminate space growth. It's coming from increased spend from our existing customers and through attracting new customers into our brand.
This is because we're widening the gap with our competitors by consistently providing superior quality and constant innovation. Looking beyond South Africa, much like with FBH, we recognize significant potential in our African operations. We've invested time and resource in thoroughly understanding these markets, fostering strong relationships, securing direct supply, and supporting local farmers. We'll continue to leverage these efforts to drive even further growth across our existing African markets. It goes without saying that growing a world-class Foods business requires ongoing investment. A key part of this is the ZAR 1.7 billion we're investing in our state-of-the-art Midrand DC, with the first phases already coming online. Let's take a look. As you can see, we're growing our core business across multiple channels. We're also expanding for more by investing in a number of very specific growth initiatives.
To this end, we've recently launched Woolworths Ventures, designed to accelerate and scale high-potential adjacent businesses backed by a dedicated team and simplified processes focused exclusively on unlocking strategic growth opportunities with greater speed and agility. The unique benefit of Woolworths Ventures is it brings together an entrepreneurial spirit and a startup mentality with the capabilities of a 90-year-old powerhouse retailer, effectively creating a 90-year-old startup. A number of these ventures are within the broader food space, such as our Food ervices business, being our more than 200 cafes, coffee pods, or hatches, and our quick service na-na format. W Seller, which now includes almost 30 standalones offering a curated selection of alcoholic beverages within an elevated retail experience, and Pet, which now has around 250 locations.
This includes our acquisition of Absolute Pets, which continues to trade ahead of expectations, realizing synergy benefits across multiple areas and demonstrating our ability to make judicious acquisitions and leveraging the role of Woolworths Ventures in enabling successful implementation. Last, but by no means least, W Ventures also includes our specialty apparel offering, W Edit. We've got 40 doors already, and having tested this concept and gained a number of learnings, we're now in a position to really double down on the opportunity we see here. Woolies Ventures is really paying off for us, delivering the fastest growth of anywhere in the business. That's given its strong like-for-like sales, as well as the opening of almost 60 new doors across various ventures in the past year alone. Very importantly, we're also seeing it bring new customers into the brand.
This year, we'll open another 60 doors across our formats and launch some exciting new concepts. In fact, I'm confident that within the next two years, we'll have doubled the size of this overall business. I'm very excited about the various growth opportunities, but I'm equally passionate about how we lead in customer experience. Earlier this year, I was delighted to welcome back Spencer Sonn as our Chief Customer Officer. Spencer is no stranger to Woolies. He has an exceptional track record in our business, having served in various key senior roles across our organization, the most significant of which was heading up our Foods business from 2015 to 2020. Under his leadership, we've now consolidated all customer touchpoints across all our channels and engagements, ensuring that our customers remain at the center of everything we do.
Whilst we continue to invest in our data and analytics center of excellence and our various digital and AI initiatives, including growing online and on-demand offerings, it is in brick and mortar, our stores, that true differences really come to life. We have fundamentally rethought the role that stores play in our customers' lives. Our next-generation store format is driving significant uplift across must-win categories like bakery, produce, and our newly introduced kitchen. We've launched over 20 of these so far, with a further 10 in the immediate pipeline, including, of course, our first-of-a-kind food emporium in Durbanville, Cape Town, and our full-line Tyger Valley store. What you'll see here isn't just a beautiful new store design. It's a bit of a sneak preview of where we're headed as a business and as a brand.
It's a glimpse of what's possible when we truly reimagine premium food, premium fashion and beauty in home, and premium service and experience, guided, of course, always by what matters most to our customers. Let's take a look. These stores truly embody what Woolies stands for: quality without compromise, innovation with a clear purpose, and leading sustainability credentials. These are the things that truly underscore the extraordinary Woolies difference. This is only possible because of the remarkable team of people we have working for us. You simply cannot lead in customer experience without also leading in your people experience. That's why we invest in our people, from training and development to paying them a just wage, to providing comprehensive healthcare. We see the power and benefit of that in the caliber of staff we're not only able to attract, but also retain.
In fact, our staff turnover numbers are more than 4% lower than the industry average. That has an impact on our store experience. It has an impact on our customer experience. Not only does it make good business sense, it's the right thing to do. On that note, I want to pause to sincerely thank our people. We are privileged to have an extraordinary team whose passion, whose hard work, and commitment are the cornerstone of our success. I also want to thank our customers and acknowledge them for their loyalty and trust, and our suppliers and partners for their collaboration and dedication. Before moving to the outlook, I'd like to talk about capital allocation, given the role that this plays in shaping what's to come. As you know, we are an incredibly cash-generative business, largely by virtue of our fresh foods business.
Notwithstanding the additional investments in working capital this past year, we still generated a cash conversion ratio of over 80%. What is critical, however, is where and how that capital is deployed. We continue to refine our capital allocation approach to ensure our framework and process support our strategies and growth ambitions to drive long-term value creation for all stakeholders. That is not only about generating good profits. It is about how the cash and capital we generate over time is then utilized. That has resulted in a number of shifts. Our capital structure has evolved significantly as we divested from underperforming assets in Australia and shifted our capital and management focus to our core Southern African businesses. We have embarked on a sizable CapEx program, reinvesting in our own businesses.
This was necessary not only to make up for an extended period of underinvestment during the David Jones era, but to shore up the foundational capabilities needed to drive sustainable and profitable growth. Yes, this has meant a drag on short-term profit and returns, which culminated this past year, but it was essential to longer-term value creation. We've also proven our ability to make value-accretive acquisitions. Our acquisition of Absolute Pets has not only proven margin and earnings enhancing from day one, but is generating a return on investment of around 20% for us. Very importantly, we've shifted our approach to returning excess cash to shareholders, and I'm very pleased to share that following our successful repurchase of shares in 2023, we've commenced a further share buyback program.
A number of shifts from capital structure and CapEx prioritization to investment parameters and evaluation criteria to how we reward shareholders, shifts which have been absolutely necessary to set this business up for longer-term success. In summary, and as I've shared, FY 2025 has been a disappointing year for us from a financial perspective. These are results that will not be repeated. It is a tough year for our group, but at the same time, what isn't apparent from the financial scoreboard is the extent to which we've shifted our core capabilities as a result of some very tough but absolutely necessary capital allocation decisions. Whilst we can't control the macro, which is likely to remain constrained for the foreseeable future, we have completed a lot of heavy lifting in laying the groundwork for years to come. We have a strong leadership team in place.
We have clear strategies and the capabilities to execute them. We have a world-class Foods business that remains the engine room of our value creation, and we have two apparel businesses that present significant and realizable opportunity for us as a group to unlock further value. Looking ahead, I have every confidence that we'll return an improved performance from this year onwards. We will resume the path to our margin targets. We will see the benefits of our strengthened brands and growing customer base and our competitive advantages, as well as the investments we have made. We'll deliver the sustainable returns that you, as shareholders, can and should expect from us. With that, let's open for questions.
Good morning again, and welcome to the Q&A section of our results presentation. Roy, our first question, what gives you confidence this isn't another false dawn in the FBH business?
Right, I think, yeah, a nice punchy, I think, first question, but I guess, I mean, it's important to remember that, you know, there's always going to be a degree of cyclicality in apparel retailing, but there are fundamental capabilities and disciplines that can mitigate for that. That's what I think we've tried to sort of show you and what we've done in our two-phase turnaround plan. First phase was all about getting the product increasingly right, and the second phase about improving our operational performance and driving up availability. We've invested very significantly over the last couple of years in our value chain transformation, over ZAR 1.5 billion, to really support the shifts needed to implement the technologies and the capabilities across the business. That's fundamentally what's transformed our ability to execute and deliver a more consistent, a more sustainable level of performance.
It isn't what you've called a false dawn. That's already evident, in fact, if you look at some of the various operational proof points we've shared with you. Our full price sales are increasingly and consistently above 80%. Our availability now well above 90%. Financially, you're seeing it now too in improving trading momentum. We certainly expect to see that sustain.
Your revised FBH margin target comes as a bit of a surprise. Why are you growing low margin categories if they dilute profitability? Why not focus on higher margin ones?
Yeah, I mean, a good question and an important one, I think. We absolutely see opportunity to take meaningful market share in those categories. These are the categories which for sure play to our strengths. They are categories in which we have distinctive competitive advantages and we believe the right to win, where quality really is a big differentiator. They're also categories where we can capture the Foods footfall and the cross-shop opportunity. They're also categories, I think, which drive a halo effect into other categories across the business. I think it's important that when one thinks about the size of the prize, you need to think about it in terms of GP rands, not percentage terms. As a retailer, we obviously bank rands, not percentages. Frankly, we see the value of the opportunity here far outweighing the opportunity in other categories. Their margins may be higher, but growth potential here a little bit lower. It's both a customer and a commercial decision for us.
Another question, I think, covering both apparel businesses. Your stock levels are up significantly year on year, which must surely mean further markdown risk in both FBH and CRG. How should we think about the outlook for GP margins as a result?
Yeah, Zaid, do you want to take that question?
Sure, sure. Thanks, Roy. Yes, of course. We did end the year with higher stock levels than we had planned, so roughly about 20% up year on year, and mostly coming from the apparel businesses. Let me just talk to them individually. From an FBH perspective, we did have a temporary setback with stock flow issues that we had, as we had called out in the first half. We've also made significant investments in certain key categories, such as kids. We've been quite deliberate in driving availability in FBH. That certainly contributed towards FBH having higher stock levels. However, the stock that we do have within FBH is predominantly what we call all-year product, so they're not seasonal product, and we can work through that over the course of the year. In the Country Road Group, it's been because of largely the tough trading environment.
Even though we had tried to sort of trade through that towards the end of the year, we did end up with an elevated level of inventory. However, what we've done is actually cut back on orders by more than 10%. We've kept it 10% open to buy to be held in reserve uncommitted, which enables us to lever and to chase trade if we need to. We would expect inventory to be at more normal levels towards the end of the year. Also keeping in mind, again, from a GP margin perspective, in FY 2025, we saw a number of headwinds to the GP margin. We had higher levels of promotions in both FBH and in CR G. In FBH, we had one-off supply chain costs. We also had the weaker Australian dollar, which we don't really expect to comp or to have to the same degree in the current year. Net-net, I don't foresee any material risk to GP margins year on year.
Thanks, Zaid. Roy, a couple of questions around Foods and specifically food inflation. One of your competitors reported results yesterday, and your price inflation in Foods seems well above theirs. Why is that? To what extent is higher inflation supporting your top line growth and GP margins? Another similar question. Morning, your food business has posted market-leading inflation levels, indicating a pricing move above market levels. Post-period food performance appears a bit softer. Do you not think you're pricing customers away from your offering?
Thanks for the question. We're certainly not lifting pricing. In fact, we continue to invest in price, and we've invested just under ZAR 1 billion now in price over the past couple of years. That's had a very positive impact on what we call our trusted value. There are probably three reasons why our inflation is slightly higher. Firstly, it's a mix effect. You're seeing higher inflation in key categories where we have higher market shares, coffee, chocolate, produce, for example. The price drops that we've seen, though, are more in commodity lines, which make up a bigger share of the basket for our competitors. Secondly, our internal inflation typically lags that of our peers. It's really a function of our exclusive supply arrangements. That's why our inflation seems to be stickier when we're going up and also stickier when inflation is coming down.
Thirdly, I think we're driving more effective promotions. We're, in fact, selling more at full price, and that's because our customers really trust the premium quality they get at a fair price, what I mentioned we refer to as trusted value. No, we're definitely not pricing customers away from our offering, and you can see that in our volume growth and in our market share, not just in value terms, but also in volume terms.
Thanks, Roy. What has led to the slowdown or slight slowdown in South Africa food post-period end? Is it inflation? Is it base effects? Is it promo activity?
It is definitely not lost momentum. It may be 1 percentage point or 2 below where we ended the second half, but that's the result of a couple of factors. Firstly, inflation easing, this point I've just spoken about. We lag both on the way up and on the way down. Absolute Pets has now annualized. Perhaps a smaller point, but an important one, is that our flagship Tyger Valley store has been closed for three months, going through its refurbishment and its remodeling. It's reopened now in mid-August. The reality is, despite these factors, we continue to grow market share and continue to see positive volume growth. We are very confident in our ability to continue to deliver strong top line growth across the coming months.
Thanks, Roy. Expense growth in the W S A business has been ahead of sales growth, particularly in Food. What was the cause of this? How should we think about cost growth going forward?
Zaid, you want to pick that one up?
Sure, thanks, Roy. Cost growth in Foods certainly has been higher at 14.5%. In the FBH business, it actually was very much under control. It was between 5% and 6%, so very much at the sort of inflation level. Let me just talk to the Food expense growth number. There are a number of factors that have impacted that growth. Firstly, Roy's just spoken to we've annualized Absolute Pets. That's not like-for-like. We had three months of Absolute Pets in the last financial year and 12 months in this financial year. That sort of increased the growth rate of expenses. The second important point to also note is that we have now fully absorbed all the unallocated costs from the David Jones separation. We had called out at the end of last year quite separately what those unallocated costs were. They were ZAR 130 million.
Those costs are now in the base that we see come through in each of our businesses. Thirdly, the high depreciation we've had from the various investments we've made in both strategic and growth-enabling initiatives. Those depreciation charges, of course, increase the cost expense as well. In addition to that, the OpEx from the various strategic initiatives we've got, particularly in Woolworths Ventures, in the initial years, you see high OpEx costs coming through and you see them normalizing thereafter. Looking ahead, I think we always endeavor to contain cost growth within our top line growth, trying to get positive jaws. That's very much our intent. That said, we have come through a heavier period of CapEx spend, which has both an OpEx and a depreciation component associated with that. Certainly expect that to, so it'll be sort of short-term in nature, but certainly necessary for future growth.
Zaid, thanks. Maybe another question on cost. Could you please quantify how much costs have been taken out of CRG post-restructuring?
I made a lot of reference to the restructure work that we did. We have fundamentally sort of rebased the cost in Country Road Group. If you annualize the cost, it's circa about over AUD 30 million that we've taken out. Importantly, this cost that we have taken out largely offsets some of what we call the dis-synergy and the stranded costs we have seen following the David Jones separation. I think certainly that business is now well set up for both in terms of a top line, but also having a more appropriate cost base for the size of the business.
Thanks, Zaid. Seven weeks trading performance from FBH is commendable. Can you comment on the level of promotional activity in this period when compared to the previous year?
Thank you. It has been a good quality top line result. In that, full price sales, in fact, has grown ahead of the headline growth we've reported of just over 8%. Very pleased with that performance.
Thanks, Roy. Question on CR G. How realistic is your 10% margin target in the context of the sizable impairment you've just taken?
Yeah, I think bringing the two together in terms of the margin and impairment, I think it's important to start off by maybe clarifying the impairment and what it was. The impairment, I think, just to be very clear, specifically relates, and we've called this out a number of times, to the underperforming brands. These are particularly the Politix brand and Mimco, and to some extent, Witchery. We've taken a pretty conservative view on these brands going forward. The Country Road brand, which is by far the biggest brand, we haven't impaired, nor have we impaired Trenery. As you know, Witchery as a brand is now, after its repositioning, delivering very strong growth in the new financial year. Also keep in mind that impairment and the impairment test is actually at the point in time. We've had two years of much lower profit.
That impacts the starting point of when we do our DCF calculation. In absolute terms, in terms of your numbers, it becomes a much smaller number. Whilst our plans very much indicate a pathway to the 10% margin return that we expect to get, and absolutely for this business, the absolute level of profit is lower than what it was a couple of years ago, which is effectively why we needed to take the impairment of these brands.
Thanks, Zaid. Roy, a couple of questions really around the outlook for CR G. How should we think about CRG losses into FY 2026? Does it spill over into first half 2026? Another one, can we infer from your comments about CRG being through its trough that the business will deliver positive earnings growth in first half FY 2026? A similar question.
Sure. I mean, FY 2025 was the trough for CRG . I mean, we are very confident FY 2026 will deliver an improved performance, particularly as our various initiatives gain momentum. We've taken a significant amount of costs out of the business. We've reset the structural economics. The brands have been repositioned. We've got new leadership in place. All of this will support a return to positive earnings growth, albeit somewhat more skewed to the second half, partly because of macros, which are still quite tough despite easing interest rates, but also because of the excess levels of inventory we're still in the process of clearing.
Thanks, Roy. A couple of questions around our buyback, and maybe we'll make this the last topic. You've announced another buyback program. What is the size of the program, and how should we think about the outlook for net debt in the context of that, and your heavy CapEx profile?
OK, thanks. You'd recall that we've bought back just under ZAR 4 billion worth of our shares over the past couple of years. We haven't disclosed the size of this program. What I can say, it's probably the most compelling investment opportunity we see, particularly at this point in time, given where our share price is at and what we expect to deliver from an earnings perspective as a result of the investments we've made to fundamentally transform our apparel businesses. Yes, I think to your question on debt, no, we don't expect debt to increase as a result of our buyback. In fact, we actually expect net debt to decrease by year-end, given the outlook for a stronger EBITDA, the release of working capital. In fact, our CapEx spend is also coming down. It's slightly lower this year than it was last year.
Net debt will actually come down from here. Our share buyback is going to be funded primarily from the proceeds of the Melbourne property sale, which marks not just the end of the DJ' s era, but I think a sound capital allocation decision as well. Of course, we'll sustain our dividend throughout. As you know, we have the highest payout ratio in the sector. Overall, I think some really important capital allocation decisions over the past few years, including buying back our own shares, which continues. All of this, by the way, sets us up to deliver sustainable returns, certainly a sustainable and increasing level of returns for our shareholders going forward.
Roy, Zaid, thank you. To all of our listeners, thank you for joining us online. We look forward to engaging with many of you over the next week or two. As always, please feel free to reach out should you have any further questions.
Thank you very much.
Thank you very much.
Thank you to everyone.