Mr Price Group Limited (MRP) Earnings Call Transcript & Summary

Well, good morning, everyone, and welcome to our results presentation. You don't have to worry, you are at the right presentation. This is the Mr Price Group half year results to September, and what you can see behind me, and hopefully, you've had a chance to look at some of the product, is a first glance of some of the product that will be hitting the shelves next week, and it's part of a activation -- a brand activation with Coke, and it's absolutely fantastic that one of the biggest brands in the world have chosen to partner with Mr Price, one of the top 20 brands in South Africa. And it's equally fantastic as to what you can do with a private label, mix in the brand and still create a differentiated fashion product at great value. So we're really looking forward to it, and we think it's going to be very successful. This is quite a long presentation. We split it into obviously, different segments. We'll split it between myself and Mark Stirton, the CFO. Looking ahead, it's going to be a bit longer than normal, not just a page. There's a lot we have to talk about. And then at the end, there's a lot more detailed analysis that we've put in appendices that we won't speak to, but the information is there if you want to have a look at it. Well, I think the last time we spoke to you, it was our year-end results, and we're hoping that we are over most of the challenges that were going to be thrown at us. But here we are 6 months later, and I'm sad to say we weren't over the lump because what -- and you can see it really displayed out there. What we've had to deal with as a team, what the retail sectors had to deal with and business at large, has -- it has been considerable. But upfront, I just really want to give a shout out to all our associates, all our partners who've really pulled together in this period, and we're going to have a little bit of fun at the end, just showing you a little bit about some of the personality in our business, but it's really going well. Now back to hardships, and you can just read that in your own time, but what it does show the varying levels of lockdown from April 2020 when we were in level 5 lockdown and all our stores were closed and then the various waves that then came through subsequently. So other than the adjusted level lockdowns, the low levels 1 and 2, we did it through a third wave, June, July. And of course, there is a threat of a fourth wave now, and the infections in South Africa are increasing. But not only that, we had to deal with civil unrest in July, you'll see that blue block there. And we all had to start dealing with global supply chain challenges that really kicked in since about March. So that's been a difficult thing to manage with, but I think we've done reasonably well. Not only that, load shedding, and you can just see the graph at the bottom there, load shedding. And this is Eskom's words how that's affected the SA economy over the years, and the last 2 years have been standout years. We're obviously very hopeful that the situation will improve but understand that there's actually a lot to be done still. So just then summarizing all the challenges. I won't go through all those items on the left-hand side. I have spoken about them already, but how did we actually react as a business? First of all, the thing that we're very pleased about is our earnings per share exceeded pro -- pre-COVID-19 levels. We're very happy about that. We bounced back fairly quickly, given all the challenges, and it's not only HEPS, but when you start looking at profit attributable to shareholders, there's really strong gains at that level, which Mark will speak to. During the period, this is the 6 months that I'm talking about now, we gained 210 basis points of market share, and if we then strip out the acquisitions, we were up 50 basis points, but that's on a prolonged period of gaining market share over a period now. We've been speaking quite a lot in recent presentations about testing new departments, new categories. Overall, very pleased how that's gone, and collectively, they account about -- for about 4% of group sales now. So it's not all about sales and market share. We have to deliver profits as well, and it's been a positive impact on our bottom line. We've doubled our online sales over 2020, and one of the standout factors there is over 1 million monthly app users, which is incredible. Very pleased to report that 90% of the stores have been reopened after civil unrest I was talking about, and in addition to that, and it just shows the extent of the work that our property head division had to do relative to the size and infrastructure that we have available as we opened 48 new stores in the period and looking to ramp that up in H2 as well. We've been hard at work regarding the acquisitions. I'm going to go into that a little bit more detail, both Yuppiechef and Power Fashion, and there you can see the respective dates that they're included in our results. But as we go through the presentation, just remember that Power Fashion was included in our year-end results only for a couple of days. So it's really the balance sheet that's in the results and not the income statement in the prior period results. Something we're very proud about, and we're going to talk at some length about this is supporting South Africa and just the volume of merchandise that we do source from South Africa, 39%. But then when you take Southern Africa into account, we're up at 53% of our total units, which is very satisfying for us. We are still cash flushed. After acquisitions, we've still got ZAR 3.9 billion cash available, and just to stress the point once again, other than store leases, we actually are totally free of real debt. Okay. The graph on the left-hand side just really talks to the economy and what's been happening there. You can see, and it's quite obvious why that sharp falloff happened, but although there is a recovery that's taken place, really the unrest pulled up a little bit of a handbrake on that, and although we're trending positively, we're still not at pre-COVID levels in terms of GDP. Hopefully, we'll get there soon. But as you can see, nominal wage growth and nominal household expenditure has been ticking upwards, and yes, we've had 2 consecutive periods of gains for the first time since the outbreak of the pandemic. Business confidence is also increasing. This is the second quarter. It was increasing by -- and it increased by 15 basis points to 50. Don't forget, 0 is neutral. So anything above 0 is positive. The latest results have come out and has come off a bit from 50. I think it's down to 43, but it's still trending pretty well and well above neutral, as I just said. Talking specifically about the civil unrest. Many of you would have read the notices and the communications that we have put out, and we went to quite a length explaining the impact that it was having and what we as a company were doing. But just to recap, because this is the period that these results do impact, 539 stores were temporarily closed for the week; 111 were closed due to total looting. They were damaged, and that's about 7% of our space. As we stand now, 96 would have reopened -- well, by the end of the month. And the remainder, we're hoping that they're going to be open next year, but some of them are landlord specific, and it really depends on the damage to the center or to the location. In terms of the financial impact then, we estimate that we've lost retail sales of ZAR 320 million. So just to be clear, that sale is not in these results, and as a result, that -- on the base that we had, that would have equated to 3.7% sales growth that we've actually lost in this period, and that relates to the looted stores only. You can see there the write-offs, cash, PPE and inventory totaling ZAR 185 million. Mark's going to talk about how that impacts our results. It is playing havoc as to when these things get reported. The losses, when they incurred, when you actually account for the recovery via insurance and then when it -- where it actually takes place in your income statement. So Mark will go through that. So yes, we'll talk about how those numbers also impact our results in the first half that we're reporting on now just in terms of the statutory reported results that exclude any kind of recoveries from these things, but obviously include all the write-offs. So we've taken the hit. Just then in terms of insurance claims, we received interim payments from SASRIA totaling ZAR 235 million after the period end, and then likewise, with BI, the business interruption side, interim payments of ZAR 92 million after the period closed. We also spoke about what we did for our communities. I won't go through all the detail, but we're pretty happy with the way that we responded as a business, and you can see on the right-hand side all our relief efforts that we did, and I just once again want to thank our staff, our customers, our suppliers for -- everyone that actually contributed in the relief efforts. I think we pulled together very nicely. Thank you. Getting into the number side. What we've done is we've actually commented on performance versus last year. It's a very difficult period to compare against because of the lumpy base with a month of lockdown in it, which was obviously a catastrophic month, but we had months that we had -- subsequent to that, that we bounced back very nicely. And in some months -- and particularly in some segments of our business, we had a very, very strong basis, which we're up against in the period that we're reporting now. But then -- also then just to perhaps see some -- through some of that noise. We've also compared the numbers to 2020. So you've got a 2-year growth, and there you can see what's happened from our revenue, up 35% on last year, 15.7% on 2 years ago. Operating margins increased on last year by 120 basis points, and that's where we start now seeing the impact, not only of the base, but on, obviously, some of the things that we're going to be talking about now. Our profit after tax was 50.7%, up -- once again, to stress, that includes write-offs for looting and the unrest, but it doesn't include any recoveries. Our diluted HEPS are up 33.5%. We had given guidance a couple of weeks ago, and we said it was going to be up 30% to 40%, so a little bit under halfway, and then on normalized diluted HEPS, we had given guidance 40% to 50% up, and we're a little bit north on the halfway point for that one. We're up 46%, 46.4%, and pleasingly, once some of that noise, and these are the write-offs that are stripped out, ZAR 185 million I was referring to, we're up 10.4% on 2 years ago. So we're not talking about exceeding '20 interim results, September 2019, which is the FY 2020 interim period, very nice to be up 10.4% on those. Then likewise, dividend will follow that, 34% up. Don't worry too much on what it was 2 years ago because it really depends on what we did with the interim dividend way back then. So very pleased that we can -- that we've got the cash, we've got the performance, and we're still rewarding shareholders by holding our dividend cover at 63% -- our payout ratio at 63%. Okay, I'll hand over to Mark, and he's going to take us through a little bit more of the detail.

Good morning, everyone. It's -- as Mark said, it's looking back and reflecting. I was looking at the interim results presentation from last year and just thinking back at the tumultuous time that we were experiencing, and I'm glad to say that the business has bounced back, and we actually are very excited about our future, and hopefully, I can demonstrate some of our present and what we've done over the period. So we opened up with this slide because I think it's incredibly important that we are reinforced to the years, the investors and this audience that we've got a very strong track record, and Mark and I are very passionate about making sure that our history is not lost, but our future, we believe, is brighter, and we want to make sure that part of that future revolves around maintaining our key ratios. One of them is our return on equity, and you can see that over a 10-year period -- and this work was actually done by Investec, was 42.5%, and the market did 13.8%. On a 35-year HEPS compound annual growth, we did 19.4% with our dividend slightly behind at 18.2%, and that's because of the COVID, the 1 year that we didn't give a dividend because of the COVID, element that we were uncertain about, but if that hadn't happened, we would have maintained that same balance. On a 25-year share price compound annual growth, we're up 16.3%, where the JSE is only up 9.8%. So it just goes to show that we've got a great track record, and we don't anticipate -- we don't want in any way to impact on that. Getting to the group income statement. As Mark said, there's a lot of noise, but I'm going to try and help you navigate through it. From a retail sales and other income line, we were up 36.3%. Gross profit up 29.6%. Again, I'll take you through a gross profit slide that will unpack the impact of the looting on it . As you know, about ZAR 150 million of that looting of the ZAR 185 million went through gross margin. Expenses at 19.7%. And the big thing about our model is that we pride ourselves on what we call the profit wedge, and that healthy profit wedge is back intact. What I've done for the bottom, Mark spoke about profit attributed to shareholders at 50.7%, and I normalized that for you, and it comes out at 68.5%, which is a stellar growth, and we're very proud about that. And that, again, I just want to reinforce, has no income as a result of the civil unrest included in those numbers. So if you add that back, it would be well north of 70%. So if you look at it on a 2-year basis, and obviously, we -- Mark said we put this -- the 2020 numbers and there, again, adding back the effects of the write -- ZAR 185 million, we would be up at 10.5%. Also just to reiterate, if you look back at our 2019 results -- or September 2019, you -- or September '20, sorry, rather. You would have -- our firm base was -- we had a very firm base relative to the market. So we're also very proud of how we've bounced back despite that strong base. From a growth driver perspective, retail sales growth for the period was up 37.8%, excluding the acquisitions, 27.8%, and our comparable growth was up 27.3%. From a geography perspective, SA and non-SA grew similarly at 37.6 % and 37.3% respectively. But again, our strategy is very much a home strategy, and 92.7% of our sales come out of RSA. From a channel perspective, bricks was up 37.3% and online was up 49.9%, with online base being 48.7% in the prior period. Online now represents 2.9% of retail sales, which was -- which we're very pleased about and is growing very nicely. On the brick side, our super regional, and I'll pick up a little bit more on the store performance later, but the store -- the super regional and urban centers have recovered nicely. If you remember last year, we were very proud and we still are proud of our diversified property portfolio and where our locations are. And with our outlying locations performing very well, and they continue to perform well despite the base. But our super regional and urban centers, which we really have our big, large format flagship stores, have traded very well, and we're very pleased with how they're performing. From a tender-type perspective, cash continues to be obviously our core of our offer, and that was up 38.2%, also supplemented by the acquisitions. Excluding the acquisitions, it would have been up 26.5%. Credits bounced back nicely at 34.2%, albeit off a slightly weaker base as a result of us having to pull back credit applications last year as a result of the uncertainty, and cash sales now represents 85.7% of all retail sales. From a merchandise perspective, unit growth was up 47.7%, excluding the acquisitions, up 21.7%, and RSP inflation was down 6%, which this was mainly due to the impact of power, which trades at much lower average retail selling prices. Excluding power, inflation was at 5.3%, which we believe was very key in us gaining market share and making sure that the customer didn't feel the effects of all the cost pressures that we felt over the period. We sold 120 million units. From a segmental performance, as Mark spoke to you about our growth strategy last year and the acquisition strategy, you'll see that power there at 5.8% was a newly acquired, now represents 5.8% of the overall business. And as we alluded to earlier, Yuppie was only in the base for 2 months. So it's obviously a lot lower in the slide. But what is key is that all our segments, apparel, home and financial services and telecoms, are all up into the double digits and have recovered nicely over the period. From a space growth perspective, we now trade off 1,642 stores. We opened 48 stores over the period, and 96 of 111 stores have been reopened, and I think it's just -- Mark alluded to it, but it was just a Herculean effort from our property team who had to navigate very difficult conditions, supplier challenges, and we're very pleased at how we've been able to restore those 96 stores. And a big shout out to that team and the efforts that -- and also the operations teams across the divisions that had to restore those stores and the staff. On an annualized basis, annualized weighted average space, we did 11.1% net space growth. Excluding the acquisitions, it was up 2.3%. We negotiated 176 leases out of the 1,600 stores that you see there and lower annual escalations and base reversions were achieved, which is -- which bodes well for our value model. What we're very proud about, and again, it's how I opened this slide, is that we're very proud about our metrics. We don't allocate capital willy-nilly. We have very strict criteria and hurdles that we apply, and you'll see, and I've just -- I've popped this thing because I think it's essential to how we allocate capital and the fiscal discipline we apply, that all our stores, our new stores are trading at over 50% return on capital employed, and this has been a historic thing. It's not a new thing for us, but I think it's a good point to land. From a gross profit analysis perspective, we've received a couple of notes that you guys really want to see the breakdown of this. ZAR 151 million was impacted on the gross profit, rands. And obviously, excluding the acquisitions, our gross margin was down about 40 basis points. As you can see on the 2020, and obviously, I'm referring to the 2021 number. Here on the 2020, we're flat. From the -- what impacted that extra 40%, we, at the beginning of this period, as you remember, going out of last year, there was a lot of uncertainty around where the South African's -- where South African economy going, We felt that as a business that to maintain our margins and to -- and even in some places we have to defend, some key price points and key product areas. And we felt that we needed to make sure that those margins were potentially -- we had to lower them a little bit in order to defend that position. But that's worked out really well for us because we -- we've maintained lower margins -- lower markdowns than last year, and also, we gained market share. So the strategy worked. Going into the second half, we also -- we're feeling that, that 42% GP margin is more aligned, and we feel that, that will be closer to where we will land. We also entered some new markets with a new product, which Mark will speak to, and those came at slightly lower margins, but we're experiencing really good, strong market share gains there. So we're pleased about that. From a telecoms perspective, again, civil unrest impacted the stock in the stores, and that impacted margins by 150 basis points. It's a hard growth channel for us, as you know. We've spoken about it several times, and we have an MVNO network, which is -- which we're changing strategy on and to a SIM-only as a postpaid, and that's also resulted in some of the IFRS 15 unwind. So overall, we're very pleased, albeit that, obviously, the write-offs and the acquisitions have impacted it, but overall, we feel the shape of GP is in a good place, and there's -- and I'll take you through stock a little bit later. We feel that over the period, this was actually a good result. I've added this slide in. It's actually some work done by Bank of America Merrill Lynch, and I think it's important for us to always hold intention that our model is a value model, and we've been showing a track record of exceptional fiscal discipline around overheads and expenditure over an extended period of time. This is a 5-year time frame, from 2016 to 2021, and again, some of our competitors, and you'll see that our -- we grew at 4% overhead growth and the rest of the competitors grew at 5.4%. And our total expenses to sales was 28.2% versus the balance being at 37.7%, with an operating margin of 18.1%. We really feel that, that is a credible performance, and we don't -- despite all the growth aspects that Mark is going to speak to you about, and we've continued to speak to many of you about, we don't -- we're not going to change that discipline. We're not going to change the way we run this business, and even with the acquisitions, our culture is incredibly important and pervades everything we do. We've got a saying in the business, and I'll take you through overhead expenses now, that every decision we make every day must support our value root, and this is -- this permeates throughout the business. It's something that we challenge everyone in terms of how they do stuff. We don't spend money frivolously, and every rand is a prisoner, as I like to say. So total expenses grew 19.7%, as I said to you. That has maintained the profit range despite gross margin being impacted. Excluding the acquisitions, which obviously weren't in the base, expenses would have grown 10.3%, and excluding some of the nonrecurring items -- as you know, we had credits in the base last year. We had some asset write-off impairments, and this year, we've had the acquisitions and also some write-off as a result of the looting. Our comp expenses, if you want to call it that, is 6.5%, bearing in mind that our space growth was 2.3% on a comp basis. So if you take off the space growth, we're well below inflation levels, which I'm very pleased about, despite COVID austerity measures in the base, which, as you know, all businesses had to really tighten the belt, and we've had to obviously bring some of those expenses back as we start to trade up. Operating costs were down due to net bad debt and improvements and lower noncurrent asset impairments versus the base. Again, just to create a relative position, our total expenses as a percentage of our RSA is 27.8%, even lower than the work that Merrill Lynch did. One of the citadels of our business is our balance sheet, and we very -- we protect this very consciously. And as you'll see from September last year to the 2 major transactions that we did, the 2 acquisitions impacted the shape of the -- of September '21. But obviously, less so from March, with Yuppiechef only being the new inclusion. But the key call outs are on inventory, and there's -- we're very pleased with the state of our inventory. It's -- we speak about it often in our business It's key to our model, and we've -- we -- overall, as a business, we've got fresh stock, and it's turning at higher turns, which is important because if it's fresh and it's turning, that means that you're making better margins, and that's reflected in the lower markdowns that we've achieved. Just to also remember that our inventory in the base was down 9.2% despite overall inventories for the period being up 40, and that 40 includes Power Fashion and Yuppiechef. We also introduced those noncomp categories, which Mark's spoken about in the past. Scarlet Hill, baby, extended sizes and others, and we've also had our Lay-by and has -- Lay-bys have been a great addition to our business, and it really supplemented credit growth. And that also obviously creates delays in terms of stock and how we have to hold stock for the customer. But I think it's key from a strategic imperative, we also felt that holding higher levels of stock going into the uncertainty of the many supply chain challenges which are well documented, we feel that we are very well stocked for high summer, which is a key trading period, and as you know, there are some key months in there to your retail success, and we feel that based -- having the fresh stock and having stock that's got lower markdown relative -- markdown units relative, we feel in a good position to trade over this festive season. But coming to the year-end, we feel that our stock will be at single digits on March -- in March last year. Another big item obviously is cash, and it is spoken about a lot. We allocated 6% of the cash balance to the Yuppiechef acquisition. I'll take you through the cash flow quickly now, and we've -- one of our projects is a supply chain finance project, and we've released about ZAR 200 million of working capital through that project and anticipate another ZAR 250 million in the next 12 months, and I'm hoping potentially some more. I'd also like to just phrase -- just headline the fact that this year, we cut off on the second of October, and I'll tell you why that's important coming into the cash flow versus the 26th of September last year. And that's obviously created a bit of movement in our cash as a result of having to pay creditors earlier. So moving on to the cash flow statement. You'll see that we restored the dividend last year in March, and that's come through in our results, and it's always a big dividend for us, and just based on the weighting of how we earn our money over the period, and that was ZAR 1.2 billion came out of our cash flow over the period. Obviously, the Yuppie acquisition is a part of this as well as from a working capital perspective, as I said a little bit earlier, our stocks are elevated versus the prior period. But the key differential in why our working capital is lower for the period is really because of that 2nd of October cut off relative to the base. We had -- if you look at the debtors, we had almost ZAR 280 million worth of rental prepayments in that number as well as, obviously, all the creditor payments, which we pay on the last day of September, which would be reflected in the downturn versus the prior period. Outside of that, I really feel if you actually work back and you reset the dates, you see that our free cash flow generation is still extremely strong. From a CapEx perspective, we gave guidance at the beginning of March at our May presentation that we're looking to implement CapEx of about ZAR 750 million. We're at ZAR 860 million. What I'm pleased to say is that majority of that relates to new store growth that we've found a lot more opportunities, again, not at compromised returns. And we're really feeling that there's a lot of growth on the horizon in terms of store growth. And you can see that almost 60% of that ZAR 860 million is relating to stores, and we anticipate opening 123 stores over the period, another 75 in the second half. 27% of the CapEx is related to technology, and the balance is as a result of other IT and infrastructure and supply chain, e-commerce investments. We've also slipped in this analysis done by JPMorgan. Again, just wanted to reiterate that our CapEx as a relative position to our EBITDA is 8.3%, some of the lowest in the sector and actually incredibly low relative to the sector. And again, I just want to reiterate that this is because of the gates that we have put in place in order to allocate capital. From a credit performance, as you know, credit is not something that we chase after, but it is an important part of our model. The consumer -- the TransUnion SA Consumer Index is now still about 50%. As you can see, in the past, in the same period, it was well below that. So the consumer has definitely bounced back in terms of its health. Credit sales for us is up 34.2%, as I said to you a little bit earlier. Now this has been driven by a 62.5% increase in applications and an 83.7% approval rate. Now I just want to also reiterate that this approval rate has not come at changing scorecards or lineate -- creating a new leniency, and that's obviously -- then approval rate is up at 34%, 390 basis points up on last year. And that's come as a result of us just attracting a better customer as well as our -- we believe that our merchandise has spoken for itself, and that's come through in the market share gains, and that, as a result, has also uplifted the credit sales. Yes. So I think from a credit sales perspective, we're feeling in a good place, and I'll just take you through where we are from the overall debtors book perspective. From a debtor's book perspective, we're pretty flat on last year despite those credit sales gains. Net bad debt over the period is at 10.1% of the debtor's book, down -- up on last year in the same period, 8.1%, and down on March 2021. And that's obviously as a result in September 2020 -- we've -- we had some book freeze as a result of the lockdown because a lot of people couldn't -- we collect majority of our debt in store, and obviously, with our store base being closed, we had to give the customer some time to pay. So that has improved, and our impairment provisions at 10.6%, which is well covered from a net bad debt perspective, and we believe that this improved health from March '21 is going to continue into the second half. Accounts able to purchase is up at 86.7%, and our 18-month on book health performance is some of the best that we've had for a while. So overall, we believe that our trade receivables and our credit base is in a good place, and we just actually had our money strategy the other day, and we're excited about where the other verticals that this business can go into. Thanks. That's it for me.

Great. Thanks, Mark. We're going to move across to strategy now, and I'm not going to talk to every slide. I'll add value where I can. Otherwise, we'll be here for another hour. So we're scheduled to wrap up in the next 30 minutes or so. But first of all, the vision, and we have communicated this to the market before. Just reminding that this is a 10-year vision. So it is long term, but it's really a call out to think exponentially and to get growth back on the agenda as a group. I think that's been missing in recent times, and there's been quite a lot of commentary in terms of maybe competitors have got some self-help on the expense line. We probably have got a little bit of that, but as Mark said, we've been very frugal over many years as part of our discipline. Our self-help is on our top line growth, and that's what our strategy is all about. So it's all about top line growth, and it's all about focus and removing distraction and underpinned by the 6 pillars there, of which we'll talk you through a lot of the detail at the year-end, but I'll take you through 1 or 2 of the more important pillars in terms of reporting back progress at the half year now. Mark is talking about shareholder returns and how important they are for us, underpinned by metrics, obviously. But we want to be the best performer in the retail sector on shareholder returns. Just to reiterate, that's driven by our earnings growth. That's got to start off with top line growth, as I just said. Once you deliver top line growth, we've got to manage our GP sensibly to make sure that we -- it's easy just increasing your ingoing margin, but that puts the business in jeopardy over the long term. So we want to resist that, as I've also communicated on many times. So managing GP sensibly so that we gain market share is critical for us. Once you've done that, you've got to manage your overheads, and if you do that properly, then the profit expansion comes. That delivers the earnings growth. As you then do that, our PE rating should react to that, coupled with the fact that we have got leading metrics, and we plan to keep it that way. But I do feel at the same time that some of those metrics have come at the expense of growth. So we have revisited those, but just to be clear, we still want to be in the top quartile relative to our peer set. And then the final part of shareholder returns is dividends. We're very pleased that we've been able to hold on to our historic dividend ratio and not adjust it or decrease it at the same time that we are very aggressively pursuing growth. So it's a great place to be for ourselves, and I'm pretty sure it's a great place for investors to be as well. What I've done on this slide, and this is really how we visit growth internally, broken it down into 4 quadrants, and before we go off and start talking about acquisitions and new concepts and that kind of thing, the call to action, first of all, is our core business and, therefore, comp growth. So in other words, what are we doing within our existing formats to keep our brands strong, our product offer very strong and maintain our positioning that we've got? So it's really all about comp growth first. And one of the ways we've been able to do that is -- and I'm going back sort of 2 years. First of all, we're focusing on South Africa, removing the distraction and by then bringing that focus, not only have we gained market share, but it also starts highlighting opportunities, which I'll get to in a minute. Part of the comp growth story, of course, is a strong omnichannel focus. Mark's spoken about our e-com performance. It's doubled over the last 2 years and really have got leading engagement and a leading platform, which we're quite proud of. But realize that there's always more that you can do. Everything that we do, it has to be relative to the amount that we're prepared to invest and the returns we expect from it. So we do apply a lot of retail science to what we do. Density is one area that we'll do it internally in our comp business, and that, therefore, informs what products gets with space in the store, how much space they get, where it's located and it filters down all the retail science metrics that we apply internally. It's a key, key focus for us. I did communicate about a year ago that I think some of our store environments have been a bit under capitalized. So we are starting a store revamp process, but what we did see with the looting and the civil unrest that we've just been through, those are effectively stores that are getting refreshed. So that's where the CapEx went in this half. That will be a program that will take place over many years, but it's really a step to make sure that the brand health and the store experience is at the level that is fitting for our customers. So in terms of comp growth, the focus is therefore on value. We do a lot of customer research, what we do with our brand and the perception of our brand in the marketplace is very important. Marketing and our personality is very important, and then finally, how we interpret trends and how we test them ahead of season to get the reads that enables us to put down the bold calls that we do, that's all about confidence and having confidence, not only in your people and trending, but actually the confidence in your processes, and those are buttoned down properly now. Noncomp growth. Mark spoke about the store growth that we've got. I won't talk about that again. We have introduced 20 new departments and categories over the last 2 years, and as a collective, those have performed very well. There's always learnings you can have. There's always refinements. There's always some hiccups. For example, school [ wear ] and the back-to-school didn't happen because of COVID when we wanted it to, but I guess there's a balance of things that we need to improve ourselves, and the other half is, well, a bit of normalcy returning to the market. But collectively, those account for about 4% of our sales in the first half, so quite a nice addition collectively there. In terms of acquisitions, yes, we -- it's obviously been an area of focus for us in the last 8 months or so. Going back to April with Power Fashion, we have bedded down 2 other acquisitions, and that really gives us entry into new markets and new customers and is once again linked to what we said a little bit earlier about our decision to stay in South Africa. And once you do so, well, there's new customers that we can target. We've got very strict criteria that we apply to acquisitions. We've commented on those before. They haven't changed since the last time we spoke. So we're consistent on that, and I just want to be clear that we do have a Head of Strategy. Part of that person's job is surveying the market for opportunities. And we've looked at many, many businesses over the last, I'd say, 18 months. Some has been a 5-minute look, some has been 1 hour or 2, some are a little bit longer. But I think you'll take a lot of satisfaction knowing that saying no is a bigger part of the strategy than necessarily saying yes. So if they don't meet our criteria, we're very clear not being sucked into the process. And the ones that we have had a good look at, and the 2 acquisitions we've had are 2 recent examples, we've got big growth ambitions for those 2 businesses. So new customers and new markets. The one way that you fill that bucket is on acquisitions, and the other side is really new concepts or more organic growth and these businesses then take form from inside the business. Once again, they have to have very attractive returns. Mark spoke about our return metrics. And also, we must be prepared to test. And I think that's one thing that really has come back to the group as well. Test. If it fails, fail fast, get out of it. But test, if it's successful, then equally, we might be prepared to ramp it up as quick as possible. Mark is speaking about what's happened about our GP percentage over the last 2 years, and to me, the really pleasing thing is that over that period, we've had market share gains at the same time as actually maintaining our GP, in fact, improving our GP. Especially once you strip off the write-offs that Mark spoke about, our GP on 2 years ago is up something like 150, 160 basis points. And over that time, we've actually gained market share as well. So it's not gaining market share at all cost and buying market share, we've earned it the hard way, and I'm very happy with that. There you can see 280 basis points of market share gain over the last 12 months. That equates to ZAR 1.6 billion on an annualized basis, and I won't go through the detail there, but you can see what's happened with each of the segments. Apparel, Mr Price Apparel, absolute standout performance. And has actually gained market share for 19 consecutive months. Brilliant performance, and [ the ladies ], we all know that it was a more conservative customer, with COVID. Stayed away from stores, but really pleasing to see the market share gains in the last 6 months there. That's more than offset the previous 6 months. The home sector, as I said, not only was an extremely strong performance in the base and the over performance there, but we do have a collective -- collectively a large share between Home and Sheet Street of the RLC. The RLC is quite a small market. Of course, there are a lot more independents and other players that operate with -- externally to the RLC, and certainly happy with what we're seeing there as well, 100 basis points up. Okay. Just looking at market share gains a little bit differently. On the left-hand side, you'll see the RLC market share, and on the right-hand side, our market share according to Stats SA, which is a much bigger group of contributors into that. But on the left-hand side, and I'll just look at the left-hand side, the red line. The red line is Mr Price Group, excluding the Power Fashion acquisition, and in fact, we've gained 100 basis points in each period, and that 100 basis points gain in 2021 actually increases to 260 basis points gain when you include the acquisition. Likewise, similar trend on the right-hand side when you look at Stats SA. This is something we've been speaking about for some time as well. It's the opportunities matrix. So it's quite clear if you look at that apparel segment on the bottom, that price value segment, this is -- those are companies that compete heavily on price. We filled that bucket with the Power Fashion acquisition, and the other one that we filled was in homeware, and you look at the more aspirational customer, high-income earning customer. We closed that one off with the Yuppiechef acquisition. So it doesn't mean that there's still a lot of opportunities that we're looking at. We also have to be sensible and pace ourselves through this. Mark has talked about metrics and the infrastructure that we've got. We're a value player. So bandwidth is a big thing to us, but we're also quite happy to increase that bandwidth by making strategic appointments into our exec teams, but the point is we've just got to manage things sensibly. We are looking at opportunities in the Apparel side and the aspirational value segment. You can see there [ one sterling ] apparel and homewares. We're quite well advanced and likewise in FS and Telecoms. That side of the equation has taken most of our efforts to date and probably will do so for the next short while. There's other opportunities on the right-hand side of that, in e-com and new sectors, but particularly in new sectors. At this point, we've identified areas that do look interesting, that we think would fit into our fold, but it hasn't -- there's been no activity beyond that identification process, and we'll get there at the appropriate time. I just wanted to be clear on what Mr Price Group stands for. And this 80-20, we spoke about it at the year-end as well. 80%, if you just take -- these are not absolutes, they're just some guardrails that we put in place, but we'll be happy at the end of the day if our group was focused on cash. So therefore, cash generation and taking that cash and investing it and returning it or -- and having that balance is important to us. 80% is fashion and price value, so that value positioning is absolutely critical to our group, and 80% private label. That's where, as a group, we want to be focused, but it doesn't mean that we can't focus on other things. It just means that we want the overwhelming majority of our efforts in our businesses to be operating in that segment, but as I said, by staying and investing in South Africa, there's opportunities for doing other things, too. Just going to give you a little bit of more information on Power Fashion and Yuppiechef. As we said, it was effective 1 April, Power, and it's probably an understatement when I say that it's a challenging place or time for an acquisition to take place. So it hasn't really performed the way we wanted to in the first half. You can see there the impact the unrest has had in this business, with nearly 50% of our space being temporarily closed, and 27 stores were actually looted. Most of those have reopened by the end of September. In addition to that, and these are, of course, not our decisions, but the take on stock that we inherited on acquisition date in April was less than ideal. But look, we'd make sure that we took over a decent stock provision to counter some -- a lot of that. We are supplementing a team to build capacity for growth. So we've recently -- and it's really in the merchandise space that I'm talking about, and really, what that allows is just extreme focus at a very senior level, and we've just undertaken a strategic review in the last couple of weeks on that business, and we're quite clear on where the opportunities lie that we can take advantage of. So very exciting times. Yes. Our medium focus. We had said the medium target was to triple the size of the store base in this division. That's still definitely on, and in fact, we opened our 200th store earlier this week in this division. So I really -- really, to put things into perspective, I think that the team has integrated well to us. Disappointing H1 performance, but H2 is looking a lot, lot better, both October and November trade to date, we're very happy with. It's back on track. Yuppiechef. Mark was saying it's only included -- it was a small acquisition, only included for 2 months, So it didn't really affect our group numbers in this period. But things are really progressing very well there. We say integration is performing well, but just also wanted to stress that we're taking the approach of integration light, and they're not -- both with Power Fashion and with Yuppiechef, these are not businesses that we're trying to crowbar into the Mr Price way overnight. And in fact, there's many good reasons to leave them alone. So we'll only integrate what we think we need to, and in doing that, we'll obviously take a sensible time frame approach to it as well. We're still very excited about that business. It's traded well in the 2 months that we had it. It's traded well since. So really no issues on performance there. It's going very nicely, and we're very excited about the opportunities and, in fact, the reason that we acquired the business in the first place, and that revolves around the people and the capabilities that exist as well as the merchandise opportunities. We're also going to be opening more stores in H2. Right. Mark stressed the point of capital allocation quite extensively, the Mr Price way, the DNA that drives us in our daily decisions, and you can see there in terms of capital allocation, really, what our philosophy is. We invest for the long term, for returns in the long term and scalability of our investments, but we don't have an appetite for investing in the long term without results coming quite quickly. So that's one of the criteria that we do set ourselves. Although we are prepared to take a long-term approach, we have to manage that investment very carefully to make sure that the returns don't take forever in coming through. As I said a little bit earlier, the strategy is on primarily around revenue and earnings growth, preserving metrics but not at the expense of growth, and we do consider share buyback from time to time, as evidenced in the 2021 figure there of ZAR 165 million, and I do remember that when Mark spoke to you at year-end, he clearly stipulated that, that wasn't the appetite. We did have a much larger appetite, but unfortunately, we're going to a close period, and the restrictions we put around the share buyback program were breached, and we couldn't amend them in a closed period. There, you can see the shape of our capital allocation in the current period as well. Although no share buybacks, we still had a payment going out in terms of acquisitions. And you can see the big jump, and this should please investors a lot. Our dividends, we actually paid ZAR 1.2 billion as opposed to ZAR 500 million last year. So a good balance there in, I think, investing for the future and in returning to shareholders. Right. Looking at brand. This is how we interpret, and these are things that we look at when we're talking about our brand value. Price, quality and fashion, those have always been the historic ones, but we have to start talking a lot more about convenience to the customer and the experience. I just want to stress here that when you do these things, we don't have to win on all these things. As a value retailer, we can't have the best store experience out of all retailers in South Africa, but it's doing the job that we require to satisfy that customer and to drive overall value equation at the end of the day. Very pleasing even, I was talking about Coke, one of the biggest brands in the world. We are now in the top 20 of the South African's -- South Africa's most valuable brands. We increased one place, as you can see there, to 20th position, and that's per the Kantar BrandZ survey. The great thing there is that we are one of only 7 brands to increase in value during the year. We actually -- our brand value went up 7%, whilst the top 30 decreased by 3%, and there's a calculation that takes place to get to the brand value. I won't go through that, but one of the real standouts is Mr Price now being included in the BrandZ strong index -- strong brand index, and those are brands who are included -- and the brands included there have really shown, over the years, that they generate superior shareholder returns. They're more resilient in the times of crisis, and they recover more quickly. So that's great to be included in great company. And there you can see that, that brand performance -- the portfolio performance, the 363% versus -- and how they compare and, in fact, outperform the MSCI World Index and the S&P 500 Index. Delivering value is absolutely key to us. We actually ranked second, this is the Kantar survey once again, second out of the top 30 companies for offering consumers value. You can see the table down below there. We placed second overall to Capitec and well they are -- then obviously, the highest in our sector. We're very happy about that. This is the most recent fashion value matrix survey that is out, and as you can see there, on the vertical axis being fashion forward; on the horizontal, the value that we deliver, and the positioning of Mr Price then holds in that quadrant really talks to its -- a, its great value offering; and its strong fashion differentiation. The thing I also just want to stress that we look at this very intently. It's front and foremost in our minds. It's -- permeates through our strategic planning, and you don't get there by accident. It takes years and years of absolutely dedicated, focused merchant teams delivering in terms of what the brand stands for, putting the product out there that we need to and then, ultimately, customers voting for it. So yes, I think all the processes and the magic secret sauce that we've got to do that and to deliver the results that we've got obviously works, but they come through a lot of dedication, discipline and embedded processes. So it's not only about what we say about our brands, it's what the customer says, and this is the Sunday Times GenNext survey in 2021. We were actually -- and this is Mr Price, which was voted to the coolest clothing store in South Africa, and overall, it came second in the coolest online store in South Africa behind Takealot. So I think that's great accolades, and it's our customers who are telling us that we're on the right path. Online performance. Mark said we're up 49%, more than doubled over the last 2 years, and we're actually delivering what we would say very nice and acceptable operating profits from that channel. We're not just investing, growing it, marketing and expect no returns. So quite happy that it fits into our investment ranking appropriately. In terms of its contribution there, I think the call out here, when Mark was speaking about investment and capital allocation and returns and every decision, every day must match our value roots. This is a good example of that. So to get to that, let's just call it and round it off at 3%, that puts us really in the same target as our peers, same area as our peers, and I'm talking omnichannel, not online pure plays. We've only invested ZAR 138 million -- not only, it's a lot of money in our language. But we've perhaps invested a lot less to achieve a similar result of about 3% of our sales. This page actually is a similar web survey. It's April to September this year, so it covers our 6 months, and this just gives a sense of the traffic, the market share of traffic that we've got versus others, and the people that we've included in our comparative set here is really how we would see our customers shopping. So obviously, the biggest call out and the biggest performer and 48% is the Takealot and Superbalist, but we're very happy when you add all our brands together and not just look at one single brand, but all our -- all 7 brands, we're actually 14%, which puts us in second position. And then you can see some of the stats on the right-hand side that we're very happy about. All right. Moving on to the digital future. I won't go through a lot of this but just to let investors know that this is a big area of focus for us. It has been for some time, and I think we're making really good progress in these areas. So I'll start off with our retail core and the whole Oracle stack that we are very close to implementing. We're going live -- we expect to go live on our Oracle ERP in April next year, and that will be a significant milestone for us. But I won't go through everything, whether it's the data and what we've done with the cloud and our data warehouse, the automation side and RPA or having a very close look at our customer service desk and what the store environment must look like, from an experience point of view with technology, we're doing all those things. Once again, invest appropriately, but try and surprise and delight our customers at the same time. And at the same time, give us the internal platforms and bases that we can use to run our business cost effectively but also intelligently. That's -- those are 2 keywords there. Going on to the -- looking out into the second half, and I think the first point that we have to raise is there's no doubt about it, the input cost pressures are there. Exactly how long they stay around for and, therefore, impact, I guess, not in a way that we conduct business but also how they impact competitors, the SA market in general and consumers, we'll have to just wait and see. But input costs have been rising across all sectors, really, not just the retail sector, and they've been partly driven, as we said, by supply chain disruption, but you can also then see what's happened to cotton and oil prices, which impact the cost of our merchandise. So I suppose from a retailer's perspective, those things, for the time being, are negative, but on the positive and, therefore, the -- what helps offset some of those negatives is the exchange rate and what we've done with our hedging, and without going to too much detail, that helps us offset a lot of that negative impact that I've just spoken about. Just in terms of going back to the global supply chain issue for a second. We've got shipping rates and the contracts that we've had -- a long-term contract actually ends in December of this year. But we've actually fully booked the capacity that we require and therefore -- and agreed the rate, our shipping rate to the end of June 2022. Whilst there is an expectation of the situation easing, we have seen the Freight Rate Index has come off slightly, but it's not that material in terms of the African route. I think it's down about 10% from its peak, but it's obviously got a lot -- a lot more to go before it starts getting back to normal terms, but what we've then contracted from January to June is way, way below the rates that have been quoted right now in terms of that Freight Rate Index. So we're very happy with what we've contracted. Yes, and we've taken out some surplus beyond June as well but not our full requirements. Mark has talked about merchandise inflation and deflation once you include Power. To me, I think what's critical is balancing our strategic value positioning with margin management. We both have spoken about that, and inflation isn't something that you just dump it in on a formula basis, and it spits out your selling price. There's a lot that goes into -- and I guess it's our IP, as to how we actually deal with the inflation and manage it through. So at the end of the day, we protect margins, and the consumer doesn't felt that they've been dumped on. But to do that and deliver market share gains, as I said, was really pleasing. We're probably looking at an H2 inflation at around mid-single digits. But once again, with Power Fashion dropping into it, we'll have deflation again. It's very difficult to give a view beyond H2. A lot depends on what happens to exchange rates, the global supply chain crisis, cotton oil prices and all these things. Where we do start out as a business is whatever the input costs are, we have to try and pass on. We can't take these in the chin, but obviously, we have to protect certain key, key price points, and it's not a blind formula. Exactly then how we pass it on and how it affects our value positioning is something that we do consider internally and certainly won't be giving away our strategies on that. I won't go through it. I think you can see the disruption there from the global supply chain. We've both spoken about it, and as we're saying a little bit earlier, relative to those disruptions and how we're looking for stock going into peak December trade, I think we're in a good position. We've also taken the proactive step of making sure that we've secured our production with our suppliers for January to June next year. So we've gotten early there. To us, having agile supply chain is absolutely critical, and I think there's 2 things that we're trying to do as a retailer. We're trying to support, obviously, the South African economy, and we also have to support the consumer and their demand for product and the type of product they want. So we have to be an agile business at the same time. So quick response is also quite important. Our view is that you can get very similar benefits, and I guess, to get that quick response and to support South Africa, there are 2 ways you can do it. You can vertically integrate your business or you can not, and we've taken the latter route. I think it's -- it gives us a strategic advantage. It gives us a lot of agility, and we're a relationship business. We've actually developed extremely strong relationships with our suppliers, particularly over the last 2 years, and a lot of what we do with our suppliers actually enables that agility, and once again, I'm not going to go into some of the detail because it is proprietary, but we've got some methods that we employ with our suppliers that puts us in that position, too. So for me to have a supplier base that I don't have to invest in a manufacturing infrastructure at all means that we don't then really have to worry about some of the potential risks that come with that, single points of failure, disruption, electricity, all the input costs, all the labor issues, et cetera. It doesn't mean we don't worry about them because there are suppliers, so we are concerned about them, but it does give us a lot more agility to operate at the same time, and the process works for us. If you just see what we've been down the last couple of years, you can't get to those results, market share gains, the agility, the performance without having very strong relationships with our suppliers. So we definitely take a partnership approach, and it really is paying dividends, and we are most grateful to our suppliers for helping us through this process, too. The other thing is -- and I did touch on it a little bit earlier is agile supply chain is one thing. It's actually having your own processes and disciplines and then sticking to them when you need to and not overriding them that is equally important, and I think that's what we've done exceptionally well over the last couple of years. Those enable quick decision-making, and they allow you to get into -- to read tests in a way that we want to and to react to those tests and give you a lot of preseason reads. So we don't measure agility only in lead time but also through what does that agility to give you in unlocking the opportunities that we can then take advantage of. And of course, when we're looking at merchandise processes, it's not one-thing-fits-all. We've got a fashion side of our offer, and we've also got a core side of our offer, which you also don't need to treat exactly the same. So with all the disruption that's taken place, the message, I guess, to leave you with is that we have been proactive. We've managed through the last 18 months, I would say, very well. We've built buffers into our time frames when we needed to, but we are obviously quite cognizant that this is a -- these are special circumstances. This is not our DNA, and we don't want to be placing too early all the time, but we did it because we wanted to be well stocked going into festive trade, and I think we're in a really good position with that. There's been quite a lot of talk about support South Africa. We, as a group, Mr Price Group, certainly supports that. If you just look at that table, that really highlights what we've done with our units, and this is going back on this most reported period. You can see that we've sourced just short of 40% of our total inputs from South Africa. We've got a number of neighboring countries that we also get supplies from. So if you add that in, we're at 53% sourced from Southern Africa, which I think it's a tremendously positive statement. That actually equates to ZAR 3.9 billion that we've put into the local economy. That's just the 39.6%, and if you look over the last financial year, we've actually sourced almost 80 million units from South Africa. That equates to approximately 1 in 3. So it's 1/3 of all the units in South Africa acquired by listed apparel and homeware retailers. Our media target is to increase that 79 million to 100 million, and we've certainly got internal targets and processes that we're applying to get there, but at the end of the day, there is an overall demand that we also need to tick that box, and that is the competitiveness, the price that we get, the balance of quality, the lead times we have to operate, and it's not all just about getting a certain percentage. We have to deliver consumers value that they deserve at the end of the day as well. Over the last 12 months, we've onboarded 43 new local manufacturing suppliers, delighted about that, and when you do those kind of things, one of the consequences is that we reduce your dependence on China, which came down 230 basis points year-on-year from last year. We're also diversifying into other strategic markets, but it's not that you're going to see overnight dramatic switches. These are more long-term programs, but very pleasingly for us in our whole journey that we're on, we actually are included in the FTSE/JSE Responsible Investment Top 30 Index, which is very pleasing and recognizes some of the great work that our teams are doing there. I won't talk to all of these because I've just spoken to some of them, but it does bring it together in a very nice fashion. Starting with employment. We employ directly 20,000 people in our operations in South Africa, and then when you include the direct supplier base, that adds another 40,000. So 60,000 people that are directly included. That's a big number for any business. In South Africa, the estimate that when you employ a person, the knock-on effect that they have in terms of families and others that they look after is 5:1. So it does mean collectively, we're influencing 360,000 people in South Africa. That's something that we're very proud, as a business, to do. Other than the sourcing, which I've just spoken about, we've also had financial support of over well over ZAR 200 million aiding our suppliers in South Africa over the last couple of years. So we stood behind our suppliers as well. I'm very proud about our job-creation activities that we've undertaken as a group with our suppliers and also through our Red-Cap -- our Mr Price Foundation, and you can see there the amount of people that we've trained and placed into jobs, which is very heartwarming, indeed. Right. So how do things then -- how do I bring all that commentary together into a one-page summary? Well, I think it's an understatement to say that a tough and unpredictable retail environment is still going to carry on in the second half. There are significant risks that are still out there. We're hopeful that they're getting better, but we have to see them getting a lot better before we can really bank on it. We spoke about COVID-19, potential of a fourth wave -- or not the potential. I think we're in the beginning of the fourth wave in South Africa. I don't think it's going to be as extreme in terms of lockdowns as we've seen in the past. Electricity suppliers, South Africa and China are both quite erratic at the moment, and the global supply chain disruption, we've spoken about that at length. All these have got the potential to lead to erratic stock flows and high product inflation, but I think I went to some degree and some depth to explain what we're doing to try and mitigate those things. I think as a business, we've responded well, and we are certainly -- have been an agile business. I think the statement that really pulls it together at the end is that if you look at what this business has been through over the last 18 months, I can't ever remember a period that we've been put to the test the way that we have during this period, and I think we've come through it very well from a company perspective, but at the same time, it's not just about us. It's about our partners, and it's about all our stakeholders, and we can look them in the eye and say, "We've come through it together very well." We're very proud of that. I think we're clear on our strategy, and I think we're beginning to execute that strategy very well. We're gaining very good momentum internally. We've got a clear plan, and we're succeeding against that plan. We're gaining market share. We've identified growth opportunities. We've actioned those growth opportunities, and there's still more to come. We are stocked and well stocked going into peak December trade. We're going to manage that down into year-end, as Mark said, along single-digit growth. And certainly, the immediate outlook is we've often spoken about 42% being our GP target for this business. That's certainly our target in the second half. Just on the ESG side. As I was saying a little bit earlier, I'm quite pleased with the work that we're doing there, and we haven't put a date to this yet, but we're actually going to be holding an ESG Investor Day in 2022, and Matt will be in contact with you all regarding setting up and agreeing that time frame. So we look forward to a dedicated day on those matters. What are we going to do forward -- going forward? Because we've always found that reporting on sales growth period year-end, it's very difficult looking at 6 weeks and trying to get a read of 6 weeks and then managing expectations. So we're going to be reporting as we normally do on trade post September. So it's for the quarter. We'll report sort of in the middle of January. The date will be on our website, and then what we're going to do is for the quarter ended June, we're going to be then be reporting to the market on a sales update as well. But this time, we're going to report in July. So we'll get into with our half year and then our year-end intervening those periods, we'll get into a quarterly reporting cycle. So the significant things is we won't be commenting on trade post this results presentation, and the sales update that takes place normally in August will be brought forward a month. We'll get into a nice quarterly basis. But that said, I think October trade, we're up against a very tough base last year. We had a very strong -- in fact, we had strong double-digit growth last year. But October trade, we exceeded our internal target. So that was a positive. In November, we're satisfied how November trading is going to date. So that's all about the company. I won't go into the appendices, as I said. It's all about the company and the numbers, but I did start off this presentation by saying, as critical as those things are, it's also about our people. And I'm not going to say other -- too much other than I think this video that we're going to show you will just talk about the mood, the optimism and, I guess, the unique culture that Mr Price has and the special people that we've got here. I hope you enjoy it. [Presentation]

Right. I hope you enjoyed that. We're going to move into Q&A now, and Matt Wariner, our Head of Investor Relations, is going to try and filter and channel the questions into themes and put them to both Mark and myself.

Morning, everybody. I thank you for all of the questions. I have a high volume. So I have just tried to group them together. So I just want to start with a question around new departments. So with the new departments of baby, Scarlet Hill, school uniforms coming into the business, how are those managed in terms of both margins in the business as well as the space that they take up in stores and how that balance is struck?

Ultimately, when I was talking about the retail science that we apply, it really comes down to that. So it's not only do we consider it, well, what is the sales opportunity. We obviously then consider what margin is that coming to the business at, and therefore, on a [indiscernible], a gross margin per meter basis, how much space do we actually give it? So that's all the filtering that takes place internally, and I guess there's a fair amount of competition in vying for the space internally. But ultimately, it's metrics and the performance that must count. So that's what we go through. The departments collectively are -- when I said they're now contributing 4%, and that's not any surprise. It's throughout the group. Collectively, as a unit, that performed very well, but it's quite clear that in each of the things, there's learnings. And it's then the opportunity to correct that learning, and in another section of the presentation I was talking about, where we need to fail, we need to fail quickly. Well, the pleasing thing is, I don't think we need to fail on any of those, in fact. I think they've all been implemented well, but there's opportunities to improve some. But as a collective, they've performed extremely well.

Okay. And then just a question to Mark Stirton, if you could just explain in a little bit more detail the supply chain finance program and the value that, that has unlocked.

Yes. It's obviously, it's quite a complicated process, but by and large, it's allowing our suppliers to access capital early, and it's through a mechanism that we've got through one of the biggest prime revenue, which is one of the biggest supply chain finance programs in the world. And through that mechanism, we facilitate better liquidity for our suppliers and, obviously, for us.

Okay. And then just in terms of increased inputs, cost pressures and looking both the impact on the GP in the second half and beyond, and then what the general approach will be in terms of absorbing costs or passing on costs to the customer.

Yes. Thanks, Matt. I did talk about the starting positions that we obviously seek to pass costs on. We'll include it in our margin, our PMI. Often, there's times you can do that. Sometimes there's times that you can't, and that might -- it might manifest itself in resistance at a price point or you're putting yourself -- and that's the resistance from the consumer, or you're putting a pricing in an area where your competitors have actually got a better value offer. So that's a very important quadrant, and it's a fashion -- it's the fashion and our differentiation on fashion that can protect us somewhat from that. I said that we're looking -- the GP margin, I said what we're targeting for H2, the input cost pressures and the offset against an improved FX rate relative to the same period last year. But who knows beyond H2? Going into H1 of the new financial year and beyond that, it really depends on what the currency does, and it really depends on whether all those cost pressures start easing. So we don't want our price points bouncing all over the place. We want to be fairly consistent. So the way that we then manage and put that inflation through the system is once again a bit of IP that I think we've done pretty well over time.

Okay. There were a number of questions just around Power Fashion, so I have just grouped them around the most common ones, with one of the most common ones being just around any identified operational synergies in the medium term and the impact on margins that we first communicated around our Power Fashion business.

Yes. Look, as a total business, Power Fashion operates at a lower margin, but they've also got -- like us, they've got a seller and a merchandise GP, collectively, they're under. So yes, I think really consistent in terms of what we originally thought about that business. I think there's a really good opportunity to improve the GP from the first half. I have spoken about some of the challenges that we've actually had there. But yes, I think, overall, as a business, it's -- the reason that we bought it, the opportunities that are out there and our expectations of that business are really exciting and as we envisaged them.

And then just with regard to Power Fashion as well. There was a comment made just around nonoptimal take on stock. Were there any surprises in this? And how do you think about this in terms of future acquisitions coming into the business and the approach towards that?

Yes. Look, it's something that you just have to manage. As I said, there's a decision that aren't made by us, but it would have been a different story if we had taken over a shape of stock that, as I said, was less than ideal, but we didn't have a stock provision to match it. So that's what you'll do. You'll have a look at the stock, so it wasn't a surprise. It would have been a surprise if we had taken over and had no stock debt. So you look at the stock. You look at it. Is it worthy of taking over and, therefore, preserving margin? And then relative to that, what kind of stock debt do you actually carry through as well? So I can't say it was a surprise then.

Okay. And then just a question around dividends, and a few different questions on this. But a general theme just being around the payout ratio in this half, based on HEPS versus normalized HEPS, was a consideration around that as well as the balance of the dividend payout in terms of the growth strategy and investing in growth as well and how we see that.

Yes. I think the overall payout ratios -- I think consistency is a great thing, and I know that investors do look for consistency. If I had to play it out into the foreseeable future, I can't see our dividend payout ratio changing. I don't see it going up, but at the same time, we'd like to protect it from going down. So it's a cash-generative business. I think it's quite key that we want to be able to invest and return to shareholders in the way that we have. We didn't go there in terms of the interim dividend, in terms of normalizing it. I think these insurance claims that we do have are interim payments. There's still a lot of process that we have to go through to make sure that although we have received the money, that we can actually keep the money. So the process isn't final yet. And once those do come through, they'll be dropped into earnings, and we will then report them in the dividend for the next period.

Okay. We are going to have to close the session there, and we do have a hard stop at 10:30. So just a big thank you to everybody for joining. There were a high volume of questions, so they were grouped into the most commonly asked, but there is opportunity for engagements post this meeting, and the slides are available from the presentation online. Otherwise, that's a wrap from us today. Thank you.

Great. Thanks for joining us, everybody. Take care.