Metcash Limited (MTS) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen. Thank you for coming along to the Annual General Meeting of Metcash. My name is Peter Birtles, and I'm the Chair of the Board of Metcash Limited. And on behalf of the Board I'd like to thank you for all coming along today and attending this meeting. Before we commence, I'd like to acknowledge the traditional custodians of the lands where we are today and where we're all connecting from. I'm connecting in, because we are doing an online meeting, I'm connecting in from the land of the Gadigal people of the Eora Nation, and I pay my respects to Elders across country, past, present and emerging, and I extend that respect to any Aboriginal and Torres Strait Islander people here today. We certainly have a quorum present, so I now declare the Annual General Meeting open. First thing that I'd like to do is to introduce your Board of Directors who are with me on the stage here today. And firstly, we have Doug Jones, who's our Chief Executive Officer and Executive Director. Next to Doug, we have Marina Go, who is the Chair of our People, Culture and Nomination Committee. And we have Margie Haseltine, who is the Chair of our Safety and Sustainability Committee; Mark Johnson, who is especially busy with us. He is the Chair of the Audit and Risk and Compliance Committee, but also the Technology Advisory Working Group. And then we have Nicky Sparshott, who has recently joined the Board as a new Director, and therefore, under our constitution, will retire today and is offering herself up for election later in the meeting. And then we have Dave Whittle. And finally, we have Johanna O'Shea, who is our Company Secretary, and it is also Joanna's birthday today. She organized the meeting especially to be on her birthday. As well as the members of the Board, we have members of our leadership team here with us, and we have our Group Chief Financial Officer, Deepa Sita, who's at the front here. And sitting with Deepa, we actually have our signing partner from Ernst & Young, who are the company's auditors, Katrina Zdrilic. Ms. Zdrilic will be available to answer any questions that shareholders might have concerning the conduct of the audit, the preparation and content of the auditor's report, the company's accounting policies and also the auditor's independence at the conclusion of the Group CEO's presentation. We welcome and thank Ms. Zdrilic for her attendance today. Also, we have with us our Chief Executive Officer from our ALM, that's our Liquor business, Kylie Wallbridge; and our CEO from our Total Tools and Hardware Group, Scott Marshall. And we also have a number of other members of our group leadership team with us as well. So at the meeting today, we will review the company's activities during the year and receive and consider the accounts and reports for the 12 months ended the 30th of April 2026. We'll then go on to consider the 4 resolutions that were outlined in the Notice of Meeting, which was lodged with the ASX and made available to all shareholders on the 7th of August 2026. Moving on to talk about our voting instructions to help us run the meeting today. All resolutions will be put to a vote, and we have electronic headsets -- handsets, which we'll use to decide the votes by an instant poll. Once voting opens, the resolution text will appear, and it will bring up the voting options that are available to you. You do that by pressing the green square. You then press 1 if you're voting for the item, 2 to vote against, or 3 to abstain. To move on to the next item, press the green square again or return to the full list of items by pressing the red triangle. Your selection and the word received will appear on the screen confirming that your vote has been cast. If you do wish to change your mind, simply select a new option by pressing 1, 2 or 3, and your original vote will be canceled and your new selection will be counted. Any appointed proxy who has been given discretion on how to vote should vote in the same manner. Any appointed proxy that has been directed to vote in a certain manner and has no discretionary votes to cast does not need to vote as those votes will automatically be counted in accordance with those directions. Once the poll is closed, the results will be displayed on the screen, showing the combination of votes that were cast in the room and also all the proxies that were received prior to the meeting. If you do have any issues with your handset, please obtain assistance from one of the attendants. If you're joining the meeting today online and you do wish to ask a written question, select the messaging tab at the top of the Lumi platform, type your question in the box towards the top of the page and press the send button. A copy of your submitted questions along with any written response from our meeting team can be viewed by selecting My Messages. Should you wish to ask your question verbally, collect the request to speak button in the broadcast window. The audio questions interface will now display and you will be prompted to confirm your name and enter the topic of your question, submit your details and select join queue to be connected. If prompted, select allow in the pop-up to grant access to your microphone. Please note, while you can submit questions from now on, I will not address them until the relevant time in the meeting. So I will now turn to my formal address. I will provide you with an overview of how the company performed in the 2026 financial year as well as comment on other important matters, including our strategy, our Board changes, our approach to remuneration and to ESG. I'll then invite Doug Jones to talk in more detail about the company's operating performance as well as progress against our strategy. So let me begin with a look at the year-end review and a brief overview of our financial performance. I'm pleased to share that the company delivered a resilient performance in the 2026 financial year, which reflects the strength of our diversified portfolio, disciplined execution and the advantages of our independent retail model. This was achieved in a year of mixed trading conditions, ongoing cost of living pressures and sector-specific challenges. Against that backdrop, the group continued to demonstrate the quality and resilience of its earnings and cash generation while continuing to advance its long-term strategic priorities. The group delivered solid financial outcomes for the year. Group revenue increased to $19.6 billion, which was up by 0.7% and up by 3.8% if we exclude tobacco. Group EBIT was $503.7 million, up 1.6%, excluding the $12.4 million of strategy and integration costs. Operating cash flow remained strong at 558 million, which reflects the quality of earnings generated by our business and the focus on disciplined working capital management across the group and the inherent strength of our business. Underlying profit after tax was $268.8 million and underlying earnings per share were $0.245. Total dividends for the year were $0.18 per share, fully franked, which was consistent with last year and modestly above the group's target payout ratio. The balance sheet remains strong with leverage of 1x at the low end of our target range. And this provides flexibility to support ongoing investment and shareholder returns. Food delivered another year of strong performance, supported by improved competitiveness in our supermarkets and ongoing growth in both foodservice and convenience. The continued expansion of this business is also helping to further diversify the group's earnings base. In hardware and tools, the integration of the Total Tools and the Independent Hardware Group has created a stronger, more scaled platform across both trade and DIY. While market conditions remain challenging, the improved momentum in the second half reflects the benefits of this integration and targeted management initiatives. The success of the tobacco mitigation strategy has helped the business offset at least $35 million of earnings from the loss of around $1.8 billion of tobacco sales since 2021, largely to illicit trade as well as lower earnings from the market downturn in hardware and tools. The results we delivered are underpinned by a clear strategic direction. Our strategy remains centered on winning with independents. It leverages Metcash's unique combination of scale, differentiated capabilities and strong competitive networks. This model continues to underpin the group's resilience and positions the business to capture growth opportunities across large and essential markets. The group continues to make meaningful progress in executing this strategy during the year. Importantly, the independent networks across food, liquor and hardware and tools remain healthy and competitive and continue to attract retailers and suppliers. It is the unique scale and capabilities of the Metcash model that ensure our customers are best placed to compete. Recognizing the conditions in which we operate, a key priority is to optimize the performance of our existing businesses. And at the same time, we continue to invest in digital and data capabilities. This includes scaling the sorted business-to-business marketplace and the near completion of our Horizon ERP program. We're also building a modern AI-ready operating environment in partnership with Microsoft and investing to make the business more scalable for the future, one that includes a stronger earnings profile and higher-margin businesses. These initiatives are designed to strengthen the core platform, improve operational efficiency and support future growth opportunities, including extending our offer into services such as retail media, loyalty and digital, which Doug will expand on a little bit further. So turning now to our Board changes. We've continued to ensure the composition of the Board reflects the right skills, experience and diversity to support the company's strategy. As part of our focus on renewal, Helen Nash retired from the Board on the 31st of July 2026. Helen made a significant contribution over her 10-year tenure, providing strong financial expertise and governance across a broad range of matters. On behalf of the Board, I sincerely thank Helen for her dedication and service, and we wish her well for the future. Also in July, we welcomed Nicky Sparshott to the Board as a Non-Executive Director. Nicky brings deep executive experience across retail, consumer goods and digital transformation in Australian and international markets. Her commercial perspective and customer focus further strengthened the Board's capabilities and are well aligned with Metcash's strategic priorities. The Board remains focused on succession planning and maintaining an appropriate balance of experience, independence and diverse perspectives. So this brings me now to remuneration. The Board is committed to a remuneration framework that aligns executive reward with company performance and long-term shareholder value. The outcomes this year reflected performance in a challenging operating environment. Group earnings improved modestly, supported by a strong food result, continued growth in liquor and improved momentum in hardware and tools in the second half. So against this backdrop, STI outcomes range from between 7.1% to 25.4% of the maximum opportunity, which the Board considers appropriate. Following a review of the remuneration framework, greater weighting was applied to long-term incentives with a corresponding reduction in short-term opportunity. This rebalancing strengthens alignment with shareholder outcomes and reinforces management focus on sustainable value creation. The FY '24 long-term incentive award vested at 20.5%, reflecting moderate financial performance over the period and subdued shareholder returns, which were below threshold. Deferral arrangements for senior executives continue to align remuneration outcomes with longer-term performance with increased deferral applying this year to the group CFO. Non-Executive Director fees were unchanged in FY '26. Overall, the Board is satisfied that remuneration outcomes appropriately reflect company performance and remain aligned with the interest of shareholders. I'd now like to turn to ESG. Metcash remains committed to responsible and sustainable business practices with ESG committed -- embedded in how we operate and create long-term value. The safety and well-being of our team members remains our highest priority. We delivered further improvement in safety outcomes in FY '26, while continuing to strengthen capability, proactive risk management and mental health support. We also continue to progress diversity and inclusion, maintaining gender balance at a Board level and within the group leadership team, along with pay parity in line with WGEA reporting. In managing our environmental impact, the group achieved key milestones, including sourcing 100% renewable energy for our Australian operations and delivering a meaningful reduction in emissions. Pleasingly, we achieved our interim 2030 target ahead of schedule, alongside continued investment in our on-site renewable energy and efficiency. We remain focused on reducing waste and improving circularity with initiatives supporting recycling and waste reduction across the broader network. Our progress is reflected in strong external ESG recognition, improved modern slavery ratings and enhanced disclosure through our sustainability report, which is aligned with the new sustainability accounting standards. We recognize that strong governance, a focus on people, environmental stewardship and community support remain fundamental to delivering sustainable long-term shareholder value. Looking forward, while trading conditions are expected to remain challenging, Metcash enters the 2027 financial year in a position of strength. The group has a clear strategy, strong market positions and a resilient business model. The Board remains confident in the company's ability to deliver sustainable returns and long-term value for shareholders. So in closing, I'd like to thank my fellow directors for their continued commitment and contribution during the year. And on behalf of the Board, I'd like to sincerely thank our management team led by Doug Jones, all team members across the business, all our independent retailers, our franchisees, our suppliers, and to our shareholders, thank you for your ongoing support and contribution. Thank you. So I'll now hand over to Doug to give his presentation, which was also released to the ASX before this meeting.

Thank you, Peter, and good afternoon, everybody, in the room and online. I think you can go to the first slide. Thank you. I'd like to begin, as I always do, with a reconfirmation of our strategy, which -- of our purpose, I beg your pardon, which as Peter noted a few minutes ago, is also our strategy. The key note among you will notice that we have evolved our strategy from -- purpose from championing successful independence to winning alongside independents. And we feel that, that's appropriate as we pursue our aspiration of being the #1 partner, powering an unstoppable network of independent businesses across Australia. Next slide. On the subject of competitive advantages, we have 3 core aspects to those, which together give us a unique and specifically advantaged competitive moat around our business. The first one is unmatched scale, which is manifested in the number of suppliers that we serve and customers that we serve each and every day. The thousands and thousands of bannered retail stores as well as nearly 100,000 and bannered stores. Our trusted and differentiated retail capabilities sit on top of our logistics capabilities and alongside them and bring that unique scale to life every day. Alongside that and completing the Trio are our competitive networks, which are the banners and brands that we operate and which form the ultimate manifestation of our market offer. Next slide, please. As we note, we've made clear progress against the strategy that we articulated in April 2024 at our Investor Day. These are focused in 3 key areas: Firstly, on scaling our networks; secondly, on improving our efficiencies; and third, on strengthening our networks. As you can see on the slide, there's been clear progress throughout. That said, we're not complacent. We know that there remains significant work to be done, and we're up for that. Next slide. As we then turn our attention to the results for the year that ended in April earlier this year, the headline is that the FY '26 result was delivered on a base of solid execution with the pressures understood and managed. The key metrics of revenue of $19.6 billion, up 3.8%, excluding tobacco and growth in normalized EBIT and EBITDA as well as strong operating cash flow of $558 million tell the story. Our financial strength comes through in our 3-year cash realization ratio of 104%, and our leverage at the low end of the range and dividends maintained at a 70% payout ratio. The key takeaway is that our earnings were resilient through the year, we did a great job of converting cash, and our balance sheet provides us significant flexibility. Next slide. Looking then at the portfolio, you can see each element of that portfolio doing its job. Food and liquor provides the stable earnings base. In a competitive and value-conscious environment, the earnings were maintained despite, as the Chair noted, a significant decline in tobacco sales over a multiyear period. Hardware and tools maintained their sales momentum and it improved through the year despite weak trade markets. We're pleased to say that we're seeing the results of our targeted actions delivering fruit. There was strong discipline in costs, in working capital management and in the tight control of capital expenditure. Our platform extension into products and services both protects and strengthens our core as well as providing us new revenue opportunities and margin growth potential. This matters because as food and liquor provide the stability and hardware, the upside when the cycle turns, our diversified portfolio supports that resilience. On the next slide, you can see what we call the revenue stream view. We introduced this at the half year. And at the end of the year, we now include earnings. Wholesale remains our core earnings engine and our growth and higher-margin streams broaden our resilience and generate new opportunity. For investors, this evidence of the transition to the diversified platform, not a single channel wholesaler should give you confidence. The proof points are the significant growth in wholesale earnings, up more than 1/3 in the period, while the share of total earnings has reduced from 91% to 76%. This is in the context of that $1.8 billion decline in tobacco sales since FY '21. The estimated earnings drag is around $30 million. And at the same time, hardware retail earnings were down around $30 million. So the business has offset at least $55 million through a stronger and larger and more profitable core. I must acknowledge that this includes acquired businesses, which required capital to be invested, and we're now focused on delivering returns on those investments. As we turn to ESG and to make some of the points that the Chair noted already, we're very pleased with our progress against 3 key focus areas: planet, people, and our impact in the community. It's noteworthy that we've maintained our 89th percentile ranking in the Dow Jones Sustainability Index for the third year in a row, and we have achieved an A rating in the Monash Modern Slavery rating as well as, as Peter noted, met 100% of our baseline energy needs from renewable sources in the year. And in the future, we're targeting this for all of our sites. I want to turn to Horizon for a moment. This core large and very complex IT project continues to show steady progress. We've already gone live with the customer master modules, and so a significant element of the solution are already live and in use. The full financial system has been used for more than a year now. And now, with -- along with the customer master shows that a significant part of the technology platform is up and running. We're planning to launch the Release 1, which is Western Australia and our national support office later in this quarter. There are 2 important things to note here. We've made the prudent decision to settle Release 1 through the peak trading period and to delay the Release 2 into the first quarter of 2027. I flagged that this was an option at the results presentation in June. And the second is that we've extended the scope to take advantage of the AI-ready fabric platform within the Microsoft technology stack. This wasn't available until recently and certainly not at the inception of the program. And it allows for the retirement of legacy technology platforms and generates attractive returns. On the next slide, we turn to the trading update. As you can see, sales have continued in growth across all pillars. We flagged that the first half earnings will be impacted by an adverse Superior sales mix, the removal of the accelerated tobacco excise increase, which we told you about in June, and persistent food and liquor cost inflation. These cost inflation from elevated pressures are being offset to some degree by our cost-out programs, which are on track. And in the second half, we have plans to continue to reduce the impact in food and liquor and to continue to support the hardware momentum. In food, supermarket sales are resilient in a highly competitive trading environment. And while in supermarkets, tobacco is still negative, it is improving fast. And there's a direct correlation between the performance of tobacco with the strength of enforcement in that particular state. In foodservice and convenience, corporate account growth has been offset by the decline and the continued margin pressure in the street business as well as moderated growth in QSR and our shipping business. In petrol and convenience, we're pleased that we've had a number of contract wins with sales improvement flowing through and a large amount of that through tobacco. First half earnings will be impacted by that accelerated tobacco excise cessation, which is $10 million for the full year, weighted towards the first half, adverse food service and convenience sales mix, ongoing cost inflation above sales growth. In liquor, we've continued to take market share through the ALM supplied independence. This is within the context of a market that is characterized by subdued demand and elevated competitive intensity. Pillar earnings, like foods will be impacted by ongoing cost inflation above sales growth rates. In hardware and tools, we've had pleasing continuation of the sales momentum. Although market uncertainty does continue to impact the outlook for the sector, we've made good progress on the strategy of returning the business to mid-cycle margins. As I conclude then, I'd like to iterate the Chair's thanks both to my colleagues, to the Board, to the thousands of team members in our business, to the independents who partner with us and trust us with their business every day and of course, to our shareholders. Thank you.

Thank you, Doug. So let's now turn to the formal items of business. Item 1 is the financial report. So the item is to receive and consider the financial report of the company and the report of the directors and auditor for the financial year ended 30th of April 2026. You will note that there is no requirement to vote on the reports. The company's 2026 annual report was sent to shareholders who requested a hard copy and was also made available on the company's website and the ASX market announcement platform. The 2026 annual report contains the statement of comprehensive income, the statement of financial position, the statement of cash flows and the reports of the directors and the auditor, along with our first sustainability report, which was prepared in accordance with the Corporations Act 2001 and the AASB S2 climate-related disclosures. These reports are now open for discussion. If you are a shareholder or a proxy, attorney or representative of a shareholder and wish to ask a question about the reports or any questions generally about the business, please raise your hand and an attendant will offer you a microphone. When invited, please introduce yourself to the meeting and ask your questions. All questions should be directed to me as the Chair in the first instance. Our Investor Relations team will also be monitoring the online facility for questions. So an opportunity will be given to shareholders, both present in person or attending via the online facility to ask questions specific to each resolution to be put to the meeting before voting on the resolution. So if you do have a question in relation to a specific resolution, please hold that question until that resolution is considered.

So I'll open the floor for any questions. Natasha?

Thank you, Mr. Chair. I'm Natasha Lee, shareholder. Firstly, I'd like to thank the Board for their solid result, although the share price is a little bit in a doldrum, so we can't really do much about that. You will be aware that the dividend payment was a little bit late for some of us. There was a bit of a hiccup there. So the first question concerns the price gap for your large store price gap for food. On Page 15, you said it's 1.2%, but on Page 25, you've got it as 2.1%. I think the number is being transposed here. So I was just wondering what is the correct gap? And is this relating to wholesale or retail prices?

So it is the measurement of retail prices against the competition. In terms of the number, Doug?

Natasha, thank you for the question. I believe -- but I will take it on notice and confirm for you. I believe the difference is the different baskets, whether it's the high compete extra special stores, which have a lower price gap than all large stores. But I will confirm that for you. Those numbers are correct.

Right. Okay. It was just a little bit confusing in a way. But in any way, it's...

I mean I think what's important to recognize there is just the progress that we've had in that area. It's been a continued focus over a number of years, and we've seen that price gap really reduce over time. So our retailers are in a much better position now to compete than they were a few years ago.

Yes. I've noticed that. And I think that's throughout the supermarket retailers, there is a degree of price matching or near price matching, which you're reflecting there. As far as the Middle East war, you said there's been supply chain disruptions. Are they in particular areas? And what has been the impact of that?

There have been limited supply chain interruptions as a result of that. I think that the impact on our business was muted. We spoke about it in our results announcement and the pre-results announcement. The biggest direct impact, and I think all Australians felt it, was through the increase in fuel prices. And we managed that very carefully with our independent retailers as well as with our suppliers. We're fortunate that there were no major product disruptions, although we did take some considered positions on inventory ahead of what we perceive to be areas of specific risk. In the end, we've sold through all of that inventory, and I'm pleased to say that it's largely normalized.

Okay. That's good. Yes. I haven't heard of any sort of major disruptions like toilet paper being sold out and things like that. So how are you monitoring the changing socioeconomic preferences in the liquor sector to identify the growth sectors? And to what degree is sort of use of AI and monitoring of purchasing through loyalty cards and the like being applied?

Yes. Well, what we can say is that the focus on consumer behavior across the whole organization is something that has a lot of focus. And within the liquor sector generally, we're seeing changes in consumption patterns. We're seeing changes in preferences. We are seeing a move towards convenience and lower volume purchasing, which is actually a positive for Metcash's liquor business being more of a convenience-focused business, suiting the independents within that. And I'm sure Kylie can talk much more knowledgeably than I can in terms of the category changes, but we are seeing a focus much more on that immediate solution rather than necessarily buying in bulk.

Yes, because there are generational preferences.

And so you could see things like ready-to-drink solutions being much more popular amongst the younger generation.

And just the final question in this area about sustainability. You're moving towards hybrid and electric vehicles. And also congratulations on your other achievements, not that I've looked at, but there wasn't really any detail about your vehicle fleet. So what percentage of the fleet is hybrid or electric? And what is the time frame to achieve 100%?

We don't operate directly that many vehicles in our own fleet, Tasha. We work mainly in partnership with large and small transportation contractors who -- many of them have different strategies on their EV conversions. I don't know what that figure is. As always, we'll need to balance the cost of ultimately moving the products against the impact in the environment, the sustainability of the assets that we use. And of course, we measure all of that through our -- primarily through our Scope 3 emissions.

My name is [ James Stuart ]. It's a bit of a political question. Coalition policy, I believe, is to reduce tobacco excise to around about 20% of that, which it is at the moment. First, would that make lawful retailers of tobacco cost competitive with the unlawful trade that we now have at the moment? Firstly. Secondly, what are the lumpiness -- what are the lumpinesses that we get as far as law enforcement goes? Because I live in Queensland. In Townsville, for example, the unlawful trade of tobacco is discrete. All the smokers know where to go. You go to Cairns and you can walk into a shop in the Main Street of Cairns and buy brightly colored packets of cigarettes for the s***** ones at $10 and the good ones at $20. Can we be cost competitive if the coalition do what they say they're going to do and reduce the tobacco excise to 20% of what it is at the moment and combine that with a bit of law enforcement for the Cairns. Can we be cost competitive?

I mean this is -- that side of it is a very complex area, and there's a number of, I suppose, competing priorities because the health lobby have got a perspective, the treasury have got a perspective. I think there's plenty for the coalition to do if they were going to progress that. I think all we can do is operate as best we can within the environment that we're presented with. And the focus of the current government is that enforcement is the way to go. I mean that's the kind of approach. And what we are seeing is different levels of enforcement. Actually, in Queensland as a whole, we'd have to say that Queensland has led the way in terms of enforcement. And what we've seen is that in relation to our tobacco business, there has been a stronger recovery of tobacco as we've seen those enforcement actions being put into place across Queensland. Clearly, as you're demonstrating, it's not uniform at this point. But we are now starting to see those enforcement actions in New South Wales. We've seen the change in Premier in Victoria showing a greater interest in more action on tobacco. So we're hopeful that we will see that there. And as we've shown in the trading update this morning, you've started to see tobacco come back. So enforcement is starting to work and have an impact.

I just have to say it's extraordinarily variable.

David Wilkinson, shareholder. The 52-week high for Metcash shares was $4.06. Today, they're trading at $2.93, which is roughly a 26%, 27% drop in the value. I'd like to get your thoughts on that. And when we might expect some sort of a turnaround in the share price that it may start to increase in value.

Yes. So I think we share your general disappointment with the share price. And our view is that the shares price is not representative of the inherent value of this company. So it's our responsibility as a Board and as a management team to build the confidence that shareholders will get to a much more representative value. There are things that we are doing in terms of the performance of the business, as we've outlined, we've got a strong strategy that's going to drive growth. We're looking at how we manage the capital allocations across the organization. One thing that we would say is the company has consistently actually demonstrated very good management of cash, and that's allowed us to maintain strong dividend levels. And of course, that's a key part as well, is maintaining those dividends. So yes, we're focused on growth, but we're also focused on cash capital and ensuring that we continue to deliver good dividend growth as well as share price growth.

Well, in relation to that, why do you think that the market doesn't pick up on that then? Why do you think that they disagree with that stance as it were?

Yes. I mean it's an area that I obviously spend time with some of the major investment groups out there and as do other members of the Board and management. I think there are a number of factors. I think the reality is that the company's earnings have been flat for the last 3 years. And so the market is looking for the company to deliver growth in earnings. When you look at some of the external issues that we face, such as the tobacco issue, we'd say our actual underlying earnings have improved. So as we work through, we feel there is momentum there, and we just need to translate that through to the bottom line. I think there is some question marks over our competitiveness in the market versus the big giants that we operate against, whether that's Coles and Woolies in food or Bunnings in hardware. And so being able to demonstrate that our retailers can compete effectively in that market, which with that earlier discussion that we had around pricing continuing to work on that, allowing our retailers to be competitive to demonstrate that. I think that's important. So I think it's about earnings growth. It's about capital discipline, and it's about giving confidence in our market position.

My name is Patricia Beal, and I'm here as a monitor from the Australian Shareholders' Association with proxies from 41 members whom they want to express through me today. Firstly, you've done pretty well in a competitive market, I guess, and well done for that to hold your position and not be any worse off. But it's not a year, I guess, in which one would aim to get a huge profit or else there would be screens from share -- from customers, et cetera, and inquiry from somebody else, I suspect, or else the customers would just not come back. But anyway, I noticed one item recently, Woolworths were -- I think it was, were refusing to buy bananas from Coffs Harbour. And therefore, the farmers couldn't sell them locally to Woolworths and they couldn't -- people in Coffs Harbour couldn't buy locally grown bananas. I presume you optimize your logistics a bit better than that and can offer locally grown goods, as I know you do in general to customers.

Yes. Well, certainly, a key part of our model is buying locally as well as nationally. And Doug, anything you wanted to.

Yes, absolutely. That is the strong point and the -- and it talks a little bit to the earlier question about serving local communities by recognizing the trends, whether it's in alcohol or preference for local bananas, our network is well set and designed to do exactly that.

Excellent. Yes. One question I had was about the skills matrix of the Board because we are well aware as long-term shareholders that the company is run by the management under the oversight of the Board. And when Board members come up for reelection, we want to examine their qualifications and also the qualifications of the current Board to see that you get a good balance of skills, et cetera. And many companies certainly have the Board skills matrix within the annual report, whereas you've only chosen to put it at this stage in the corporate governance report, which is a separate item released separately to the market and available through the company or the ASX or whatever. But we were thinking that it would be more convenient in the annual report. And the description of the skills is very vague about 3 levels of competency or otherwise for a number of headings for primary skill, if you consider yourself knowledgeable, and lesser Level 2 skills and then Level 3 skills. And there's a couple of the items that had very little, if any, primary skills in that area. I know you mentioned continuing education for the Board, and we would like to think that, that might be happening for -- so that the improvement might be there in future years.

So I mean we'll take on board your comment in terms of potential inclusion in the annual report. I suppose our view is all of that information is released at the same time, the corporate governance statement is released at the same time as the annual report. So that information is out there and available. Certainly, my observation of our description of the categories, I don't see that as particularly different to other companies. I think there is a reasonable amount of information. But again, we'll take on board your observation as to how we describe that. You and I had the opportunity to have a conversation a couple of weeks ago. And I think realistically, can a company end up in a position where you have expertise amongst your Board on every single matter, I think that's a challenge. And there are some areas where a Board will naturally supplement the skills that it has by taking on external advice by people who are experts. The role of a director is comprehensive, and we need to be able to contribute to discussions about strategy, about governance, about financial issues, IT, marketing, whatever it may be. So there's a lot of things that we need to be considering. And in some areas, you might get somebody that's an expert but actually is not able necessarily to contribute more broadly to other discussions. And for example, I think the areas that you've highlighted would be stakeholder community engagement, I think, is an area that we've said that no one on the Board is an expert in. Our view is we can supplement the Board there. But when we look at people who perhaps have that background, are they able to contribute more broadly to all of the things that come across the Board table? That's where it starts to be more questionable. And I don't think it's effective to have a Board that has people that can only contribute in 1 area, or maybe 1 or 2 areas. It doesn't make an effective Board. So I think we are very comfortable. And what we actually have effectively done in that table is it's almost in priority order. And you can see that in the areas that are most important, we have the highest levels of strength across the Board.

And just a minor question perhaps. I noticed during the year, that the number of employees went up very significantly from 11,000-odd to nearly 14,000. And was that an increase commensurate with the number of shops that increased or whatever?