Metcash Limited (MG9.F) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the Metcash 2022 Full Year Results Briefing. [Operator Instructions] I would now like to hand the conference over to Mr. Doug Jones, Group Chief Executive Officer. Please go ahead.

Thank you, and good morning to everybody. Welcome to the financial year 2022 results presentation. My name is Doug Jones, the Metcash Group CEO. I'd like to begin by acknowledging the traditional custodians of the land from which we are connecting today. I'm connecting from the Wallumedegal Country and pay my respects to elders across country, past present and emerging. On a personal note, if you'll indulge me, in spirit of thanks and acknowledgment on behalf of both myself and my family, I'd like to acknowledge the Board of Metcash, the Metcash leadership group, all the team members, retailers and members, suppliers and shareholders who have made us all feel so welcome. I'd like to extend a special thanks and acknowledgment to Jeff Adams, the outgoing Group CEO, for his support, counsel and friendship through my own transition and to congratulate him and his team on the exceptional results that you see today. These are entirely of Jeff and his team's making, and they deserve the credits and praise and they should be very proud of them. Before we start, I'd like to just run through the order for today's presentation. I'll talk to the highlights and further performance. I'll provide an update on a few key initiatives. Then I'll hand over to Alistair Bell, our Group CFO, for financials. And then I'll return for some comments on the outlook, and we'll then open up for questions. With me in the room today, in addition to Alistair, I've got Scott Marshall, CEO of Metcash Food; Annette Welsh, CEO of hardware. Chris Baddock, CEO of Liquor; and Steve Ashe, our Head of Investor Relations. As you can see on the slide in front of you, the purpose, vision and values will be familiar to you. They've been in place for some time, and there's something that struck me as I joined the business and engaged with the Board and the leadership. They've served the business particularly well through the challenges of the last few years. And I can tell you that this is a purpose-led organization, and that purpose is alive and well. It's made real through our values and our beliefs. Turning to the group highlights. These results represent continued progress on the exceptional FY '21 performance. And they really are great despite the challenges that Metcash and many Australian businesses have faced. Both the model and the operations have been resilient and flexible. The price competitiveness has continued to improve overall offer presents value to shoppers and these shoppers have noticed and have continued to visit our stores. Much of this has been achieved through the progress of MFuture initiatives, and the performance, as you can see, has been broad-based. It's in all pillars. And this has delivered a very balanced result. The investments made in acquisitions are generating great returns for shareholders, and I'm sure they're pleased about that. As a result of the strong cash flows and healthy financial position, we've been able to support substantial shareholder distributions. As a result of all of this, Metcash and the independent retailer network have emerged stronger and healthier than ever before. There's greater confidence in the model from the network, and this is embodied in the higher levels of investment by retailers who've done well in the last few years. It's particularly pleasing to note the accelerating sales momentum towards the end of the financial year and into the first 7 weeks of this year. Turning to the group highlights slide. You'll see these are exceptional by almost any measure, with record sales and profits. Sales growth is superb on both a 1- and a 2-year basis. The total sales number of over $17 billion for the first time is up 17.2% over 2 years, showing that shoppers are sticking with their independent stores and that that trend is now becoming a habit. The 2-year performance shows the network's continued resilience and relevance to the core shopping base of each pillar, each format and each brand. Hardware really have had a fantastic year, and the Total Tools acquisition has delivered in an outstanding manner. Liquor performed well in the face of changing regulations and channel shifts. And Food continues to improve with superb underlying earnings growth. They're healthier and a more confident network. Overall, the balanced portfolio performance as well as disciplined capital management has delivered strong cash flows, and this has underpinned significant growth in earnings per share as well as distributions to shareholders. FY '22 wasn't without significant challenges. These will be familiar to you on the call. These are not unique to us, and in fact, are worldwide. We believe our response has been unique, though, in scale, nature and effectiveness. Throughout, and I can tell you this from personal observation, the focus has been on health and safety of our team and our customers. The response highlights our operational responsiveness and flexibility. It's made possible through the operating model. It's underpinned by a strong network of independent partners and the commitment and excellence of our purpose-driven teams. It must be pointed out though that managing under these circumstances does add some costs. Some decisions undoubtedly cost more and impacted operating leverage. To be honest, I will encourage the team and they will anyway make the same decisions again faced with the same circumstances. They're well aligned to our objectives of keeping our people safe and our retailers served as well as our purpose and strategy and the performance is something the group can be very proud of. We've worked hard to further -- to make further progress in improving our ESG credentials. In creating a safe and rewarding environment where all team members are free to bring themselves -- all of themselves to bear in support of our purpose in addressing our impact on the planet, and it's supporting the communities we serve and that we operate in. We recognize that we've got work to do on safety as one incident is too many. But it's pleasing to note that despite 250,000 more hours worked under difficult circumstances and often with less experienced labor, our overall safety score did improve slightly. We've made continued progress towards being a more diverse company that is representative of the Australian population. And we're very pleased to have retained our WGEA Employer of Choice citation for the fourth year running. We've made great progress towards our 40/40/20 diversity targets, and I should point out that female representation at top levels is 46% today. On the environmental front, we're committing to net zero emissions by 2040 and are aiming for 100% renewable energy usage by 2025. Our commitment is to continue to make strong progress, and we're going to measure that through an improvement in our Dow Jones Sustainability Index ranking as well as a reduction in our emissions in line with the 2030 science-based target which implies a 42% reduction. Just to point out that this year later in July, we'll publish our first separate sustainability report. And this will contain more details on our plans, our goals and our progress towards those. Looking at the results by pillar. You can see it's a strong and pleasing result for the group. All the pillars have performed well. And the group's diverse portfolio supports this balance and this balance continues to improve with Hardware now contributing nearly 20% of sales as well as 40% of group profits. All 3 businesses have achieved great operating leverage despite the costs that they have incurred to deal with the challenges that I've outlined. There's been strong growth in charge-through sales as retailers recognize the value in accessing a broader range, and suppliers continue to take advantage of Metcash as an effective right-to-market partner. Just remember, these sales are not a shift from one channel to the other, the sales that we otherwise wouldn't have got. Finally and most importantly, the results demonstrate that we've held on to the gains made in FY '21. The 2-year sales growth are a testament to a retail offer that's relevant and sustainable and increasingly preferred by shoppers, builders and trades people. Looking at Food in a little bit more detail. The continued improvement is built on the fundamental improvement in the quality and competitiveness of the network. This has been driven, as I've said, by the MFuture program as well as the performance of our people. It's also underpinned by extremely positive relationships and support from our supplier partners. This is resulting in a continued rebuilding of the trust and confidence of our retailers. And their belief in the network as well as their own strong financial performance and position have driven further reinvestment. And as you know, that primarily shows up through the DSA program. Excluding tobacco on a 2-year basis, the growth of nearly 12% is extremely pleasing, even more so when you consider the like-for-like IGA network growth of 14.6% over 2 years. You can see this growth wasn't achieved just through inflation, but also through likely share gains. And it did accelerate as the COVID restrictions eased, as you've seen. And as I should point out, it was strongest in the States with the fewest restrictions. As I mentioned before, the growth is underpinned by a network whose store owners recognize the benefits of reinvesting in those stores, improving the quality and relevance of the alpha. And as I've said before, shoppers haven't just rediscovered the local independent stores. They've liked what they found. And then I understand that they don't have to pay more for convenience, wider ranges and service that only locals can provide. Of course, inflation is here and has accelerated. Getting into a little detail, you will have seen that H1 and H2 numbers for inflation have changed from the first half to the second half. If you exclude -- if you look at inflation on an excluding tobacco and produce basis, wholesale inflation in the fourth quarter was 3.4%. In April, it was 5.3% and in May, 4.5%. And as we pointed out, an increasing number of suppliers are asking for price increases. As I've noted before, many of the in-flight and future initiatives are well placed and targeted to support retailers offering great value to shoppers, not just through competitive prices, which are underpinned by extensive price match and low-price everyday programs, but through broad ranges of suppliers and products and value offerings as well as unmatched door experience. The Food EBIT growth of 4.1% on sales growth of 1.4% represents great leverage, and this is underpinned by strong trading and good cost management. You can see it's further improved when you adjust for the loss of 7-Eleven and the onerous lease resolution and tobacco excise benefits in the comparative period. The Food team have faced challenges but have kept the safety and well-being of teams and customers in mind. These challenges have included a very tight labor market, and as we know, this has been exacerbated by COVID absenteeism. They've also faced supply shortages, transport interruptions and rain and floods. Through all of this, they've done what's necessary to keep the shelves full while managing costs carefully. You can see the results speak to the effectiveness and robustness of the wholesale operating model itself. This model allows retailers the flexibility to source the products themselves so that shoppers have always got options within a category if we or suppliers are not able to provide them with a specific product. It also does so by providing the retailers with access to a wider range of suppliers both national and local. It's pleasing that in the face of all of this, EBIT margins improved slightly by 10 basis points to 2.1%. Looking at the MFuture Food update. As I've said before, these projects and initiatives are aimed at making the network more relevant and competitive. I think it's relevant to point out the Food team have progressed the strategic agenda at a time when they could have been excused for focusing only on operations. A disciplined strategic review has delivered refreshed brand clarity, and this is universally endorsed by our retailer boards. And as you know, it's made real through the DSA program, the Diamond Store Accelerator program. We're well on track towards the goal that we've shared with you of refreshing 90% of the network by FY '26. This year, we're aiming to complete a few more DSAs than we did in FY '22. And it's interesting to note that some stores are now asking for a second refresh, a sign of program maturity and retailer confidence. I'm a firm believer that investing in a fleet of stores on an ongoing basis, not just when times are good, is critical for the ongoing future success of any good retailer. As discussed, the wholesale resilience underpins the flexibility and resilience of the model. This year saw continued investment in our core logistics assets for improved service efficiencies and better capabilities. On that note, we're delighted to share that we have signed a development and long-term lease agreement with the Goodman Group to build a 115,000 square meter best-in-class wholesale food and liquor distribution center in Truganina just outside Melbourne. This follows the successful opening and operation of the Gepps Cross facility in South Australia. Just like in Gepps Cross, safety is uppermost in our mind, and the facility will incorporate safety by design principles. It will give us additional capacity across a wide range of categories. It will deliver improved service to our retailers and our on-premise customers as well as a better right-to-market service for our suppliers. And most pleasingly, it will be an improvement in the working conditions and environment for our people. It's underpinned by the strong growth in that region and follows the extension of our supply agreement with FoodWorks. As we've guided on the slide, CapEx for us will be a total of $70 million with $20 million of that coming in the current year. That's primarily for racking and fitout and these numbers are included in the total CapEx guidance in the slides. Construction and operation will align with the new 5-star Green Star sustainability rating. And as you can see, it includes a significant 2.7 megawatt solar rooftop installation. Construction will commence in the first half of this year and completion is slated for the second quarter of calendar 2024. Turning our attention to Hardware. We really have been a star this year. Hardware sales have been exceptional at more than 20% growth in this year, which is more than 50% over 2 years. The year saw the expansion of our retail network with 10 new IHG stores as well as 11 Total Tool stores and a further Total Tool store being expanded. It's really pleasing that this takes the Total Tool store base to 100. This is a significant milestone for the company and one that the original founders and shareholders should be very proud of. We've completed a number of acquisitions, which are detailed in the slides, and one of them is a Frame & Truss plant. This takes the total to 10 across the country. We're getting really good feedback from shoppers who are enjoying their experience in all our Hardware stores. And in a retail network basis, the combined Hardware network of all stores is now bigger than $4.4 billion and is up an incredible 28% on a 2-year basis. Online represents 6% of total Hardware sales and this number is 8% in Total Tools. A little bit of detail on the Hardware sales performance. If you look at the IHG sales growth of 12.5%, this is made up of the like-for-like Hardware growth of 10.5%, split between trade at 12.7% and DIY at 6.7% in FY '22. But if you look at it over 2 years, DIY is up 39.1%, which is higher than trade's 11.6%. The result is that the trade mix this year has reverted to the mid-60s, which is what we consider to be more normalized. The Sapphire investments are highly effective, and we're seeing high double-digit growth in the period following revamps. Like in Food, inflation remains high and supply constraints in key product categories persist. However, we continue to see strong demand within the home renovation and homebuilding markets. On the next slide, we can take a look at some of the Total Tools detail. Again, to understand the underlying performance of Total Tools, you need to look at the like-for-like network sales growth, which is a remarkable 48.1% over 2 years. Of the 11 new stores I've mentioned 4 are co-located with Mitre 10 stores. It's early to draw conclusions on performance, but we like what we see so far, and we think there are more opportunities for the format. The business has continued to benefit from the Total Tools Holdings structure and what I think of as a well thought out and clearly understood put and call deal structure between Total Tools Holdings and the independent franchises -- franchise holders. What this does for the franchise holders is it allows them to continue to invest with confidence while protecting our asset base. Looking at Hardware EBIT, being a strong performance from both IHG and Total Tools to deliver a stellar EBIT growth of 40.7%. IHG's profit growth was enabled by the strong network growth I've spoken about, increased contribution from company owned and JV stores as well as good acquisitions that have generated strong returns, and disciplined operational performance and cost management. Leverage was tempered somewhat by the passing out of much of that productivity to members. As we continue to live up to our commitment of keeping them highly competitive in price range and stock availability as well as reinvesting in the shopper experience through programs such as Sapphire digital and loyalty. Total Tools also benefited from topline growth as well as an increased contribution from company-owned and JV stores. Naturally, the higher Total Tools EBIT margins deliver strong operating leverage in high sales growth periods. Looking at Hardware and future update, you can see that Hardware has got a clear strategy. This includes continuing to win new DIY shoppers and doing this through highly effective recruitment and store reinvestment programs. We've got a clear focus on a relevant range and competitive prices as well as on emerging categories like bathroom, kitchen and laundry. The new hardware Ravenhall DC in Victoria is set to open in the second quarter of this financial year. It's a 50,000 square meter modern facility, and it does have space for Total Tools. Like Foods network of the future strategy, IHG's 2-brand strategy ensures that each market's got the brand and the format that is the right one for them. As we look to consolidate our leading position in the building trade, we're focusing on our extensive footprint of trade-focused trade centers as well as the whole of our strategy, which is underpinned, as I've said, by the now 10 Frame & Truss plants as well as continued steady investment in leading trade technologies. Total Tools have continued their journey to build the ultimate tool shop as they aim to be the #1 choice for trade quality. This progress is evident, and you can see it in the network growth and strong performance of exclusive and owned brands. And again, I want to call out the online penetration of 8%, which is market leading, and the inside loyalty has sales at 89% of total sales, a truly market-leading loyalty program. Turning our attention to Liquor. Our liquor business is the second largest liquor business in the country, and it's added more than $1 billion of sales in the last 2 years, all while have navigated various changes in regulations for the on-premise market extremely well. This balanced channel and customer strategy with on-premise and retail has served the business well as there's been a recovery and on-premise, we've seen continued strength in retail. Like Food, the team has prioritized service to retailers and on-premise operators. And the success of their network is similarly built on an increasing preference for local shopping but it's been sustained by shoppers who have liked what they found and discovered that they don't have to pay more for the experience. Again, it's interesting to note that in WA, with the least lockdown regulations, our sales growth has been the strongest. By any measure of compared to the overall 2-year sales growth is a fantastic result and one we believe we can build on. From an EBIT perspective, it's really pleasing that EBIT margins have been maintained at 2% despite the additional costs and supply chain challenges. From an MFuture perspective, also like food, there's been no slowing of strategic progress in the year. The team are just so honored to win the Roy Morgan Best of the Best award. This is a result of sustained and continued above the line and below the line investment in awareness and conversion and backed up by a fantastic local service as well as continued improvement in price competitiveness. The investment in O&E helps both Metcash and retailer margins and delivers great value to our shoppers. That portfolio grew at 23%. Within supply chain, we're now launching ALM Connect. This is similar to Food's charge-through model. It's focused on reducing the friction for our retailers, making us easier to deal with and giving them access to a wider range. Suppliers have responded positively, again validating that they see Metcash and in this case, ALM as an effective right-to-market partner. Just to provide a short update on digital, I think it's true to say that we started late but was spurred on by COVID. And Food have now quickly settled e-commerce on their chosen platform and are making really good headway. Today, we've got more than 190 stores live, which implies more than 90 have signed up in the second half. We're getting really positive shopper and retailer feedback. And that means we're confident of achieving the target of 800 IGA stores on the platform by FY '25. It's interesting that the basket in Food is high at $120 and $110 in Liquor, and it shows that customers are expanding their repertoire using the platform for new shopping missions. Looking at Liquor, they've launched brand sites now and have moved off the Shop My Local platform. Hardware are the furthest progressed and they have a 6% contribution, as I've said, with over 8% in Total Tools. Obviously, we see this as an opportunity for continued growth. We'll continue to invest in the platform in all 3 pillars in a sensible and deliberate manner and will continue to work with partners as we maintain the pace of growth while keeping costs in check. We've seen similar pleasing progress in our rewards area. In IGA Rewards, we'll continue to invest in that program with urgency, while Liquor are launching their brand loyalty programs. Both Food and Liquor teams will continue to work with and learn from the IHG and particularly Total Tools colleagues. Campbells will be launching CampbellsPlus pilot in July, to extend the Campbells offer beyond their warehouse range by connecting buyers and sellers online. As you can see, Hardware is a leader in e-commerce, digital engagement and loyalty space. They've done this through sensible investments in practical tools and this has delivered increased traffic and improved conversion through more relevant and personalized engagement and expanded online offers. And that, in turn, has delivered online sales growth of over 100% in IHG. Their loyalty program now is 1.2 million customers and their loyal Mitre 10 and Home Hardware program members. Total Tools are also well advanced in their online and loyalty plans and coming off a relatively higher base have delivered great growth of 42%. They're really driving hard on personalization and engagement across all their channels. Their loyalty customers now represent a base of 1.6 million highly engaged trade customers. And as I've said, the sales to this group is nearly 90% of total sales. Looking at Project Horizon. This project has 2 key areas of focus: firstly, replacing, derisking and modernizing our core systems, and we're going to do this in order to reposition Metcash as a modern technology-led wholesaler. By replacing our legacy systems with an integrated Microsoft Dynamics 365 ERP platform. Secondly, we aim to significantly improve our processes and to do that through standardization and simplification in order that we're easier to do business with. This will have a positive impact on our customers, suppliers and team members. We've now finalized the scope and we've extended it in a couple of areas, including Campbells point of sale. We're doing this to build a more stable business for that business and to better integrate it into Metcash and so that we can reduce future integration costs. I just want to mention a couple of important milestones so far. So firstly, as you know, in November last year, Core Finance went live, and I'm pleased that we've now completed the first financial year end on that system. In the Plan, Buy, Move space -- Plan, Buy, Move, Sell space, we're well advanced. The first element of forecasting and replenishment starts in the first half of this year after we made the decision to bring it forward to access benefit earlier than originally planned. We've also successfully migrated the Hardware business to a common Group active directory. This was also brought forward to accelerate internal working efficiencies. So now that we've chosen Dynamics 365 as an integrated solution, it's great that we're working closely with Microsoft. We've got a good strong partnership with them, and they continue to build key functionality into their core release. And this is relevant because that platform approach has already allowed our IT team to do an upgrade to the latest release and this demonstrated the robustness of the solution design. It also gave us the ability to adopt new features and functionalities as they're delivered by Microsoft without business interruption or further investment being required. You'll note the CapEx investment as well as our expected rate of investment to the end of calendar '23. And you'll note the $14 million included in significant items in the second half of the FY '22 year as OpEx. These relate to noncapitalized investments of items such as project management costs, training, data conversion, parallel and duplicated systems costs and accelerated depreciation of legacy systems. Phase I of Horizon focuses on derisking and simplifying the business through the replacement of the ERP, which is our aged core ERP. This sets us up well for Phase 2, which will position Metcash to be a more modern wholesaler underpinned by technology and data and will allow for further value realization. Horizon is a multiyear, highly complex program that touches many parts of the business. I've stepped into an active sponsorship and governance role and there's great oversight by steering committees and by our Board. All governance and program management processes that one would expect of a program of this nature are in place. So I'll now hand over to Alistair, who will talk to the financials.

Thank you, Doug, and good morning, everyone. I'm now on Slide 24. Before I review the detailed financials, I'll just make some opening comments about the year gone by, focusing on the financial highlights. Now this is my second full year results I presented for Metcash. Last year, we were very proud, but 2022 has been another year of strong performance with higher earnings and pleasingly good leverage even after the challenges that Doug just outlined. You've probably noticed in the detail, we finished the year with a healthy balance sheet and this has come about from ongoing strong trading performance and our focus on capital allocation. There are a few elements to capital allocation. So let me unpack these. I'll start with working capital. A good example is we successfully invested in inventory to keep stock on shelves for our retailers and members. Secondly, we continue to buy value-accretive businesses like Total Tools, you've already heard from Doug about the significant contributions this is making. Thirdly, the substantial distributions to shareholders. This includes the successful $200 million buyback that we did in August last year. Now another area I wish to highlight, it's often overlooked. And now during the year, we took the opportunity to reset the debt book and other facilities. It improved our terms, tenure and pricing and this sets us up well for the year ahead. So all up, we're in very good shape and delivered a ROFE of 31%. So let's move on to the profit and loss. As a reminder, this year represents a 53-week trading period. Now Doug has already provided the insights into the pillar sales and EBIT so I'll focus on the rest of the profit and loss. The slide sets out the P&L, and it nicely shows how the leverage has converted the sales growth into increased profits. So if you look at the right-hand side of the table, you'll notice this benefit, starting with the 6.4% sales growth to $17.4 billion of sales and then converting into 18.6% increase in underlying profits to $300 million. Now I should also point out that the EPS increase is higher than the profit increase, and that's due to the buyback. My comments are focusing on underlying profit. Why is that? It's an important driver to assess and measure our performance and for calculating our investors -- calculating dividends for our investors. So now let's look at the other specific items in the P&L. Depreciation and amortization is up slightly. It is up slightly in line with the growth in right-of-use assets associated with the JV stores that were acquired with Total Tools. Net finance costs are higher. This is because Metcash moved into having modest debt levels as planned and following the buyback. Now this is partially offset by lower cost of debt, we're at 23 basis points lower during the year. And the third item is significant items are higher. There are 2 main factors making up significant items. The nature of both factors are the same as the half year and last year. The first relates to the value of the Total Tools put options. You'll recall that as Doug outlined pre call option arrangement. And with the continued favorable performance of Total Tools comes an increase in the value of these options. The fair value is assessed at each reporting period and the uplift is a charge on the current earnings and for this year, there was a further increase in value of these options of $28 million. It's noncash for now, but obviously, it does increase our future option payment that happens in the years to come. The second relates to Project Horizon and the accounting standard requires us to expense the noncapitalized costs. These costs predominantly relate to project resources, accelerated amortization and incremental licenses. Now at the bottom of the page, if you cast your eye down to the bottom there, you'll see the healthy ROFE of 31%. So clearly, a stellar result for Metcash for the year gone by. So let's just move on to the cash flows. So on this page, Page 26, I'm on. There are 4 points that stand out. Cash realization ratio, our ongoing increasing investment in Total Tools, we invested $100 million during the year, substantial level of shareholder distributions and a return to modest debt levels. Now our operations generated strong cash flows equating to a 91% cash ratio. Now let's put this into context. The 3-year average is 90%. There's always pluses and minuses each year. And as many of you are aware, our working capital can be impacted by seasonal fluctuations. What's this mean? The move-ins are the largest cash flow variable we must manage. So delivering a 91% ratio after the strategic investment in inventory is a very pleasing outcome. It's also worth noting we will continue to invest in the inventory, while supply product remains uncertain, and whilst inflation remains high. This approach has served our retailer and members well as well as our investors. The other main cash flow is related to shareholder distributions. You can see those as the 2 items on this page. Dividends of $199 million and the successful buyback and we ended the year with a net debt position, and this is reflected on the next page, the balance sheet. So moving on to Slide 27. With the balance sheet, the key message here for everyone is we continue to be in a healthy position with financial flexibility. Now this is a busy slide, but the main points that I'd like to talk to is the working capital. Working capital remains a key focus not only because of managing the seasonal nature of our inventory buy, but also ROFE is so important for our performance. I'm going to just talk to some of the line items. Year-on-year changes in the mix of the working capital are weighted to Hardware. This is because Hardware has longer inventory and sales days. I think that's understandable by the nature of their products. And this is obviously longer than the Food and Liquor. With CapEx, the vast majority of the business acquisition relates to Total Tools is $100 million. And there are 2 elements to expanding our investment with Total Tools. You'll recall in the first half, we acquired an additional 15%, taking our interest in Total Tools Holdings to 85%, and the other relates to Total Tools acquiring 15 more JV stores. This is part of their strategy, and it was good to have completed those acquisitions during the year. In the balance, $47 million of the $65 million of growth relates to Horizon, $7 million for the new Hardware DC and we acquired another 2.5% in Ritchies during the year. Now on the bottom left-hand side of the slide, you'll see a reduction in the net assets. That's mainly due to the buyback. So finally, the net debt of $189 million is a good segue under the next slide. So we'll move to the debt management slide. In my opening comments, you'll recall I referred to us taking the opportunity during the year to reset our facilities. Now this page summarizes the picture. But the benefits of the reset was to get better terms, that's a lower financing cost. And our cost of debt during the year was 23 basis points lower. We've also got longer tenure. For example, we put in place a 7-year facility and got greater flexibility with the different types of facilities. Now this is all important because our financial requirements moved about throughout the year, and the debt book must provide the flexibility to accommodate not only the seasonal nature of our inventory buying, but our ongoing capital allocation to manage the trading environment, and/or funding growth projects, whilst we always keep a good headroom for our banking covenants. So we finished the year with better terms and tenure and are well-placed for the year ahead. So let's move on to the dividends. The Board has approved a final fully franked dividend of $0.11 per share. That equates to $106 million of cash, and this gives a full year dividend of $0.215 per share, up substantially from prior years. As a reminder, this is our second year of paying dividends at an increased payout ratio of 70% of the underlying profits. The dividend goes ex on the 12 July and will be paid to shareholders on the 10 August. Now as a closing comment, Metcash has had a stellar year and continues to trade strongly. That said though, whilst the outlook for the economy is uncertain, we do remain confident in our capital allocation model and being in a really good shape to manage through these times. Now I'll hand back to Doug for the outlook.

Thanks, Alistair. So as Alistair said, the business is in a strong financial position, and we've got good financial flexibility. Overall, we believe Metcash is in good shape. The independent retailers are in a great place, and they've got confidence in the network. The wholesale business model has been shown to be robust and has dealt well with the challenges over the last few years. And all of this is underpinned by the strong purpose in the business as well as the MFuture initiatives that continue to progress well. As we look ahead, one must give consideration to the environment that we're in. Of course, the rising cost of living is a factor. This includes not just food and nonfood product inflation, but the higher cost of services, increasing energy costs and rising interest rates. There's also an increasing appreciation of the fact that we're now operating in an environment of higher uncertainty. What this means for our consumer and how it will affect their behavior is uncertain. That said, we're really pleased with the sales momentum of the first 7 weeks. This has been strong. We expect to be able to continue to manage these challenges as they remain. We'll continue to incur the cost of doing so while that persists. We started the year with good momentum and personally, I take a lot of confidence in Metcash being well-positioned for the future. This is underpinned by the resilience and health of the network and the robustness of our operating model as well as our strong financial position with the inclusion of the financial flexibility to continue to progress our future plans. This concludes today's presentations. I just want to thank everybody for taking the time for giving us your attention. I'm now going to hand over to questions.

[Operator Instructions] Your first question comes from Ben Gilbert with Jarden.

Just this question for me. Just if you could talk around the price perception that you're seeing amongst the IGA network? And also just how you're thinking about preparing for the scenario if we did see the value shopper come back if they started to cross shop across more stores.

Thanks, Ben. I'm going to ask Scott to make a comment. And if necessary, I'll add my voice.

Thanks, Ben. Look, we've -- as you know, in the last 4 years, we've been on the journey to give shoppers a better offer. We think that we've improved the competitiveness by offering that wider range of products at a competitive price. We believe that through the programs we offer being price match and the newer program around low prices every day and the results you're seeing in our performance shows that shoppers are seeing better value. What I would say is, as competitors call things out about locking down or holding down prices, I think we have that broadly covered through price match and through the offer like [indiscernible] , as I described. And then the other area in which we're building on and getting more support with our retailers and in turn shoppers is our private label range. So we still believe there's an opportunity for us to continue to develop and grow sales within that range, which just builds on all of the good work we've done around competitiveness.

So just on that, Scott...

Sorry, Ben, I would just add that what may happen in the future, obviously remains to be seen, but the underlying sales numbers really do speak for themselves.

Yes. So just sort of final information on that. If you look at how you perceived and how you sort of look at an average basket across an IGA that's gone through the refurb program. Would you sort of say you've closed the gap within a couple of percent for that sort of core range? And is there a view that you're going to look to invest more because and obviously, you look at the choice survey you guys did very well being sort of one of the majors. Is that being reflected you think in consumer mindset? Or is the strength you're seeing in the business at the moment, the fact that people are still -- there's some shortages in produce, obviously, our network is doing better than the majors, et cetera.

So Ben, undoubtedly, some of the things that Scott's talked about have supported the competitiveness of the network. We do measure price gap and we do it in a number of different ways, in different formats. What I can share is that we've seen a better than 150 basis points improvement in that price gap in the last 15 months. And as you point out, having product on the shelf is obviously very important. So that certainly has benefited us, and that's underpinned by some of the things that I spoke about earlier in terms of the robustness and flexibility of our wholesale supply chain.

Your next question comes from Grant Saligari with Credit Suisse. Please go ahead.

Congratulations to the team on the result, fantastic result. Two questions, if I could. One is on Food. Are you able to elaborate at all on how the whole sort of warehouse wholesale sales growth in the fourth quarter compared with the IGA retail sales growth. And whether you're able to detect any sort of changes in mix that might be occurring at IGA retail?

Grant, so the scan data that we get from the network indicated that sales were broadly in line with our underlying wholesale sales. From a mix perspective, I'll invite Scott to comment.

Yes. Look, we haven't seen a significant shift in mix. We do keep -- as we do DSAs and expand the work around network of the future, we are seeing growth in fresh. And then other categories like personal care, where we under-index and we've got specific plans to grow in those categories.

Because I wonder whether if shoppers move or -- well, if shoppers are put off by some of the inflation we're seeing in fresh whether they actually move more to packaged grocery and that might actually end up benefiting wholesale sales to some extent. But I guess we'll just have to wait to see that play out. My second question, I guess, was just around the 53rd week effect that wasn't discussed in a lot of detail. I just wondered whether you could broadly outline the sales and importantly, the EBIT impact of the 53rd week.

So Grant, just to close out on your last point, we -- as we do see any shift into perishables, those obviously come through our network as well. We've got a strong fresh and frozen network. So I think we're well-placed for that. In terms of the 53rd week, we do disclose the detail on sales. We don't cut off properly on a weekly basis. So our guidance is traditional you've been just to take total EBIT and divide by 53.

Okay. So as we just prorate the EBITDA to get the 53rd week effect.

Yes, that's best.

Your next question comes from Shaun Cousins with UBS.

Just curious around Hardware. Can you just talk a little bit about if you're seeing any negative impact of lower house prices on future orders. And I guess, sort of how you feel about your confidence in the ability of the Hardware division to gain market share in what could be a tougher market, not today, given the strong results you've seen, but also more of a tougher market in the years to come, please?

Shaun, I'll invite Annette to add some color to the comments. We've not seen any impacts of any housing price changes on demand. As we've noted, there remains quite a significant pipeline of renovation and new home builds in published -- publicly available data, particularly through HIA. Annette, would you like to add any additional comments?

I think you're correct, Doug. I think the other thing is to say that we do have a relatively well-balanced segmentation across the consumers just to find that right mix between residential housing builds and the renovation market. So we should see the right flow between those 2, giving us strong confidence in that future.

Great. And maybe to you, Doug, I guess, what are your -- broadly, if you can, your first impressions regarding the business, what's, I guess, better or worse? And will there be any sort of change in priorities that we've seen from in future now and if you're not at liberty to say that now, when do you think you might provide some sort of update, I guess, if there is a change in -- or tilt on some of the priorities that you have regarding the business, please?

Shaun, so we will give a full update at an Investor Day that we're planning for late October. You'll get a save the date from Marin and Steve quite soon. I think it's -- when you look at the set of results in terms of what I found when I've come into the business, I feel very privileged to be presenting results as strong as these although as I've noted, I had very little to do with them. It's entirely Jeff and the team's doing.

Your next question come from Tom Kierath with Barrenjoey. Please go ahead.

Just a question on the Food margin, I think it's about 2.5% if you add back the COVID cost that you took above the line. Just wondering where you kind of see the evolution of margin going forward. Is that level kind of too high? Or is it kind of sustainable.

I'll take that one. I think you're aiming too high there. I think around that sort of -- we've called out a sustainable margins around that 2%, 2.1%. The team have done a great job managing costs in a very, very challenging supply period, not just COVID-related impacts, but all of those natural disasters. So I think, yes, I think where it sits is around where we'll target going forward.

And just secondly, on stock profits. I know that, obviously, there were some big price rises coming through at the back end of the period. Just any color you can provide on what the impact was and how that might play out going forward?

Look, I think we've given some commentary there around the inflation increasing in the last few months for us on the warehouse lines. We naturally will take the opportunities that are in front of us in a modest way as well. And it's important to call out that as we do that, we've got to make sure that we remain competitive for our shoppers in stores. So where we can, we'll also modestly reinvest in some of those products. But the other big factor here is stock availability. So there's -- supply chain is still struggling with keeping up with all of the current challenges that Doug has called out during the presentation. So it's not like with as those product changes or price rises come through that there's limitless stock available either.

Your next question comes from Lisa Deng with Goldman Sachs.

Doug, Alistair, management team. Congratulations on a great result. Just 2 questions from me. First is on the Food sales for the fourth quarter and then the outlook well and then the updated outlook for the 7 weeks. It seems that the fourth quarter sales were up 5.8% normalized, but then the first 7 weeks is at 5.0%. And I think maybe inflation should be increasing or accelerating. So would that imply volumes decelerating? Or if you could talk us through some of that -- that would be number 1 question. Then the second question is about the new DC. We've talked a little bit about the CapEx. What about OpEx? Do we have any guidance there?

Thanks, Lisa. Just in terms of Food sales trajectory, you're right with the numbers that you pointed out. If you look at the Food sales for the first 7 weeks excluding tobacco or actually see they're up 7.7%, which is probably a better reflection of the underlying trend. As inflation increases, and we share with you our numbers, those are measured ex warehouse. As Scott's outlined, we've got quite an extensive price match and low price program that makes sure that prices on the shelf are in fact competitive. And so the inflation that you might see on the shelf will be lower than our number. In terms of guidance for OpEx for the new DC, I'm going to hand it to Alistair.

Yes. Thank you. Thanks, Lisa, for your kind words. We -- with the new DC, we've outlined the CapEx in the announcement. In terms of any impact of relocating, it's just too early to tell and quantify. But any impact on '23 will be minimal. It won't be significant. It will be more in the year of relocating, which is in '24.

Okay. Got it. And do we have any idea on it benefits -- sort of what sort of benefits that we be looking at?

So we can describe those in nature. And certainly, from a site operating efficiency perspective. It's a modern facility that is a strong advancement on the existing Laverton DC. I've talked a little bit about safety. But from a financial perspective, it will allow us not only to grow our volume through the distribution center, it will allow us to handle more perishables. It will do a better job -- allow us to do a better job supporting our on-premise customers in Liquor, where we've seen really strong growth. And it will reduce the number of times that we're handling products in total.

Your next question comes from Craig Woolford with MST Marquee.

I might follow up with that this distribution center that you're opening in Victoria. I'm intrigued why the company didn't choose full automation. It's something that we've seen the 2 major chains pursue. And I know you've got a DC in New South Wales with that. And maybe related to that, are you looking at opening a new distribution center in WA as well.

Craig, yes, thanks for the question. It really goes to the heart of the wholesale model. In a joined-up network, the distribution centers set the tone and are able to optimize on an outbound push basis to the network of company-owned stores optimizing internal volume up on transport, truckfuls, et cetera. We serve our customers who are the independent network. And so we are on a pool basis. What we find is that at an operating efficiency and effectiveness perspective, semi automation is the preferred way to go and the level of investment that would be required for full automation simply isn't justified. That said, we always as costs of investments and potentially the nature of demand were to change, which we don't foresee it doing, we would always be able to invest. In terms of WA, we're continuing to assess and always will are assets that underpin our wholesale model.

Understood. Second one around private labels, this is related to Food. Can I get a -- some metrics around where your private label penetration is, SKU count, something like that? What -- interested in what Metcash might be doing to deal with a more value-conscious shopper where private labels may be a battleground.

Yes. Look, happy to take that, Craig. And we have a few thousand products in private label across Black & Gold and Community Co with a good representation of those products in Com Co being in fresh as well. So if you shop some of our stores, you'll see expanding ranges like in salad bags, et cetera, in those growing categories. And it's working very well and getting good traction. What I would say is we've been improving that offer over the last few years, and we've still got more opportunity to do so. As we improve the offer, working with our retailers, we're actually getting greater cut through in our retailers ranging the right products. So I think it's fair to say if you look back in time, we'd expanded our ranges into some categories that weren't adding value. Now as we're getting that right, we'll start to see momentum with our -- not just our retailers ranging the product, but our shoppers picking it up. So I think it's one that I'd love to give more color on at our next presentation.

Your next question comes from Richard Barwick with CLSA.

I just wanted to follow up on or ask about expansion on some of your comments on inflation and also your price competitiveness. Because I think you mentioned earlier, you talked about a Scott was talking about 150 basis points closure of the price gap to competitors. And then there's the comment that customers shelf inflation would likely be lower than the inflation that you guys see. Just be interested to hear how you describe it in the context that traditionally Metcash has been a real price follower or IGA has been a price follower in the market, but some of those comments would suggest that that's not the case and you're actually taking a more active approach on that. And I think if you can answer that in the context of the wider process as suppliers come to you with cost increases. Just, I guess, the thinking as you go through that process to accept or not or how you actually feel of those price increases through?

Thanks for the question, Richard. I'll make a comment and then hand to Scott for some detail. I think the first point that we want to make is that the proposition in the independent network is founded on more than just price competitiveness, which as you point out and we've spoken about, has improved significantly. We also offer in the network, the ability for retailers to range a wider range of national and local products that customers have choice as to how they manage their own budgets. And so we don't rely simply on price competitiveness for our overall customer value proposition. In terms of some of the detail and how we deal with supplier price increases, I'll toss it over to Scott.

Yes. That's a good question. And when I first came into this role, one of the biggest challenges that I was told we faced was that perception -- shopper's perception of price. And we've certainly been building on those programs that were in place like Price Match through to Low Prices Every Day program. We're very focused also with Network of the Future and having the right offer by each format. So it's not one size fits all, which we believe is a competitive advantage as well. Just on dealing with supplier price increases, we're a wholesaler. So as a supplier comes to us, we naturally take a price increase or they could choose not to supply us. So that's pretty black and white. On the other side of that is the merchandise team negotiating and working with our supplier to ensure that we have a competitive promotional program to pull the stock through the shed. Because at the end of the day, we measure sales on the way out, not the way in. So for us, it's really important that we partner with our suppliers and we've seen that particularly over the last year, some really good partnerships that have helped us remain competitive in each market we sit in. And the other thing I'd just like to call out, it's important to note when we talk inflation versus our competitors, we're talking wholesale inflation here. And as Doug and I have both pointed out, the differences or the difference that we have in being a wholesaler. So it is always apples and oranges when you start to look at market inflation. So looking at what's going through a register versus what's going through our warehouse network.

So, Scott, when -- traditionally, I think you guys have tracked pretty closely the competitor retail prices. What information do you make available to your customers for them to be able to make their decisions around pricing?

For our retailers?

Yes, yes.

So as the scores are independently owned, they can set their own pricing. But what they do sign up to follow is all of our promotional activity, including price match, Low Prices Every Day, et cetera. So within that, there's thousands of products that are checked weekly to ensure we're competitive in the market by format.

Your next question comes from Michael Simotas with Jefferies.

The first one for me, it is a follow-up on the Food margins in the second half. It was a very good outcome when you consider the COVID costs but also a pretty material headwind from lower onerous lease write-backs as well. Can you sort of talk about the drivers in the second half? I mean I presume it shift away from tobacco, it helped margin to some extent, but it looks like inflation is the other big variable and in the past, it dependent that made reasonable sort of short-term profits from price increases. Was that a factor in the second half?

Yes. Look, Michael, I think your summary of the -- in the question kind of answers it. There is definitely that step away from tobacco. And we are taking advantage appropriately of inflation as it comes through, as you'd expect.

And just on that inflation piece, if we sort of think about that as, obviously, inflation could be a sales and good for operating leverage through the system, but a step change in pricing sort of gives you a little bit of a boost that you sort of get once? Is that the right way to think about it?

Not really because the inflation is net of where we're obviously working with suppliers to remain competitive in the market. So it's I mean pricing is always fluid.

Sure. Sure. okay. And then just a second one, if I can, on Hardware. I think the commentary around the pipeline being extended by supply chain constraints and weather makes a lot of sense. The building industry seems to be under significant financial pressure at the moment, even though demand is quite strong. Is that something that you're watching in the business? And is there any sort of signs that you're seeing of anything that's starting to worry you? Or you think you should be able to navigate that reasonably well?

So Michael, we obviously pay close attention to the performance at an individual store and member level and work closely with our large customers. As we've shared, I think, in the past, we have a fairly low exposure to the large homebuilder market at around 5%. What we find is that the smaller builders that make up a larger proportion of our sales are able to, by virtue of their size and the shorter tenure of the pipeline, navigates better through some of the price squeezes that you've seen put the industry under pressure.

Your next question comes from Adrian Lemme with Citi.

Look, I was just interested to see if you've got any read-throughs from the on-premise sales mix for Liquor in terms of grocery because we've been hearing that since the rate rises, there has been a shift from like eating out and takeaway into grocery as people -- that also deal with the higher costs. If you've just got any insights there, please?

Yes, Adrian, nothing that is material enough for us to comment on. It's too early.

Okay, sure. And just another question. Can you talk to the labor costs rising in distribution in and as you mentioned, I think, casual labor in the presentation. But is it roughly a 3- to 4-year type rolling EBAs across your DC network? And so should we expect sort of 1 in 4, 1 in 3 to renew this year, please?

Yes, that's accurate.

Sorry, I missed that. Sorry.

I said that's accurate, your assessment.

Your next question comes from David Errington with Bank of America.

Can I just clarify, I think it was to Lisa's question, this is just a quick clarification. I think you said your April inflation was 5.3% and May was 4.5% and you're running sales ex to back out about 7.7%. So can we simplistically assume that your volumes at the start of this year is running at about 2.5%. Is that a fair way of looking at it? Or is that I'm not reading it right?

David, no, that's -- I mean, you've got the numbers right, and that's the simple mathematical formula. So at a very basic level, yes, you're correct.

So that's pretty good, you'd be pretty pleased with that, wouldn't you? 2.5% volume growth given that we're getting back to normalization. People are getting out and about, there's probably a bit of swapping and changing. You'd be pretty pleased with that. Wouldn't you? Is that a fair call as well?

Yes, we're of pleased with that. That is a fair call. That's right, and we're working hard to make sure that continues. But yes, we're pleased with it.

Yes. And second question, this is probably not as nice. But anyway, Alistair, significant items. Now the first half is -- I sound like a broken record on this, but the first half, you called out that Horizon costs were about $8 million, and that's after tax, which is around $12 million pretax. And you said that in the second half, it would be around about the same amount. But in fact, the second half has been $14 million after tax. And then I think you called out in your pack that you say that it's going to be that second half is going to be consistent with the first half and second half, which means that we're looking at around $28 million for the full year after tax for Horizon costs. Can I ask these significant items? I mean, I'm old fashioned. I don't believe you should charge them below your operating line if they are recurring. If they're nonrecurring, you probably get a chance of doing it to take them below your operating line. But why do you choose to take these costs, which are continuing to recur? Why do you take them below the line, the operating line?

Yes. Thank you, David. Your math is right on the sig items of where we've given the guidance for Horizon. As I outlined in my notes around the treatment of Horizon, these are costs that can't be capitalized. And normally, in the old days, they would have been capitalized to the balance sheet and then depreciate it over the future years. So as we've expensed these, we've called them out separately and treated them is significant. Why? Because there's no benefits really pulling through yet above line to match against it. So we feel it's the more appropriate -- it is the most appropriate treatment to treat them as sig items rather than backing them into the underlying earnings. Now obviously, this is Stage 1. And as Doug said, we're getting the platform right, and we'll continue to make sure that don't treat them as sig items when the benefits start coming through, but we are still a number of halves away before going live with the full platform.

So when you do your DC and you'll have OpEx costs with your DC, when you're building, will you sig them as well? Or will you put them to your op costs?

Yes. So you'll recall when we relocated into the Gepps Cross, DC, we did have relocation costs that we treated as significant items. These are the duplication costs that don't reflect the true benefit in the performance. It's just our way of sharing with investors the true underlying performance of the business that matches against the sales that we've handled.

Industry standard, Alistair, they all charge it to their ops. I mean Coles puts it to their op costs, all the changes, and so is Woolies. So why do you elect to charge a non-Tier ops?

Yes. So these are our major DCs. And so all of our smaller ones, Campbells, et cetera, Liquor, they're all treated above line. So it's only these big multiyear DCs. And typically, these big DCs are 40 years' plus worth of life. That's what we've traditionally done. So we do see them as a separate bucket to our smaller DCs. So all of those smaller ones are absorbed in our underlying earnings.

Last time I looked Coles and Woolies were doing some pretty big DCs and they're charging the cost to their ops. But anyway, we'll have to agree to disagree, Alistair.

Your next question comes from Bryan Raymond with JPMorgan.

My first one is just on the Total Tools conversions, 15 last year, 12 the year before, that's slowing to 8 next year. I just wanted to understand the drivers of that slowdown, but also the productivity of the stores you converted this year relative to last? Is the incremental store a bit smaller in terms of sales per store? Or have you converted the obvious ones first? And is it now just the tail of the network? I just be interested in how you think about that conversion profile going forward.

Bryan, yes, you'd be pretty much right in your assessment there when we first invested in the joint ventures, it was with the larger joint ventures and those that were probably the most significant in terms of their size. That will be the 12, 15 in terms of last year, similarly and as we run through the network, we'll pick up the investments of the joint ventures that seem appropriate. But they are on the slightly smaller scale as we continue that investment.

And just one thing about the JV stores. We've acquired these a lot quicker than they originally envisaged. You'll recall my comments about the Total Tools put option valuation increasing and this is an area. It's held the performance of that business in good stead. And the year ahead, we'll look to execute 8 and thereafter, take the opportunity to continue to earn more of those stores.

Okay. Great. That's helpful. And then just my second question is around the inventory line, actually. Just trying to understand where that's going to normalize to? We could look at pre-COVID that the business is quite different now, particularly Total Tools and the size of the Hardware business total. As you mentioned, that's going to have a longer inventory day number. Could you help us understand because you've got that investment in inventory, but you've also still got product shortages. So I'm just keen to understand what sort of the inventory day level we should expect on a normalized basis whenever supply chains, et cetera normalize?

Bryan, can you just clarify your question? Is it Hardware-related or the group?

At the group level, around that 28 days inventory that you called out in the presentation. And so at a group level, the mix of the businesses has changed within that quite a lot over the -- since pre-COVID. So just trying to understand where we should be modeling inventory days a couple of years out, whenever we think supply chains have normalized. Just wanted to understand that mix of the business and how that's influencing that line.

Well, I'm unable to give a forecast for the future, but I'd touch on a couple of things that during the year, we did do some strategic investments in inventory. It served our retailers and members well. And we'll continue to invest in the inventory particularly whilst product remains uncertain -- product supply remains uncertain, and whilst inflation remains high. How that converts to inventory days? It's pretty hard to change or say whether it will reverse or whether it will increase, but we'll continue to invest where it serves our retailers and members well. I may just ask each of the pillars to comment on their areas, how they're seeing their inventory days.

Yes. Look, I mean we've had a concerted effort in Food to get the right range and mix of stock. And as you know, well know, Bryan, historically, Food was measured on a number, not a day's inventory. So we obviously want to optimize the stock turn in the shared against that range. But I think Alistair rightly called out, we've invested strategically, particularly at key times in the last year to ensure we had the right levels of stock to support our retailers through those difficult trading periods.

I'm happy to take a response on behalf of Hardware. As you know, we've got our inventory in our distribution centers, which is really quite a small proportion, about 20% of our total sales, and we have increased those inventory days turns out of the warehouse. The more important part is actually for our members to have their inventory days with the size of volume that's going through the trade business. They have also seen a decrease in their inventory days but a heightened level in their dollars.

Thanks, Annette and Scott.

Mine is very similar to Scott certainly trying hard to ensure that we keep our retailers in stock. And as Doug rightly said, over $1 billion in sales increases over the last 2 years has seen us manage inventory really very closely, and we haven't seen a material increase.

Your next question comes from Ross Curran with Macquarie.

This is probably a question for Annette. But in the release, you talked about DIY demand being elevated, but volumes have declined slightly except the prior year -- relative to prior year. Are you able to flesh that out a little bit for us? And particularly, can you talk through DIY demand over the last 7 weeks?

Yes, absolutely, Ross. Thank you for the question. But we're absolutely thrilled. I think as you can see with the 2-year number of 39% on DIY and delivering very strongly for us. The slight decline is really very much that. It's very low single digits, but coming off 2 years of very high transaction and sales growth. And I would suggest there's no material change on that in the first 7 weeks.

Is it product specific? Or is there anything specifically that consumers are sort of trying to buy elsewhere? Or are they not buying things now?

It's really coming off the very heightened level that we saw through lockdowns and the need for consumers to invest in their homes that they were spending more time there. I would say some of our decline is probably in that area of garden and paint, which were the two heightened and really peak elements when everybody was growing vegetables and $12 [indiscernible] , which are a bit cheap when you grow them a home, but it's as much as that.

There are no more questions at this time. I'll now hand back to Mr. Jones for closing remarks.

Thank you very much. And really, in closing, I'd just like to thank everybody for spending the time with us and for your interest in the company. Take care.