Michael Hill International Limited (MHJ) Earnings Call Transcript & Summary

Good morning, and welcome to the Annual General Meeting of Michael Hill International. I'm Emma Hill, Chair of the Board of Directors, and it's my pleasure to Chair today's meeting. Our company Secretary has confirmed that a quorum is present, so I formally declare the meeting properly constituted. I also welcome Jacquie Naylor to her first AGM with us. Jacquie has kindly offered herself for reelection at today's meeting, as well as Rob Fyfe, who has offered himself for reelection today also. Finally, Janine Allis, who retires at the end of today's meeting. Janine joined the Board around the time of our listing on the ASX in 2006. Janine's entrepreneurial flair and commercial acumen has bought valuable insights and judgment to Michael Hill over the past 4 years. On behalf of the Board, I'd like to thank you, Janine, for the contribution and counsel you've provided and wish you all the very, very best for your future endeavors. Daniel Bracken, our CEO; and our CFO, Andrew Lowe, are also here with us today and will address the meeting. Alison de Groot, lead external auditor, partner from Ernst & Young, is also present to address any questions on our financial reports. On to housekeeping. I invite you to take full advantage of the technology that we are using today. The platform allows shareholders and proxies to ask questions and submit the votes. If you have any questions or comments on any item of business, you can submit them at any time, and I encourage you to do so as soon as possible. Instructions on how to do so are on the screen. Please include the resolution number as part of your question, if appropriate. We will address submitted questions after Daniel, Andrew and I have presented. Voting today will be conducted by way of poll on all items of business. Instructions on how to vote are also on the screen. In order to provide you with enough time to vote, I now declare voting open on all items of business. The polling icon will be here. Please submit your votes at any time, and I will give you a warning before I move to close the voting. If we experience technical issues as a result a number of shareholders being unable to reasonably participate, I'll join the meeting, and it will be reconvened at a later time. If this occurs, we will lodge an ASX and NZX release after the adjournment that sets out the details and the next steps. Today, I'd like to give you an overview of how we view the year that's closed. Following that, Daniel and Andrew will give you more detail on our 2020 results, our current and future focus and the trading update for the recent quarter. 2020 was extraordinary. We started the year strongly, delivering key initiatives in our transformation journey, while posting solid sales growth. As Christmas approached, tragic bushfires affected our Australian communities, along with a prolonged drought in floods. The COVID-19 pandemic then ignited a health and economic crisis that's profoundly impacted the way we all live, work and shop. And it would be hard to imagine a more challenging or a more diverse set of circumstances. Our financial results, which Daniel and Andrew will talk to in detail, have been severely impacted by the pandemic. To keep our people and customers safe, we closed our stores across all markets for between 5 to 13 weeks and this was unprecedented. While the effect of the pandemic on how we do business is material, we have responded decisively and we've adapted quickly. A range of digitally focused initiatives were accelerated, such as virtual selling and remote working, enabling Michael Hill to keep connected with customers and team members and respond to their changing needs. We reopened our retail network when it was safe and possible to do so and have implemented best-in-class health protocols like screened customer entry with temperature checks and COVID hot spots such as we're currently experiencing in Canada. The business continues to be impacted by the pandemic, and some of these impacts are out of our control like the mandated reclosures of stores across Melbourne and Auckland. Daniel and Andrew will go into more detail around how COVID-19 is affecting the business. Throughout the year, what has shone through is our people, who I want to thank. We have asked a lot from them and they've responded brilliantly. Seeing them operate, often remotely across all levels of the organization, calmly dealing with rapidly unfolding events, made me incredibly proud. The Michael Hill team has acted with determination, resilience and agility while showing they cared. Our culture has never been stronger. I'd also like to acknowledge our suppliers, our landlords and our other partners who supported and collaborated with us. These are critical relationships for Michael Hill. Assistance from our partners continues to help us successfully navigate the pandemic. As mentioned last year, given culture has always been important to us, we're very disappointed to discover the misapplication in Australia of the General Retail Industry Award. The company has largely remediated existing team members. However, during the COVID-19 closure period, the remediation program for former team members was paused, noting that interest will be paid on all amounts owing until this program of work is completed. Talking to strategy. The pandemic has dramatically changed customer behavior, and it's accelerated the digital transformation of the retail industry. This has reinforced the Board's confidence in our strategic plan. COVID has demonstrated the importance of continuing to enhance our omnichannel capabilities, so customers can shop in whatever way best suits them. We will take market share by delivering the best possible customer experience across all channels. We've sustained focus on executing our strategy throughout the year and delivered significant evolution of the group. We will emerge from the crisis a stronger, leaner and more relevant business. Moving on to the Board matters. I'd like to thank the directors for their wise counsel, judgment and commitment over the year which saw us meeting on a high-frequency basis as the pandemic took hold. Individually and collectively, the directors played an integral role in successfully navigating a sometimes rapidly changing environment. We're delighted to endorse Jacquie Naylor's proposed election as a director today. Jacquie has rich experience in retail, fashion and omnichannel. Jacquie has demonstrated to us her retail and strategic insights are valuable and complementary addition to the Board. As shareholders, I'm sure you'll be interested in Michael Hill's position on dividends. Given the uncertain economic environment, our desire -- and our desire to maintain a resilient balance sheet to withstand stress, the Board decided to declare an end of year dividend as well as to defer payment of the interim dividend. Our goal is to restore a regular pattern of dividend payment as quickly as financial performance allows. In closing, and on behalf of the Board, I would like to thank all members of the Michael Hill team, as well as our customers, partners and shareholders for their contributions and ongoing support. So I'll now invite our CEO, Daniel Bracken, to address the meeting and discuss the 2020 operational performance as well as our current and future focus.

Thank you, Emma. Good morning and thank you for joining us today. Together with Andrew, we will review the 2020 financial results and strategic and operational achievements. We will also provide you with some insights into key strategic initiatives for the year ahead and a brief update on our first quarter trading. Before I do so, I'd like to play a short video summarizing the events of FY '20. [Presentation]

As I reflect on the 2020 financial year, it was certainly a year of two halves. As they say, following on from the positive sales momentum achieved across FY '19, the business delivered consecutive quarters of sales growth in all markets to finish the first half with plus 6% comparative sales. As we entered the second half, we started to see the benefits from our disciplined rhythm of the business approach, coupled with our strategies gaining traction as the business shifted its focus to a balance of both sales and margin. The business continued to leverage the brand's deep heritage as we celebrated our 40th birthday in August. The roll-out of various digital capabilities accelerated our journey of evolving into a modern, differentiated, omnichannel jewelery brand. Prior to COVID-19 store closures at the end of March, the business was successfully delivering both sales and margin growth and was tracking to achieve increased year-on-year EBIT. Undoubtedly, the 2020 financial year will always be remembered for the COVID-19 global pandemic. The impact of COVID-19 was beyond anything we have ever experienced. The global economic and health consequences are having a profound and far reaching impact. As the pandemic advanced and as selling jewelry is an intimate close quarter process, we had no choice but to temporarily close all our stores to keep our people and customers safe. The closures lasted between 5 and 13 weeks, depending region and country. Similar to many specialty retailers, our business was severely impacted, resulting in an estimated revenue loss of at least $80 million from the fourth quarter. I am particularly proud of all our people. Never before have we asked so much of them. Despite incredible uncertainty for themselves and their families, they have and continue to respond with resilience, determination and professionalism. Throughout the year, the company maintained a laser-sharp focus on delivering new initiatives to modernize Michael Hill. We successfully embedded the new retail operating model, launched our new loyalty program, trialed laboratory-created diamonds, along with a raft of digital developments as we continued to improve the strategic foundations of the business. Our continued focus on costs resonated across the business as the reality of COVID-19 store closures impacted the entire business. As a direct consequence, we implemented a number of measures to preserve cash, negotiated deferred vendor payments, tax payment deferrals and rental abatements. The business canceled all discretionary spend, paused most of our planned capital expenditure and operated with a much leaner global support office. A number of initiatives had already been delivered prior to COVID-19, such as reinvigorated retail structure, consolidation of our repair network in all countries and improved terms with some of our credit providers. Pleasingly, our long-awaited loyalty program was soft launched digitally in October last year and already has more than 260,000 members. This gives us the ability to capture customer data for future engagement. And as a result of the successful member pricing aspect of the program, we are experiencing high transaction values and improved gross margins. As our customers turned to online shopping channels during the pandemic, we launched several digital initiatives capitalizing on the increased website traffic. These involved an enhanced website with improved customer experience; checkout process and navigation functions; direct selling through social media and digital catalogs; and a number of virtual applications into our ecosystem, including virtual sales platform, virtual appointments and virtual try ons. As a result, the company experienced a surge in sales from our digital business resulting in a record digital sales of $24.7 million, representing a milestone 5% of total sales and up from 2.8% of total sales in FY '19. We have made great progress in how we are organized and how we operate our retail business. During the year, we trialed our new store incentive scheme. Those trials demonstrated increased performance across many aspects of our business, but most notably, higher margins. I'm pleased to say that the new scheme has now been rolled out across all stores in the network and is delivering strong results. We also launched our Sparkle customer satisfaction program during the year. And this is starting to provide great feedback and insights to our teams. The new Retail Operating Model is firmly embedded in the business and we have significantly ramped up our focus on in-store execution and visual merchandising standards. As we complete what can only be described as an extraordinary year, we have emerged as a stronger, leaner and more professional business. I'm incredibly proud of the strategic progress we made during 2020 across costs, loyalty, digital, retail fundamentals and company culture, which I believe have Michael Hill well positioned to navigate both the opportunities and the potential market disruptions ahead. Prior to speaking about FY '21, I will now pass over to Andrew to review our FY '20 financial results. After which, I will walk you through our key focus areas for FY '21 as well as providing an update on the Q1 trading performance.

Thank you, Daniel. As Daniel has described, this was a year of 2 halves, as we saw positive same-store sales growth momentum continue for half 1 and also through to the end of February 2020. This followed an underlying EBIT for FY '20 half 1 of $31.6 million as we started to see the benefits of our initiatives gaining traction, along with the continued focus on costs and retail disciplines. Headline sales and profits were directly impacted by the pandemic, which resulted in all stores across all 3 markets closing for varying periods from late March. As a result of the temporary store closures, the company reported revenue of $492.1 million compared to $569.4 million in FY '19, and an underlying trading EBIT of $25.7 million compared to $34.6 million in FY '19. Even with the loss of quarter 4 trading days, active inventory management saw inventory levels finish the year in line with prior year-end. Disciplined cash management also saw a net cash position at year-end, though with additional rental accruals owing of circa $13 million. Other aspects to call out for FY '20 performance include on an adjusted same-store sales basis, the group achieved a positive 2.7% growth in sales. Australian adjusted same-store sales were flat to the year with New Zealand and Canadian adjusted same-store sales both up over 2%. We delivered record digital sales for the year of $24.7 million, up 54.7% against prior year and representing a milestone 5% of total sales. Our focus on reimagining branded collections saw them represent a record 37.3% of total sales. Group gross margin declined for the year from 62% to 60.6%, predominantly impacted by FX. Turning now to the impact of COVID-19 on store trading days in each market. From late March 2020, the COVID-19 pandemic saw stores closed in Australia for a period of 5 to 10 weeks; in New Zealand for 8 to 9 weeks; and in Canada for periods of 10 to 13 weeks. Meaning, some Canadian stores were effectively closed for a quarter of the year. In accordance with government regulations and with robust safety protocols embedded, Australian stores reopened progressively from mid-May, New Zealand stores opened in 2 tranches later in May and Canadian stores opened progressively from the Western to Eastern provinces commencing in June through to the final stores opening in early July. In aggregate, the global store closures saw an estimated $80 million of lost revenue for the financial year. Turning now to group results. Group revenue decreased by 13.6% to $492.1 million, largely due to the COVID-19 store closures. As part of our decisive store portfolio management, 1 Michael Hill store was opened and 17 underperforming stores were closed, leaving 290 stores in the global network at year-end. I will now hand back to Daniel to outline the key strategic initiatives for FY '21 as well as an update on the first quarter performance.

Thank you, Andrew, for your commentary on FY '20 financial results and in particular, your insights on the impact COVID-19 had on our store network. As mentioned earlier, I'm going to take you through some of the main strategic initiatives for this year, which will be the key drivers of both growth in sales and margin for the business. Starting with omnichannel. We will be leveraging the deployment of our cloud-based ERP platform and we now have the opportunity to embark on multiple digital and physical initiatives to meet the demands of a modern-day customer. We will be rolling out click-and-collect, click-and-reserve and ship-from-store capabilities. Bespoke customizable product will be enabled through our digital platforms. We will develop drop ship capabilities, linking key vendors directly to our customers and we are already underway with testing new marketplace opportunities. Moving on to digital. Building on the successes of FY '20, further enhancements to our websites will be delivered to improve customer engagement, conversion and transactions. We will embark on the next phase of the Brilliance loyalty program. Our marketing investments will continue to pivot towards more efficient digital channels. And I'm really excited to reveal that during the first quarter, we launched a new business, a pure-play digital brand called Medley, an aspirational and attainable on-trend jewelry offer. You can do your own research and shopping, if you'd like, at medleyjewelry.com.au. Medley offers us a real opportunity to expand into the high-margin, demi-fine category, attracting a new customer demographic in an agile and capital-light manner. And next, retail fundamentals. We will further leverage our loyalty program to drive segmentation and personalization with a focus on growing repeat purchasing customers and lifting margins. The new Retail Incentive Scheme will continue to be a key driver for increasing profitable sales and reinvigorating retail store culture, with further enhancements planned for the scheme. Additionally, an increased focus on space planning to optimize store productivity and efficiencies. And on to the opportunities in our Canadian business. With a new leadership structure now in place and focused on delivering retail fundamentals, we are confident that the team can continue to increase productivity levels as demonstrated in the first half. The management of our in-house Credit Program has been identified as an opportunity to increase margins and sales through new partnerships. While the evolution of our Canadian supply chain was previously identified as a sizeable commercial opportunity, this was placed on hold due to the pandemic. Reengagement around this initiative is now well underway. And additionally, we are exploring new capital-light growth channels in the Canadian market. And now to touch on product. We have implemented a new structure, a new operating model and calendar and new leadership and are now in place within the merchandise function. And this will deliver positive impacts across FY '21. Range and assortment optimization continue to present huge opportunities across stock turns, purchasing and margins. And with the new ERP platform now in place, we will begin to deliver positive commercial outcomes. Our branded collection strategy continues to gain market share at higher margins, and the broader rollout of laboratory-created diamonds will deliver increased margins and conversion. And finally, an absolute focus on cost disciplines and capital management are forming part of the Michael Hill culture. Optimizing our inventory, improving stock turns and leveraging our vendor relationships are a priority. As highlighted by Andrew earlier, our store network will continue to be a major focus for management. And with an increased focus on store data capabilities and the implementation of dynamic rostering, we believe that a sizable prize exists within our largest operating expense. While Michael Hill navigates the impacts of the global pandemic and the ongoing potential store closures, as recently mandated in both Victoria and Auckland, the business has started FY '21 positively. Pleasingly, gross margin improvement has continued as our investments in strategic initiatives gather momentum. Additionally, the company has identified a number of growth and margin opportunities to strengthen our business, across product, digital and true omnichannel retail. I'm also incredibly excited about the launch of our new pure-play digital brand, Medley. So now turning to FY '21 Q1 trading update. We recently announced our first quarter trading update for FY '21 with group same-store sales up 7.3% against the first quarter of FY '20, maintaining a focus on growth strategies to support both sales and margin. Gross profit outpaced sales growth, with margin growth in all markets and channels of between 100 and 200 basis points. We are pleased with these results and cautiously optimistic in these uncertain times that these results give us a strong foundation as we enter the all-important Christmas trading period. For the quarter, online sales were up a staggering 129% against Q1 last year, with digital initiatives delivering increased sales and margin across all markets and providing a favorable impact on group margin mix. For the quarter, digital sales represented 5.3% of total sales. Branded collections represented 43.3% of total products sold for the quarter compared to 37.3% in FY '20, reinforcing our strategy to emphasize unique Michael Hill product with improved product margins. Membership in our Brilliance by Michael Hill loyalty program now exceeds 260,000 members. Our membership was approximately 145,000 at the end of FY '20. Our diligent management of capital expenditure, working capital, inventory levels and a sustained deliberate focus on cost of doing business helped to maintain a healthy net cash position at quarter-end. I am particularly pleased with our first quarter results from both a sales and margin perspective. Over the past 18 months, the business has focused on top line sales growth and recovery of market share as we restored sales momentum. As previously reported, our emphasis has since shifted to a balance of both sales and margin growth, underpinned by our strategic initiatives. It is encouraging to see these strategies flowing through to our results, particularly in relation to margin growth. After what can only be described as a historic and challenging year, I would like to personally thank our loyal customers, our dedicated team members, the executive team and the Board for their resilience and unwavering support. And importantly, thank you, our shareholders, for your continued support of Michael Hill. I will now hand back to the Chair to conduct the formal business of the meeting.

Thank you, Daniel and Andrew. Before we move on to the formal businesses of this meeting, we will now take questions or comments. If you do have any questions of the Board or our external auditors or wish to make any comments on any item of business, please submit them now, if you haven't already done so. Moderator, have questions or comments been received?

Yes, Chair. We have received 4 questions. The first question comes from Alan Best of New Zealand Shareholders' Association, who mentions ROE is down 9.4% in FY '19 to 1.9% in FY '20. Equity ratio is down from 46.6% to 30.7%. Interest cover from 8.6x to 1.5x. Current ratio from 2.1:1 to 1.4:1. Please summarize the action taken to restore the ratios.

Thanks, Alan, for your question. I'm going to hand that to Andrew, the CFO. I think he's the best placed to answer.

Thanks, Emma, and thanks, Alan, for your question. I guess, naturally, 2020, the result was impacted directly and quite significantly by COVID. As we outlined in the presentation, temporary store closures did see an impact in the order of $80 million on sales. But despite this, we did note that we had a new net debt position at 30th of June. And I can confirm this remains the position currently, with our stores now trading in all markets, and a strong quarter 1 performance, as outlined by Daniel. Our earnings have been restored, and we are comfortable with the financial position of the company. Thanks, Emma.

Thanks, Andrew. Moderator, the next question?

Thank you, Chair. We have received 3 questions from Mr. Andrew Ott. His first question, can you discuss the interaction of your store and sales team members and customers buying online? Do sales team members participate in any way, both in terms of their personal remuneration and also in assisting customers buying online, encouraging customers to buy online, et cetera?

Okay. Thanks, Andrew, for your question. Daniel, I'm sure you'd like to answer this one. Thank you.

I'd be very happy to, Emma, answer that question from Andrew. I'll start by saying up until the rollout of our new ERP platform towards the end of last financial year, we very much operated as a multichannel business, with the channels, to some degree, operating independently of each other. However, even during that period, our stores did participate as fulfillment centers, if you like, for our online business and our store teams were and continue to be KPI-ed on this metric. So it is a key metric within a store dashboard that they actually fulfill those online orders within a 24-hour period. Now as we enter a true omnichannel world, the channels will start to blur. And I think it's fair to say store teams and our online team will actually operate very much seamlessly together. In the world that we're entering now, our customers dictate where they want to interact with Michael Hill. We have to be there to meet them wherever they want to interact. And what we're going to start seeing is sales starting in a digital world and completing, say, in a store world. So virtual selling is a perfect example of that. Virtually, the whole sales process will be carried out virtually. But then the actual final transaction, 9 out of 10, will happen in the store. And as a result, the team members in the store will be rewarded for that sale. Click and reserve, as we roll out the trial we're currently in, again, the whole process of the sale happened online. The customer collects it and pays for it in the store. And again, the stores participate in the remuneration associated with that transaction. So as we enter this truly omnichannel world, the channels blur and the rewards and the remuneration processes behind it certainly encourages our physical store teams to be great advocates of our digital businesses. Thank you, Emma.

Yes. Thanks, Daniel. Next question?

The second question from Mr. Andrew Ott is, how do you go about promoting your new online Medley store?

Thanks, Andrew. And Daniel, do you want to answer that one as well? Thank you.

Thanks, Emma. It's a great question, Andrew. I think it's fair to say at this point, we describe Medley very much in its sand pit phase. We're testing and trialing. It's only been live for a few weeks. We're running the business on a completely different set of tools and systems that our core business runs on. It's a discrete business. We don't want to distract the core Michael Hill business with the Medley business. And we don't want to overburden the Medley business with, if you like, the complexities of a much broader integrated model. So our Medley business is in, if you like, a test-and-learn phase. At the moment, we've launched it. We're running a small amount of social media activity to support the brand. It will be very much a brand supported through social channels and through influencers. This will not be a heavy, above-the-line marketing campaign around this brand. This is a digital brand. It's a brand that only exists in digital. It will not exist in physical stores, and as such, it will not exist within the Michael Hill stores. And we're really excited by this trial and this new venture. Once we come up for air in the new year, we'll absolutely form a strategy. As for now, we know the processes and the systems hold together end-to-end. Now we know that we've got the product architecture and the brand architecture right and the pricing model right, we will then look to now how do we roll this business out beyond the trial that's currently underway in the Australian market. Thanks, Emma.

Fantastic. Thanks, Daniel. Next question?

The third question from Andrew is, you mentioned new marketplace opportunities. What does this mean and entail?

Yes. Thanks, Andrew, again. Daniel, I'll get you talking on that one again. Thank you.

Okay. Andrew, marketplaces is sort of new digital vernacular for almost -- probably think about it this way. Think about a marketplace as an aggregator of other brands' products. So I guess in a physical way, similar to a digital department store. So Amazon is the greatest and largest marketplace -- digital marketplace in the world. We are currently trialing a wholesale relationship with The Iconic here in Australia, which is the fastest-growing fashion digital marketplace in Australia. We're only, again, a few weeks into this test, but we're pretty excited by the early results. We're reaching a new customer, a new audience, and we're pretty excited by the early signs and how that then might transform into a truly integrated marketplace model. And then after that trial, does that then open up the opportunity for Michael Hill to consider other marketplaces? Absolutely, in other markets and with other partners. So early days, but we're excited by the early insights. Thanks, Emma.

Thank you, Daniel. And moderator, any other questions?

Chair, we have received 2 more questions. The first question is from Ojay Group Limited, who ask, how good are your current relationships with your landlords?

Thank you, and thanks, Ojay Group. Andrew, I'll pass that to you, as CFO, to answer. Thank you.

Thanks, Emma, and thanks, Ojay Group. Our landlords in all 3 markets provided support to us, both during the -- I guess, for the store closure period and also on our return to trade. That support from our landlords is important to us, and it's something that we do value in our relationship with our landlords. In terms of where we sit today with our landlords, we have concluded agreements -- constructive agreements, with all landlords across every store in Australia and New Zealand. And this is a big piece of work given that across our 290 store network, we were dealing with 98 landlords worldwide. For Canada, we have 2 landlords across -- between the 3 stores, and we're still concluding that this week. But all in all, we're quite pleased with the outcomes we've achieved, and we believe we've managed through a very challenging period with really constructive relationships with the landlords.

And I might add, just with a bit of further color on that. I think we've balanced the line of being very firm and demanding and requiring of support and ongoing support from our partners. And we balance that with retaining very healthy relationships. And I think from, certainly, a management and Board perspective, we're very happy with the way Andrew's team concluded those negotiations.

Yes. Agreed. It's been really well managed. Thank you. Next question, please?

Chair, the next question is from Jim Chua, who asks, the company's ROE and ROCE have been falling consistently over the last 10 years from more than 20% to below 10% even before the COVID pandemic. Could you share your thoughts on the reasons behind this downtrend or the lessons learned, and also your capital allocation strategy, past, present and future? And he also asked, what is the acceptable rate of return for the business?

Thank you. Thanks, Jim. Andrew, I think you're best placed again to answer that one.

Sure. Thanks, Emma. I think as I already answered for the earlier question, the COVID-19 pandemic absolutely had disruption on all companies, all retailers, and included within that, those participants in the jewelry market. Going into COVID, we were quite comfortable with our capital management strategy and consistent pattern of dividends. Clearly, it was in the best interest of the company and shareholders to properly manage dividends through COVID. And I think looking forward, as to our policy, we've been quite clear in our full year results and again today that it is absolutely the Board's intent to look to return to an acceptable and usual level of dividend as conditions allow. We can't, at the moment, comment on that as we head into our important trading position, but no doubt in the new year we'll be in a position to provide more color around that capital management program.

I think Andrew, also the question around capital allocation strategy, historically, go back 5 years, it would have been very intensive towards physical store investment. And I think today and going forward, it's increasingly a higher proportion of that spend now is to digital and technology. Would that be fair to say?

Yes. As of the moment, yes. Thanks, Emma.

Thank you. Any more questions, moderator?

Chair, I confirm there are no more -- sorry, one question has come through. Jim is asking a follow-up question. Jim asks, the company's revenue has plateaued out the last 5 years. Do you think the company has run out of room for growth? Could you share what that growth strategy is, if there is one, rather than just focusing on cyclical growth?

Sure. Thank you. An important question. Thanks, Jim. Look, Daniel, I think you're best placed to answer that and talk to the growth initiatives?

Yes. I guess look back at the slide presentation that we just put up for investors and shareholders, where there was a section on our growth strategy for FY '21. So just to walk through that again. Our significant focus on omnichannel and the opportunities that, that delivers are all seen as growth opportunities for the business, whether that be click and collect, click and reserve, whether that be drop ship capabilities, linking our vendors directly with our customers, whether that be the marketplace opportunities. That's all incremental business. That's all growth. That's not cyclical growth. That's incremental growth. Our whole digital strategy over the last couple of years. In the first quarter, digital grew 129%, Jim. That's growth that is not cyclical growth. That's because we're investing in that channel, balancing that channel and doing new things and doing things differently. And that's on top of all of our physical stores also growing for the first quarter at very comfortable levels. We continue to focus on our retail incentive scheme, our loyalty program. Both of those initiatives are growth levers for our business, not to mention the productivity opportunities in the Canadian market and the opportunities around product and new product initiatives. Just the launch of lab-grown diamonds in our business a few months ago, that's incremental product sales opportunities. As we pivot our business to a greater emphasis on margin categories like silver, again, incremental growth in our business. So while we're not embarking on a traditional retail growth model underpinned by huge capital investments in new stores and new store networks, we're absolutely continuing to grow our core business through running a better business, and we've got a large portfolio of other business opportunities that we're testing, trialing, all well underway with -- to grow our business.

Thanks, Daniel. Nicely answered. Any more questions?

I can confirm there have been no further questions received.

Thanks. It's nice to have that level of engagement. I don't know if we've ever had so many questions on an AGM.

Okay. We'll now move to the formal items of business as set out in the notice of meeting. The notice of meeting, including the explanatory memorandum was sent to all shareholders. If there is no objection, I propose that the notice of meeting be taken as read. You can find a copy of the notice online on the Investor Center website. The first item of business is to consider the 2020 Audited Financial Statements, Director's Report and the Auditor's Report. These reports are contained in the company's 2020 Annual Report, which has been released and distributed to shareholders prior to the meeting. You may also find a copy of the annual report online on the Investor Center website. There is no resolution on this item. I confirm the 2020 Audited Financial Statements, Director's Report and Auditor's Report are now received. Moving on to the next item of business. This is a nonbinding resolution to adopt the 2020 remuneration report. Please note that the vote on this resolution is advisory only. Voting exclusions apply to this resolution as set out in the notice of meeting. I advise proxy votes received in respect to this resolution are shown on the presentation slide now on your screen. And I'd like to remind shareholders who have not yet cast their votes on the resolution to do so now. Voting on this and other -- all other resolutions is open. Open proxies appointing the chair shall be voted for the resolution. [Voting]

The next item of business is the election and reelection of Board-endorsed directors, Jacquie Naylor and Rob Fyfe. And Jacquie is retiring from the Board in accordance with the ASX listing rule and the company's constitution. And being eligible, offers herself for reelection as a Director of the company. Jacquie's experience and details are set out in the explanatory memorandum, which accompanied the notice of meeting. Each of the directors, with Jacquie abstaining, recommends that shareholders vote in favor of Jacquie's election. I advise proxy votes received in respect of this resolution are shown on the presentation slide on your screen. Open proxies appointing the chair shall be voted for the resolution. [Voting]

We now move to the proposed reelection of Rob Fyfe. Rob is retiring from the Board in accordance with ASX listing rules and the company's constitution, and being eligible, offers himself for reelection as a director of the company. Rob's experience and details are set out in the explanatory memorandum, which accompanied the notice of meeting. Each of the directors, with Rob abstaining, recommends that shareholders vote in favor of Rob's reelection. I advise that proxy votes received are as detailed on the slide. Open proxies appointing the chair shall be voted for the resolution. [Voting]

And we now move to the last item, the proposed amendments to the company's constitution. This is a special resolution. Full details of the proposed amendments are set out in the explanatory memorandum which accompanied the notice of meeting. I advise proxy votes received in respect of this resolution are shown on the presentation slide on your screen. Open proxies appointing the chair shall be voted for the resolution. I'd like to remind shareholders who have not yet cast their votes on this and other resolutions to please do so now. [Voting]

Now that the formal items of business have been addressed, I would like to thank you, on behalf of the Board and management, for attending Michael Hill's first virtual AGM and look forward to your continued support in the coming year. Please ensure that you have cast your vote on all resolutions. I will now pause for a little bit to allow you time to finalize those votes. And the result from the meeting will be announced on the ASX and NZX later today and will be displayed on the Investor Center website. We'll just allow a bit of time now to make sure all the votes have been cast. [Voting]

I think that's close to a minute allowed. Moderator?

So I will now move to concluding the official business of the meeting, and the voting is now closed. So I declare the 2020 AGM closed. Thank you.