City Chic Collective Limited (CCX) Earnings Call Transcript & Summary

Okay. Well, good morning, ladies and gentlemen. My name is Michael Kay, I'm the Chairman of City Chic Collective Limited. On behalf of the Board, I'm very pleased to welcome you to the 2022 Annual General Meeting. This is our first physical meeting since the COVID pandemic required us, like many companies, to hold 2 years of virtual meetings, and we're very pleased to see some shareholders have managed to join us today in person. For those who have not been able to join us, a webcast of this meeting is available to watch live and will also be accessible after the meeting concludes by following the link on our Investor Relations website. I note there's a quorum present, and I declare the meeting open. I'd like to introduce the directors and other officers of the company. Phil Ryan, on my right, the company's Managing Director and Chief Executive Officer. And beside him, our independent nonexecutive directors, Megan Quinn, Neil Thompson and Natalie McLean. Peter McClelland, our Chief Financial Officer, is also present with us, as is Marta Kielich, our Company Secretary. And also with us today is Yvonne Barnikel, representing the company's auditors, EY, who will be prepared to answer any questions about the conduct of the audit, and representatives of Link Market Services Limited, our share registerer, who are acting as returning officer for the purposes of the meeting. Now before we move to the formal business of the meeting, I'll take the opportunity to give you a brief overview of the 2022 financial year and some thoughts on 2023. I'll then invite our CEO and Managing Director, Phil Ryan, to provide more detail on our operational performance in '22, together with an update on trade and plans for the future of the company. I'll now deliver my address. I joined this Board at the AGM 4 years ago. That is at the end of 2018. If someone had told me that after 1 relatively carefree year, the next 3 years would be characterized by the extraordinary global disruption and uncertainty of the COVID-19 pandemic, and that this would be accompanied by a period of intense geopolitical troubles and great power rivalry, and that this would be conjoined with soaring inflation and interest rates as well as the impairment of global supply chains, I don't think I would have possibly believed it. But it has happened. And as of today, it appears the world still has many challenges ahead of it. The war in Ukraine grinds on with the ever present threat of an unthinkable escalation that threatens all of us, but particularly Europe. The U.K. and Europe seemingly faced a bleak winter with inflation, interest rate rises and energy shortages. The U.S.A. is also in the middle of an inflationary and rate strengthening cycle, as is Australia. The growing impact on consumer demand is being widely reported. So it'll come as no surprise to shareholders that these events affecting our major markets are having at least, to some extent, a concomitant effect on our business. Certainly, if the movement in the share price is a reasonable indicator, the public markets have taken the view that our business is likely to be deleteriously affected. And I hope today, though, that we can demonstrate that whatever external events throw at us, City Chic, with the support of its loyal customers, will do better than most. Now typically, at an AGM, we reflect on the year just passed and provide an outlook for the year ahead. I know from my discussions with major shareholders that given the volatility and uncertainty, they're more interested in what may lie ahead than what occurred last year. Accordingly, and without the benefit of a crystal ball, Phil Ryan and I will try to focus on the issues we face in 2023 and how we propose to navigate through these unknown waters. Before doing so, however, and to put things into context, I did want to remind shareholders of the resilience this business has shown over these topsyturvy last few years. From 2019 to the end of '22 financial year, the business has achieved the following: 35.2% compound annual growth in sales, 23.7% compound annual growth in earnings, 53.6% compound annual growth in the global customer base. There's been -- sorry, online penetration has increased from 44% to 82%. And there's been an 84.1% compound annual growth rate in online customer engagement. We've grown our geographic footprint from almost exclusively to Australia in 2018, '19 to include material business in the Northern Hemisphere. Indeed, as at the end of FY '22, the Northern Hemisphere comprised 56% of sales. We've also increased the range of products available to our customers to over 8,000 styles through 15 lifestyle brands, and these are very considerable achievements. And just imagine what Phil and the City Chic team could have achieved in a more normal setting. In the '22 financial year, the company performed well under difficult conditions and highlights include sales revenue grew by 40% to $369 million, underlying EBITDA grew by 11.3% to $47 million, statutory NPAT was up 4.7%, but underlying NPAT was up 14.5% to $28.5 million. The global customer base grew during the year by 30% to 1.4 million customers who are active. Global customer website traffic grew by 35% to 78.6 million visits. Online comparable sales grew by 33.8% with 82% online penetration. And of course, there was ongoing diversification of our revenue channels with partner generated revenue growing to $30 million, and $22 million of that $30 million was generated in the second half. So I hope you can see that in a choppy market, these results demonstrate the strength of City Chic's franchise and the platform that's been developed over the years. In a year when Australia was heavily impacted by COVID and associated shop closures, et cetera, the U.S.A. business chimed in and performed excellently. Our customers are very loyal. They have been for many years through the City Chic brand in Australia and the Avenue and Evans brands in the U.S.A. and U.K., respectively. Evans EMEA and its European customers now comprise 20% of our active customer base. So moving then to 2023 and, enough of the past, what lies in the future in these extraordinary times. Well, let's start with supply chains and inventory. Shareholders will recall that management informed the market that in the face of COVID-related bottlenecks and resulting rampant inflation in the supply chain, a decision was made to buy forward to mitigate the risk of supply and as a hedge against growing inflation. Shareholders will also recall that the great majority of the purchases brought forward are items that sell year in, year out, and we have ensured that we have seasonally appropriate and relevant stock on hand in each of our key regions. So notwithstanding the current economic conditions, we remain confident in our ability to sell through this stock in our various markets, and shareholders will have noticed Phil's incentives this year are based on the balance between growing profit, reducing the inventory to the previously guided number of $125 million to $135 million on a constant currency basis and cash conversion. These incentives are a little unusual, but the Board believes they strike the right balance and keep management focused on the right things in these very unusual times. A more traditional incentive scheme will be put in place when global conditions return to a more normal setting. Now perhaps the greatest unknown we actually have to deal with in FY '23 is consumer demand. Most public -- published metrics, commentaries and various surveys, et cetera, indicate that consumer confidence is low, that inflation and interest rates are eating into disposable income and that consumers are consequently taking steps to protect their personal and family balance sheets and their cash flow. Some commentators are saying these adverse conditions will persist throughout 2023 and into 2024. Our major markets, namely U.S.A., Australia and U.K., Europe, are all exposed to these headwinds. We've seen demand fluctuate between markets and within markets. Recently, Australian demand has been good, U.S.A. less so, and perhaps unsurprisingly, the U.K. and Europe are most challenged. Customers are carefully choosing what to spend their money on and are looking for promotional offers. These are challenging trading conditions, but we believe we've got the right range in the right markets at the right price points to trade successfully through whatever externalities we encounter. Phil will provide a more detailed trading update and outlook in his presentation. As shareholders will know, we are approaching a very important trading period with Black Friday, which is today, Cyber Monday and the Christmas period all ahead of us. The level of demand during these traditionally busy times will be telling in terms of both our half year and full year results. Early indications suggest demand has picked up in the weeks leading into Black Friday, and we're hopeful this will continue into Christmas. In FY 2023, City Chic is focused on the various initiatives, which will assist us in our aim to gain market share, increase customer numbers and achieve our goal of leading a world of curves. We intend to expand market share in the Americas, expand market share in ANZ, Australia and New Zealand, expand market share in the U.K. and Europe, particularly with our -- with now having in those regions seasonally relevant product in market and across a range of brands in our collective. And the shareholders will recall because of the supply chain issues that was -- we didn't have that in place this time last year. Expanding market share -- I beg your pardon, expanding and executing on marketplace partnerships, which has been very successful for us, as I mentioned previously. Consolidating our clean store portfolio and driving sales in our larger format stores, which have been a great success for us. We are also reviewing our retail price architecture to try and maintain margin, and we're continuing to develop the world of curves social community. And we will, of course, continue to execute against our ESG priorities. At the same time, we will, of course, actively manage our cost base, depending on prevailing demand and trading conditions. Moving then to balance sheet, inventory and margin. Based on my discussions with the investor community, I've been particularly focused on our inventory position and balance sheet. Let me respond by saying the balance sheet remains in a sound position and is expected to strengthen further over the course of the financial year. We're on track to reduce inventory to the guided numbers. And consequently, we aim to have 0 debt and a healthy cash balance by 30 June 2023. As I alluded to before, the real issue for us to deal with in FY 2023 is temporary margin compression, which is driven by competition for reduced demand, together with transitory logistics costs in the Northern Hemisphere. Phil will provide more detail in his presentation, including the measures we're taking to mitigate the impact of these pressures. So to sum up, I hope I have, in some way, demonstrated that we are, firstly, acutely aware of the impacts of the evolving economic conditions and uncertainty. And just as the company had to adapt over the last few years of COVID, we are focused on remaining agile, building resilience and managing the business to traverse the current conditions. We believe our expanded market penetration across geographies and channels, our category leadership globally with stock available in market for key sales periods during the year, and our investment in distribution infrastructure provides a strong foundation and will support us in our efforts to continue to grow the business and ultimately, of course, to our goal of leading a world of curves. On behalf of the Board, I express our sincere thanks for the support of shareholders during what has been a difficult 12 months of the share price. I don't believe it, in any way, reflects the value of this business nor the global platform that has been built over the last few years. If 1 looks through the cycle, Phil and the team have built and are building upon a platform that is capable of taking a material position in a $180 billion market. I also extend our thanks to the City Chic team and our customers for their ongoing support. Throughout this COVID-affected period, the City Chic team has not faulted for a moment and throughout has maintained its energy, enthusiasm and ambition. With the prospect of continued uncertainty ahead, we are fortunate indeed to have such a talented and motivated team to serve our loyal customers around the world. It's now my great pleasure to introduce our leader, our Managing Director and CEO, Phil Ryan.

Thank you, Michael, and I'd like to extend my welcome to all of you to the 2022 Annual General Meeting. FY '22 was another strong year for City Chic Collective, with sales growth of 39% and EBITDA growth of 11.3%. This was achieved with store closures, sourcing delays, material cost increases, logistics challenges and demand that has been extremely hard to predict. This illustrates the strength of our team and our business model and the support of our customer for our product range. Our vision to lead a world of curves progressed in leaps and bounds in FY '22. We are now a truly global plus size apparel business in what is a fragmented $180 billion market. We've entered new markets, struck many new partnerships, embedded new brands into the collective, all in the pursuit of our goal to provide a range of plus size product that resonates with customers all around the world. And FY '22 confirmed that our range has global appeal. As Michael stated, the Northern Hemisphere is now 56% of our business with almost 900,000 customers. Back in 2018, this was just a dream, but through strategic thinking and hard work, we've built a global business. Our growth in the Northern Hemisphere in FY '22 was extremely strong. The U.S.A. was up 54% and was our biggest region at $162 million. In FY '22, EMEA contributed $45 million in sales, reflecting the first full year of Evans. It took us over 10 years to achieve that level of revenue in the U.S.A., and it was only through the strategic acquisition of Avenue that we achieved it. This outlines the value of both the Avenue and Evans acquisition to our global growth. Australia and New Zealand grew 11% despite the store closures. At a channel level, we had an exceptional year online with 45% growth, and a lot of this growth was driven in the first half, and we're cycling that period now. The partner business showed its potential in the second half of FY '22. Over the full year, it generated $30 million in revenue with 74% or $22 million of that in the second half. Driving that demand required reengineering of our global supply chain. We have built a factory network and logistical capabilities to ship from 6 origins to 7 destination ports. This was done to move production to more specialized, lower-cost regions such as denim in Bangladesh, and to reduce the risks associated with a reliance on 1 geography. In FY '23, we are focused on in-market operations in the Northern Hemisphere as a next step in this plan. Ethical trade is woven into the fabric of our business, and it's something we've been working on for many years and is very important to me. We have an excellent team that do wonderful work in this space to ensure we are looking at all aspects of our business and our supply chain. And I'm proud of our achievements in FY '22. We've furthered our social responsibility through our continued progress against our Modern Slavery Act road map. We've strengthened our bans on high-risk cotton regions. We've actually piloted DNA/fingerprint testing on cotton products to determine its origin, and we've continued to trace all tiers of our supply chain. In the area of environmental sustainability, we've developed more sustainable package options, we've introduced some preferred fibers into the product range, and we've continued to build knowledge and capacity for future climate strategies. I'll now give a trading update and discuss the outlook. Our most important update is that the inventory reduction program is on track, but I'll talk more about this as I turn to the outlook. Globally, revenue is down 2% year-to-date. There were many influences on last year's comparative numbers with store closures and COVID-related online trading, which was particularly strong in the first half of FY '22. However, to put that in context, the FY '23 year-to-date performance is 48% up on FY '21 with growth in all regions and all channels. The expansion into EMEA and partners has delivered a truly global omnichannel business. Demand has been volatile, and the consumer is looking for a promotion as a reason to buy. The competitive landscape, especially in the Northern Hemisphere, has intensified as all businesses promote aggressively to capture the limited dollars our customer is prepared to spend. We've adapted to this environment and responded to the customers' behaviors and have promoted to stimulate demand, not to clear inventory. At a regional level, there's been very contrasting results. The Southern Hemisphere, with stores open, have showed growth, and the Northern Hemisphere, which is facing much greater economic pressures, delivered a decline in revenue. Last year, it was the Avenue in the Northern Hemisphere that delivered the growth as the Australian stores were closed. What a difference a year makes. But what it does show is the volatility in demand, but also the value and strength of a geographically diversified business. For the first 20 weeks of FY '23, ANZ was up 10%, driven by stores which were up 56%, and online down 11% off a very strong PCP in FY '22. However, to put that in context, the FY '23 year-to-date performance of online is up 22% on the same period 2 years ago, and that was a strong year for online in Australia. The introduction of the Avenue and Evans products to the Australian market has provided the building block that has bridged the gap to last year's online as shoppers return to stores Australia-wide. We have grown our Australian customer base, outlining the strength of the City Chic brand in Australia. U.S.A. is down 12% year-on-year, however, up 44% on the same period in FY '21, outlining the strength of this period in FY '22 in the U.S.A. Our partner business and City Chic brand have shown strong growth. Avenue has been the only channel we've seen declining revenue and traffic year-to-date. However, to give this context, we are materially up on revenue, traffic and conversion to the same period FY '21, outlining our assortment growth and the market opportunity. EMEA was set for a big winter with inventory in market. However, the economic conditions have led to a sales decline of 5%. The U.K. has delivered demand growth and the EU a decline, with returns materially above historical trends so far in both regions. Moving to channel performance globally. The first half of FY '22 online was exceptionally strong in all regions, and we are now cycling that period with revenue decreased by 19% year-to-date. However, if you look back 2 years, our revenue has grown 43%, outlining the strength of our assortment and our ability to drive market share in new markets. Partners have grown from $5.7 million to $13.2 million, which, while very pleasing, has also been impacted by the economic conditions. Our partner strategy has shown progress not only in the U.S.A., but in the U.K. and in Australia as well. Customer engagement with our websites globally remains robust, with traffic at $78.5 million on an annualized basis until the end of week 20. This shows the strong connection she has with our websites and our product assortment. The impact of the economic environment has been a reduction in conversion rates. However, she's still coming to our sites and is just a little hesitant to buy right now. I'm sure this will turn. It's just when. The impact of promotional activity I referred to earlier, along with the growth in our lower-margin partner business, resulted in a circa 4% of revenue drop in gross margin for the year to October, driven predominantly by the Northern Hemisphere. The U.S.A. has seen the most intense competition, leading to much earlier Black Friday-like promotional levels. This, combined with the bigger partner business, has led to the largest regional decrease in margin year-on-year. EMEA has seen similar levels of competition to the U.S.A. However, the impacts are not as material to our total results. Southern Hemisphere margin is flat with increased store mix offsetting online promotional activity. We're aiming to return to historical gross margin levels over time as present cost, consumer behavior and macro pressures ease, driven by 3 key items: Firstly, a return to the Northern Hemisphere to a more normal trading environment, will increase sell price and average basket size. Secondly, continue to review -- we will continue to review retail pricing in line with the market, and we're increasing prices that are taking effect through FY '23. Lastly, from a product cost level, we are seeing material drops in shipping rates, not quite to pre-COVID levels, but they are close. And this will allow us to realize the input cost reductions we've achieved from our factory and origin shifts. After an exceptional period of global growth, we are consolidating our infrastructure to provide a scalable platform for growth when market conditions normalize. The speed with which we had to move upon the acquisition of Avenue, Evans and Navabi left us with legacy logistics solutions. We have been planning to transition from these structures for some time to industrialize our in-market supply chain and support our consistent strategy of building a scalable global omnichannel business. All of these brands have a strong customer bases that have driven our global growth and market penetration. This has resulted in transient efficiency and inflationary cost pressures in our fulfillment process, equating to circa 5% of revenue. The fulfillment impact on profitability is focused in the Northern Hemisphere. There are 4 key drivers of the fulfillment costs. Firstly, our promotional activity has led to a reduction in the average selling price and average basket size, meaning we are driving more activity, which elevates fulfillment costs as a percent of revenue, and this will normalize as economic conditions stabilize. Secondly, we have seen a material rate card increase from our Northern Hemisphere 3PL providers as they face cost pressures relating to labor, fuel and infrastructure. Thirdly, we've seen inflationary increase in storage rates, which will decrease as our inventory position unwinds. And lastly, consistent with the reported experience of all European online retailers, the returns percentage in EMEA is well above historical levels, driving a material cost increase. We're taking a number of steps to build scalable operations globally and return to historical fulfillment costs while continuing to improve our customer service. The first step was to build a leadership team that was capable of driving a global logistics business, which are now all in place. Our new logistics director was responsible for the Australian automation and implementation and a strong global apparel experience. In the U.S.A., we've signed a deal to move to a more automated facility that will allow us to be much more flexible, efficient and drive scale. Having a facility like this in Australia has driven our growth online, and this is the first step in setting up the right infrastructure in the U.S.A. to allow us to achieve our potential within this market. I'm excited for this next big step in our U.S.A. journey, and I expect this to take around 6 to 12 months to embed as we transition out of our current provider. And I'll give you an update of our progress at the half year results. The new facility allows us to consolidate our Canadian warehouse as the new partner has cross-border capabilities, meaning we have only one pool of stock in Northern America. We are in the process of consolidating our operating warehouse arrangements in both Europe and the U.K. This will materially reduce the fixed costs, rationalize inventory pools and still deliver excellent customer service, if not better, than what we are now. And we expect this to be completed by the end of the financial year '23. We will then review our EMEA logistic operation to determine the optimal long-term solution with view to implement in FY '24. These actions will drive down the fulfillment costs over the medium term, assisting the reduction of inventory through fewer stock buckets in our emerging markets and most importantly, improve the customers' experience. We see gross margin and fulfillment costs as temporary issues focused in the Northern Hemisphere, and we're anticipating a return to historical levels of EBITDA margin as our plans are actioned and present cost, consumer behaviors and economic pressures abate. Moving to the outlook. We are on track to deliver the inventory targets, and at financial year, we expect to have a positive net cash position. Inventory at the first half is expected to be in the range of $168 million to $174 million, subject to demand and FX fluctuations. FX has an impact on the value of our U.S. dollar held stock on consolidation. At October, compared to FY '22 year-end, that increased the value of our stock by circa $5 million. However, this is a noncash translation impact, and despite this, we are on target for inventory to be in the range of $125 million to $135 million by June 2023. I'm very happy with the market relevance of the stock and the performance of our inventory so far given the conditions. We are moving inventory between regions to deliver seasonally relevant product to the most appropriate market to drive demand of existing inventory. Our purchases into the second half remain flexible to demand fluctuations, and we are managing this very, very tightly. As Michael said, we have the biggest period of the year in front of us, including today, which is Black Friday, into Cyber Monday and Christmas, and we are well positioned to take advantage of this period with our ranges ready in all markets to drive demand. While we do expect continued pressure on the consumer in the second half of FY '23, we are cycling lower comparative numbers as the second half of FY '22 in revenue was not as strong as the first. In this environment, we are also reviewing those costs that we can actively manage and are looking to deliver a sensible cost base that will not hurt our future growth or customer experience. In summarizing from the way -- from our perspective, the inventory is on track. The issue we are dealing with is margin contraction driven by softer Northern Hemisphere demand, resulting competition and increased logistical costs. And as I hope I've demonstrated, we expect those issues to resolve through our actions and market normalization. Our business is well positioned to accelerate when macroeconomic conditions stabilize, underpinned by our strong customer base and improved logistics operations. This is a moment in time for the consumer globally, and it will pass. I want to thank our team for another wonderful year in FY '22. It seems whatever challenges are thrown at us, we can manage through together, and that drives my confidence in the resilience, agility and strength of our business. To the Board, I would like to say that your ongoing support for the team is something that we very much appreciate. To our 1.4 million customers globally, you are at the center of our organization, and we put you first. And I appreciate the support of you, our shareholders, that you have given us through these last volatile years. Thank you, and I will now hand back to Michael.

Well, thank you very much, Phil. So now we'll turn to the formal part of the meeting. As the notice has been circulated to our shareholders, I propose to take the notice convening the meeting and the items of business as read. Shareholders will be given the opportunity to ask questions in relation to the business of the meeting, including the resolutions that are being put to the meeting and before any vote is conducted. Shareholders will be given the opportunity to ask general questions about the business and operations of City Chic, not specifically related to the items of business, but that will be at the end of the meeting. If you have questions that don't relate to a specific item of business, we do ask that you save those questions until the end. The company did receive 1 question prior to the meeting in relation to capital management, and I will address that at the end of the meeting. You've all been issued with attendance or voting cards. When I call for questions, those with yellow or blue cards are able to ask questions. If you'd like to ask a question, please raise your yellow or blue card. Wait for an attendant to bring a microphone, then please stand and state your name and then proceed to ask your question. If you happen to be holding a red attendance card, that means you are a visitor or not a shareholder. And as a result, you don't have the right to ask questions or make comments. For shareholders and proxies, I will ask you to confine your questions to matters relevant to the particular resolution that's being considered, and I'll do my best to answer them or direct them to the auditor or a member of the Board or executive team as appropriate. After questions, where there is a resolution to be put to the meeting for a vote, I direct that a poll will be held, and now I open the poll on each of the resolutions 1 through to 4. A representative from Link Market Services will act as a returning officer and scrutineer for the poll. If you are here today, both as a shareholder and a proxy, you will need to use separate voting cards in relation to your own shares and shares you're voting as a proxy. The blue cards are nonvoting cards, which are issued to shareholders who have already voted by proxy and to joint holders who can speak and ask questions at the meeting. If you hold a yellow card, this is for voting as a shareholder and/or as a proxy holder, including as represented by a corporate representative, attorney or proxy where the vote is at the proxy's discretion. You will be asked to vote at the appropriate time on the resolution to consider the adoption of the remuneration report for 2022 financial year, the reelection of Ms. Megan Quinn as a director, the appointment of EY as the company's auditor and the proposed grant of performance rights to Phil Ryan, our CEO and Managing Director. Resolutions 1 through 4 are all ordinary resolutions, and they will be decided by a simple majority of the members present and voting in person or by proxy. For those of you holding yellow cards, to fill these out, you will find instructions, and all resolutions are printed on the front of the voting cards. To vote, simply place a mark in 1 of the 4 against or abstain boxes for each resolution. If you mark the abstain box, your votes will not be counted for that resolution. If you need to leave for whatever reason before the end of the meeting, please make sure you put the completed voting form in the poll box at the registration desk by the door. I encourage shareholders and their representatives to complete their yellow voting cards after each resolution has been discussed. At the conclusion of the meeting, please ensure you've marked your votes for the respective resolutions. A representative of Link Market Services will collect the voting cards after all resolutions have been discussed. If you need assistance at any time, please signal 1 of the representatives of Link. Now moving to the ordinary business of the meeting. The first item of business on the agenda is to put before the meeting the annual report of the company and its controlled entities for the 2022 financial year, including the financial statements and the reports of the directors and the auditor of the company. These documents have been made available to shareholders and are also available via the ASX and the company's investor website. There's no vote required on this item of business. I now invite any questions in relation to those reports, including any question of the company's auditor relevant to the conduct of the audit, the preparation and content of the auditor's report, the accounting policies adopted by the company in relation to the preparation of the financial statements and the independence of the auditor in relation to the conduct of the audit. If you have a question relating to the resolution, please wait and ask your question. Are there any questions regarding the reports or for the auditor?

Mr. Chairman, my name is [ Riley Raymond ]. Just a comment. Beside geriatric and short on hearing, I'm not quite sure if I understood it correctly, but I thought that you said the sales increased last year, 35.2%. I thought the Managing Director said that increased 39%. And the slide seemed to indicate 25.56%. So I guess it doesn't matter very much.

All material -- can somebody just -- can we hold that question, if you don't mind, so we can just double-check those numbers? And we'll come back to you.

And just on the subject of stocks, I think that's probably the major cause for the share price decline, people worry. And I noticed at the time of the end of the financial year, they were $195 million. Was that billion or million?

Million.

Million. The current level I gathered has reduced quite a bit. What is the current level?

We've guided to $168 million to $174 million as at December.

And then I suppose in relation to that then, the cash at the end of the financial year was down to [ 953 ]. What is the current cash position? That's now 5 months ago, so just concerned how that's changed?

Yes. Well, the cash position, as I said, the balance sheet is in a sound condition, and we're obviously in the half year accounts, we'll give a full accounting on cash. But as I think as we -- well, as we did guide, there will be a -- on our estimation, there will be a significant cash position and no debt by the end of this financial year. But the cash position -- as I said, the balance sheet is in a sound condition. So there's cash.

So are you going to tell me about the current cash position?

No. Is someone checking those numbers? Thanks, Peter. When you're ready, we'll come back to that. Thank you, sir. Much appreciate for those questions. Are there any other questions for the auditor in relation to the accounts? Okay. As there's no further questions, we'll move on to the second item of business.

The next item on the agenda is the consideration of resolution 1, to adopt the remuneration report, which is included in the director's report in the annual report. In accordance with the Corporations Act, the vote on this resolution is advisory only, and the outcome is not binding on the Board. That is not to say the Board does -- of course, doesn't take these resolutions very seriously, and the Board will consider the outcome of the vote and any feedback from shareholders at this meeting when considering the company's remuneration policies. In the remuneration report, we've endeavored to provide shareholders with detailed disclosure regarding the terms of and rationale behind the company's remuneration framework in FY '22. We believe that City Chic's remuneration approach provides good alignment between business objectives, shareholder value and executive remuneration, which motivates and retains talented executives. As part of agenda 5.1 -- as part of agenda 5 -- item 5, I will speak to, and the shareholders will be able to ask questions about, the proposed structure for incentives for senior executives in 2023, which is a part of the overall remuneration framework, but which is not relevant, obviously, to FY '22. While the approach for equity-based incentives for 2023 is different to grants made in earlier years, the Board believes the approach remains aligned with the principles outlined in the FY '22 rem report while taking into consideration this period of global uncertainty. We will discuss the Board's rationale for the structure of 2023 incentives and remuneration later in the meeting when we consider resolution 4, and there was detail around that in the information memorandum accompanying the Notice of Meeting. Are there any questions or comments relating to the remuneration report? Okay. So it seems there's no questions. Noting that each director has a personal interest in their own remuneration from the company set out in the report, shareholders are asked to adopt the remuneration report and vote in favor of resolution 1. Proxies, which have been received in relation to this resolution prior to the meeting, I see, are now on the screen. The proxies open at my discretion, I intend to vote in favor of the resolution, and we will now pause for a moment to give you an opportunity to complete your yellow voting card for this resolution. Please retain your voting cards, which will be collected by representatives of Link once voting on all the resolutions has been completed. [Voting]

Well, while you're filling in, yes, Phil, have you got the answer to that?

Yes. I missed your last name, sorry. I apologize.

[ Riley Raymond ].

[ Riley Raymond ]. 39% was our growth in the financial year last year. Michael quoted the CAGR of revenue of 35.2% over the last 3 years, and 25% was our comparable store number. So comparable like-for-like, so the 39% that I quoted was our total revenue growth last year. Does that make sense? The 35.2% Michael quoted is the CAGR revenue growth over the last 3 years. And the 25% that's in the pack is the comparable store growth in FY '22.

I think what I was trying to demonstrate was that it has been an extraordinary performance through very difficult years. Compound annual growth rate over those years of 35% as Phil was focusing on '22.

Yes. [ You did frighten me ] for a second though.

Okay. So we now move to the next item on the agenda, which is the reelection of Megan Quinn as an independent nonexecutive director of the company. Biographical information about Megan is available in the Notice of Meeting. Megan joined the company in October 2012. She is an independent nonexecutive director. She's the Chair of the People, Culture and Remuneration Committee and a member of the Audit and Risk Committee. Megan has more than 25 years' experience working internationally with organizations, including Harrods, Dell and Westpac. She was also a Board and National Committee member of UNICEF Australia. She is a senior adviser working across a broad range of industries, including retail, financial and professional services, health care, consumer and digital. Megan's strong strategic, operational, supply chain and financial expertise is complemented by her capabilities around brand, marketing, innovation, transformation, digital and customer service and experience across all channels. And I think the fact that Megan was a co-founder of Net-A-PORTER speaks for itself as to the value she adds to our Board and the company. Megan is a nonexecutive director at ASX-listed Reece Limited, InvoCare Limited and The Lottery Corporation. The reelection of Megan Quinn is unanimously recommended by the Board with Megan, of course, abstaining. And Megan has, as a member of the Board, been part of the company's growth. And her extensive knowledge of the company and her industry experience, as I said, are a great asset for our company, and Megan always brings a great contribution to Board discussions. However, as Megan has been with the company now for 10 years, she has decided and confirmed that if she is reelected, she does intend that this will be her last term on the Board. And consequently, the Board will put in place its succession plan. Are there any questions relating to this resolution? No questions? Oh, I beg your pardon.

Not really a question, just an observation. My name is [ Diane Quinlan ] from [ Quinlan Investments ]. I'm surprised that Megan can't speak for herself.

Well, I understand some people do that. I take the view that people -- my personal view is that people standing up and telling others about themselves is a little infra dig. I would prefer to be praised by others, and what you heard was my comments. But Megan, you're very good at being able to speak for yourself. So [ be up and stand here ] and go for it.

Well, thank you. I won't tell you anything about my history, but I will tell you how committed I am to this company, how proud I am to be associated with a group of people who are wanting to lead a world of curves for under-catered to group of women and people internationally. I really admire the growth and ambitions of the team and share the ambitions of the Board. I'm really proud to be associated with this group of people. And I've been on a journey through SFG and our divestment of 5 brands, when we got down to $0.11 and how proud we all were recognizing the focus on our customer, understanding what she needs, where she is, how we can address her needs, how we can make her feel better about herself, I'm really proud to be associated with our share price getting to $6.60, and we can't wait to get it back there. So I'm not leaving until we fix that.

Well, thank you, Megan, and thank you, Ms. [ Quinlan ], for your question and comment. Okay. So if there are no further questions on this resolution, I put the proxy numbers on the screen. They're up there now. And for proxies open at my discretion, I intend to vote in favor. We'll now pause for a moment to give you the opportunity to complete your yellow card for resolution 2. And again, please retain your voting cards, which will be collected by Link once the voting on all resolutions has been completed. [Voting]

Okay. The next item on the agenda is resolution 3, which is the election of Ernst & Young as the auditor of the company. As detailed in the Notice of Meeting, noting the tenure of the company's previous auditor, Deloitte, the Board considered a good corporate governance to rotate the audit appointment and sort proposals from leading audit service providers. The Board recommends voting in favor of resolution 3 being the appointment of Ernst & Young as auditor of the company. Are there any questions in relation to this resolution? Okay. No questions. So the proxies received are now on the screen. And for proxies open at my discretion, I intend to vote in favor of the resolution, and we'll now pause again for a moment, give you an opportunity to complete your yellow voting card. [Voting]

Okay. So the last item on the agenda is resolution 4, which is the proposed issue of performance rights to Phil Ryan, our Managing Director. As I alluded to earlier, and as was in the Notice of Meeting and the company memorandum, the terms of the proposed issue of performance rights reflect the Board's view that during this very unusual and uncertain time, the objectives of the company's executive remuneration framework are best achieved by focusing executives on the execution of key objectives and short-term performance outcomes while simultaneously seeking to retain key executives over the medium term, both of which the committee believes are critical to ensuring the future success of the company and sustainable growth in the medium to long term. The People, Culture and Remuneration Committee spent a considerable amount of time, I can tell you, in many meetings considering the remuneration of executives in this unusual period of global uncertainty. During the year, the committee also engaged independent remuneration consultants to provide a range of advice and information on remuneration matters, including the appropriate incentive structure for executives. It had originally been the committee's intention to utilize the existing loan funded share plan to deliver the long-term incentive component of executive remuneration for this financial year. However, after much deliberation and advice, in the committee's view, due to this uncertainty and volatility in the environment in which we're operating, the company's and shareholders' interest will be best served over the course of the next 12 months by management focusing on delivering a stronger balance sheet and generating cash flows. In addition, the committee believes there is material risk of potential unintended consequences in trying to set realistic long-term hurdles in the face of so many global unknowns. It really felt like as we went through this, trying to set 3-year hurdles was either going to be unrealistic for management on the 1 hand or insufficient for shareholders due to the extent of the unknowns. So this resolution seeks to, amongst other things, obtain shareholder approval for the purposes of ASX Listing Rule 10.14 for the grant of performance rights under the equity incentive plan to Phil on the terms outlined in the Notice of Meeting. As outlined in the notice, the performance rights will only vest and Mr. Ryan will only receive shares upon the vesting of all or some of the rights if the stated vesting conditions, being performance and service conditions, are achieved. The nonexecutive directors believe that the proposed grant of performance rights to Mr. Ryan is appropriate and in the best interest of the company, and therefore, recommend that shareholders vote in favor of the resolution. Are there any questions relating to this resolution? Okay. If there are no questions, we will now put the proxies on the screen, please. They are now shown on the screen. And for the proxies that are open at my discretion, I intend to vote in favor of the resolution. I'll now pause for a moment to give you the opportunity to complete your voting card. [Voting]

Now as this is the last of the resolutions to be considered today, once you've completed the voting card, please provide it to the representatives of Link, who will now come around and collect those cards. We'll just pause for a minute or so while that happens. All done? Thank you. I'll now declare the poll closed. As the counting of the votes on the poll may take a little time, we'll announce the results via the ASX as soon as possible after the meeting. Ladies and gentlemen, that concludes the formal business of the meeting. And on behalf of the Board, I'd like to thank you for your support, and I now declare the meeting closed. We will now take any general questions about the company not related to the items of business. As I mentioned earlier, we did receive a question from a shareholder prior to the meeting in relation to capital management, including dividends and an SPP. And the Board considers, as you would know, capital management regularly. As noted in the presentations today, we do expect to be in a good cash position by the end of FY '23 and 0 debt. And consistent with our comments at City Chic's FY '22 full year results, capital management decisions will be reviewed at the first half in '23 and again at the second half in '23 as working capital is released and having regard to the company's capital needs as it grows its global business. So stand by for more information on that at the half. Are there any other general questions from shareholders in attendance? Yes, sir.

[ Andrew McPherson ] is my name, private investor. I just wanted to -- a quick one for Phil. The -- I guess, look, quick observation. The market, obviously, is in a pretty skeptical mood on any uncertainty at the moment. So I think the big inventory build, while you guys made a strategic decision to do it, the market was kind of like we'll shoot you, and we'll ask questions later. Now I guess I just wanted to get a feel kind of -- I see the -- I can see some very clear advantages, which you guys probably were mindful of when you went for it, supply chain risk, inflation cost savings, U.S. dollar hedge for our Australia and New Zealand market. That's all good stuff. Against that is probably inventory storage costs will be elevated, fashion obsolescence risk. And I know you continue to reassure us you're comfortable, it's your core range, it's seasonal. But I just wondered if you had any -- were able to provide a bit of insight around how all those things net up in your opinion. And positives, negatives, which way are we -- does it all weigh up? Are certain of those drivers more important than others? Because the market seems to be -- have taken the opinion that there's probably been too many announcements where all the sunlight will be weighted to the second half. And so the market's kind of, yes, okay, we'll talk about that later. So just do you -- can you shed any light on that?

I think the guidance we gave today around the reduction already in the first half is fairly material. So I would say it's not -- it's weighted, but you still see progress already so far. As we said through the results of the last period, [ POs ] are easier -- how we're managing this business is looking at what the product is and then phasing our product out over time as we see appropriate and then moving between regions as required to put it in the most seasonally appropriate time to drive demand off it. We couldn't -- you can't control purchases in the next sort of 3 months. It's a lot harder to fix -- to change things dynamically that fast. What we said to the market at the time, and I believe is very well versed, is that we're really managing our purchase in the second half. We have a lot of what is ready for the second half already in market ready, and we're going to really fluctuate the demand into the -- sorry, the purchases into the second half with what we see demand doing. As to the fashionability, I mean we tied out putting the slides in again, Andrew, but I think everyone wants to -- what I've heard from the investors is they want to hear that it's on track and that we're going well. And you don't say the same thing again and the risk of doing that. I've learned about this lady a lot over the last 16, 17 years. And what she wants us to do is give her something that makes her feel good about how she feels, what fits her and what does her well rather than what is the latest thing. I think a lot of people think because we sell apparel, we need to have what was on the catwalk in Milan last month. We're just so far away from that. What our lady wants and what I've learned over the time is she wants something that makes -- that flatters her and makes her feel good, not something that -- it has an edge to the trend. And when -- if I had the slides here, I'd show you through it, but we have a wrap dress in chiffon that we've done now for, gosh, 12 years, I'm surprised [ somebody wearing it ] today. Those kind of shapes the change. And what we've been able to do is position the inventory towards future periods around the geographies that are a new print. Now whether that print is good or bad won't be different now or next year. Now in 5 years, yes, there is a shift. But between years, we -- and it's funny, COVID taught me that more than anything because what we did was we had to go, my goodness, what are we doing with inventory? How are we going to buy this? We stopped the designs and said, "Look, that goes to next year." A lot of it wasn't in our balance sheet then. So it was different without our structure of how we bought. To go global, we had to shift to taking ownership in inventory in origin, which is why it's all out in the open now. We did this through COVID. And I said, "I'll put that there, and I'll play this." And the sell-throughs of those products have been no different for the better or worse. Just, yes, we have a good track record of putting something out she likes. Anything we see is fashion, right? Anything we see as risk, we move fast. And then you sort of -- anything that doesn't sell goes into a normal cycle, and that is a small percentage of what we're holding is total. So on the whole, as I said in the speech, I'm very happy with the performance of the inventory to date. We're on track for the $125 million to $135 million. And yes, I'm looking forward to hopefully see what the customer likes in the next few months and years.

May I ask 1 other 1, a quick 1 just while I've got the [indiscernible]. Just about the Europe and U.K. market, the margin compression and kind of increased competition you were commenting on. I just wondered about, do you guys have an opinion on kind of the sustainability of that, in particular with your -- I guess your chief competitors in that market, how sustainable is that? Because at some point, you'd expect some of your competitors to retreat or everyone to stop that mutually assured race to the bottom kind of thing.

Look, what we do as a bit of our business structure, we leverage a fixed cost of Australian production design and operation to deliver product around the world. Hence, the operating cost that other businesses would have to deliver to market, we have an advantage because we do pretty much everything except logistics and customer service at the office in Alexandria, pretty much. And when you look at Europe from my point of view, it's about getting more eyes on the product we're already doing. Now when we started lead a world of curves, Andrew, we -- Evans was who I was looking at it, right? They were the best. They were part of Arcadia, they were part of Topshop. And fast forward to today and they are part of us. I really believed it would -- when we bought them, COVID was there, but the environmental -- the economic, not environmental, sorry, impacts have played out a lot worse over there than anyone else. There's really not a great deal of competitors. You've got Yours and Simply Be. I don't know their capital structures, right? Simply Be, a public, and [ Brown ], as the base, they seem strong. But again, what we said today is we're going to consolidate our operations in there to reduce the fixed costs so that we can weather the storm through whatever Europe has to say because that lady will buy plus size clothes. Will it be this year, will it be next year, will it be the year after [indiscernible]. But I believe in our assortment and I believe in our ability to deliver it to her. And we've just got to make sure that we are bunkered down in the European area to make sure we're ready because she will come back.

And I think it was probably fair to say that speaking to other retailers in Europe, people who are in -- dealing with people in our economic demographics, they're absolutely seeing exactly the same thing, in particular, the high return rates. And hopefully, the Ukraine war gets sorted out because I think that's probably going to be the flipping point. And as we saw with COVID, Phil, you might want to put some color on this, when it flips, it flips like really big. And I see Natalie nodding there because, of course, she's the Chief Retail Officer at Cotton On. And when it flips, it just flips really big. So all fingers are crossed.

And even with all of this, we did $45 million last year in EMEA. Now we -- I started on Latin America in 2010, right -- no, 2009, and I have a lot of black eyes, right? And what Evans and Avenue have done, what I've learned is that those access to customer bases give you such a leg up in the market. And that -- we were -- if you look at our 2018 numbers, I think it was sub-20 in America, and that's after almost 10 years. And with Evans, we got that within a year. So what it's given us is a strong customer, the economic conditions will be what they'll be. We've just got to make sure we are there when she is ready to buy again.

And brands with true heritage.

Yes. You're buying the history of stores. You're buying the history of 100-plus stores. Evans was as well known by everyone on the high street.

And I think Avenue had 300 stores.

Avenue had 330 stores.

Thanks for the question, Andrew. Any other general questions? Yes, sir.

Simon [indiscernible]. Just a question for Phil again, and we're going back to inventory. I mean if we get back to normal type market conditions, what would you think would be a normal level of inventory that you should carry? I know it's a difficult question, but...

My first question is, what is the expectation of growth over time? Because our store inventory in Australia, I have down to an art form because I know what the revenue is going to be. We know how we're going to run it, we know what we're going to do. I think -- I'll give you an analogy. So we had 100 stores, we opened 200 stores, now inventory doubled. I understand that. In online, you can't just think I'm going to turn my stock faster. You have to deliver her something different. You have to offer her [ more ] lifestyles. And you have to learn about what she's shopping and buy deeper into that. Now we did that into -- with a very good -- and trying to mitigate all the risks that you outlined, Andrew, but also trying to grow. We were -- when we made those purchasing decisions, growing at 50% in the U.S.A. and we just bought Evans, which was the biggest business in the world. So normal depends on what your rate of growth is. What we've said now is getting to $125 million to $135 million, I'm comfortable with for this year, and then we'll assess through the markets what H1 does and what demand does and then what growth we expect. Because you can't just open $100 worth of stock and I'm going to grow 50%, you've got to invest in that growth. And for us, unlike physical retail, the capital goes into inventory, not into shopfits. Does that answer the question, Simon?

And I think that's why the key issue for us -- although everyone does seem to be focused on inventory and balance sheet, the real issue for us is more around trying to work our way through demand and logistics. They are the real issues, I think, Phil.

Completely focused in the Northern Hemisphere. I mean all other -- you've seen the Australian retail updates. We're 56% up in stores and only 11% down online. Most people are a lot more than that down online, right? Most people are a lot more, and that's, I believe, because we've bridged that gap that she's returned to stores with additional lifestyles of Avenue and Evans, again, investing in inventory to deliver something different to our customer online rather than say, "Hey, buy another one of those wrap dresses." We are offering her a different part of what she does. And the interesting thing is it's actually our loyalists who are buying into it in many ways. Our cheerleaders. Am I allowed to say that, right? It's not -- we are getting new customers, but it's also our existing core customers who are buying into different lifestyles, especially through -- as we bring in Avenue and Evans. And I mean 11% will be one of the better omnichannel online retailers to last year. We're already at sort of half plus of our sales online.

Thanks for the question, Simon. Any other questions, ladies and gentlemen? All right. Well, look, thank you all very much for your attendance and participation in the meeting today. I know you will have had a lot of questions. I hope we managed to answer most of them in the presentation. They're a bit longer than they normally would be, but these are unusual times. And I hope you all have the opportunity to have a quick cup of tea with us out at the back. So thank you for your attendance.

Thank you, everyone.