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

Well, good morning, everyone, and welcome to the Mr Price Group's Annual Results Presentation. So this is for the year to March '23. Just before we get into the detail, you would have noticed that the timing of the presentation itself and the recent results is a bit later than normal. That was just really because as we'll discuss later in the presentation, we are going through an ERP change, and we thought we needed to build ourselves in some buffer time, which would give our auditors sufficient time to get the evidence that they need. Running in parallel with that, we're actually going through the mandatory audit firm rotation exercise. And we've also got 2 sets of orders that are running parallel, which does absorb some capacity in the team. So back to November and back to March, April results next year, we'll be back to our normal cycle. So that's the one thing I don't wanted to say. The second thing is before we dive into numbers and analysis and obviously, the road ahead. I just wanted to really maybe just give a sense of how I'm feeling generally about the business and the economy and I guess, the trading environment. And I think certainly, as you'll find out, it's -- in this climate, it's very easy to be negative. And I think when we go through the first section of the report, looking at the market and the trading dynamics. It's going to give everybody all the reason they need to be negative. So I think we've got to be realistic. It's really tough out there. We've got some company specific things that we're going to talk about in some detail, which obviously impacted results. But I think if I sort of then take a more medium to longer term, I'm probably -- and I suppose you can be in 2 camps. You can be in a camp that you're negative or although ground on realism and as I just said, you can also have a view that you're slightly optimistic. And I'm going to say that I'm in the latter, and that's really grounded on, I think, first of all, when you talk about South Africa. There's no doubt there's significant challenges that South Africa tends to overcome those challenges as it's done before. You can look at some pretty milestone events in 1960, 1994 that I think people were not sure where this could go, but here we are and we've overcome them. So I think there's a natural resilience built in. And I think the elections next year will bring a lot of focus to government and delivery. So we'll certainly look forward to that. And also, I think that what I've seen and what I've also been party to, is business and government working a lot closer together on a lot of things, which is really positive. But I guess on the one hand, receiving input is one thing. But actually acting on the input is another thing. And hopefully, that will strengthen as we go forward. But the short term is very messy. We'll give you some insights now and leave you with our outlook. But from our point of view, when things are messy, I mean there's a lot of macro things playing out. Good companies aren't immune. But I will say this, good companies have a plan. And from us -- from our point of view is when this sort of messy cycle is over and starts dissipating, I think Mr Price Group is going to be in an excellent position to capitalize on the next cycle in the swing. So the layout of the presentation itself, I'm going to talk a bit about the operating environment, as I said. Mark will dive into the financial performance, and then I'll close on the medium- to longer-term outlook. Okay. I must apologize for the slide because it's become a bit of a swear word in South Africa, but this had a dramatic effect on our performance, and performance in general for the economy. And I just wanted to take a minute out to explain, where Mr Price was in their decision-making process and how we reacted to what is unfolding. So the graph there just really sets out the historical loadshedding performance of that we've experienced. And as you can see, most of that graph, up until the dark blue line, I'd say it was more or less manageable. It certainly wasn't ideal. But in that environment, I think, it for us, certainly, it didn't require us to go and spend if you take all our companies, all the investment ever made, probably ZAR 300 million to ZAR 400 million over time on power backup solutions. And certainly, as a value-minded company. We do watch our spend very closely, as you all know. And we didn't make the decision at that point until to roll out power solutions. However, at September, you can see that blue line. September loadshedding was as high as the full 2021 financial year. And even from that point, you can see how it escalated into December, which is obviously a peak trading month. In fact, December was the highest month on record. So I think that explains how the ramp-up happened. And we certainly, we felt the dramatic impact from September onwards. And I think the next slide is really also going to highlight that to you. So we've publicly commented on which divisions or in fact, the total group, how we were prepared in terms of backup power. In the graph on the right-hand side, I think now starts giving you a much better analysis of where we were relative to what we'd call our core businesses, so it's excluding acquisitions. And then obviously, our acquisitions. So when you just saw on the previous graph that loadshedding had ramped up in September. Our core business is at 37% -- 37% of our stores had backup power solutions, which as I was alluding to earlier, was low. We got up to 42% by the end of December. So that really was despite best efforts to try to get in pre-festive trade, it was still pretty low relative to the market and to our competitors. We then said that we had made the decision this is at September to roll out all backup power solutions to all our stores and that we had set a target to get there by the end of June. And you can see where we landed at the end of March, 60% of our stores, our core stores, 78% our total stores in June, well, it's only a week or 2 away. And we certainly we will be at 100% by the end of June. Very pleasingly, when we've actually done an analysis and we've taken looking at stores performance 2 months before, loadshed backup was installed and then trade 2 months after we've seen on average of 5% sales uplift. So hopefully, that will set us up quite nicely. If you want to quantify it, we've actually estimated that we've lost 318, 000 trading hours and almost ZAR 1 billion in sales. So if we just take the simple GP impact of that although roughly 40%, it's ZAR 400 million. And if you equate that back on to the graph that we just saw in the previous page, a lot of that was in the second half. So yes, I think the -- we don't have to talk about the impact that that's had on business probably much further. But the solutions that we have got -- we've got strong solutions in place. Majority inverter and battery solutions -- as I'm saying, the backup power solutions that we've installed are really good solutions, mainly inverter and battery, but obviously, in big centers, we've also got generator capacity. And roughly, we've gone out with a solution that represents lighting levels of about 70% in our stores, which also puts us in a very favorable position versus competitors. Pleasingly, the solution can last us up until about Stage 8. But if we need to scale it because the situation worsens, these solutions are scalable because there are solutions out there that aren't. I say there that the DC and head office has limited risk of disruption. Well, we've just experienced it, but you also experienced our generator coming up and working. So overall, as I said a little bit earlier, whilst I'm talking ZAR 300 million to ZAR 400 million for the total group. Since September, we had allocated ZAR 220 million CapEx. And all that, we spent about ZAR 70 million up until the end of March, with the balance being spent up until the end of June. Still staying with the external environment, and I'm not going to go into a lot of detail here. I think most of it is known to you. Obviously, escalating interest rates, as you can see in the graph there. The inflation and what that's done in eroding disposable income, as you can see on the right-hand side, real wage growth is also minus 3.3%. So I guess, looking at the interest rates, there's been 350 basis points increases in the year and another increase post year-end. We'll have to wait and see with the latest inflation figure. CPI came out was down 50 basis points. We'll have to see if that starts moderating the interest rate increases or not and whether that's sufficient. But on the top right-hand graph, you can see there the impact that inflation had. And I'll get on to discuss the impact on value business in particular. But when food is going up 14%, public transports going up 16%, people have just got less money to spend in areas that are not absolute necessities. This is a slide that also just drives home the point. This is Capitec's data, looking at 20 million of their clients. And there you can see the shift in spending that's happened in the last 12 months up until the end of February. And we've highlighted the red block, there is clothing and shoes purchasing which is on the plus side, but it's obviously one of the smaller blocks because really the money is going into food, groceries, cell phones and takeaway food. Obviously, if there's loadshedding and you don't trust it, what comes on at different frequently and at different times to advertise. You can't necessarily get home and cook. So takeaway food has gone up. Then staying with the external environment. And I think this is quite key messaging for us too, that if you look at the graph, it actually shows what cash sale in the industry has done and credit sales and certainly, if you look at the blue line, you can see how that's risen in the last year or 2, but starting to taper off. So I think when times are tied to people might have access to credit. When the repayments start hitting, then there's a natural tendency to pay back, but there's no doubt that credit has been fueling a system for at least the last 12 months. Relative to that blue line, we don't operate at that. You all has known as is -- as a cash-based retailer, very cautious approach to credit. So relative to that blue line, what I can tell you, particularly in the second half of this financial year, our credit growth was about half the growth rate of the industry and we were very comfortable with that. That's evidenced by our net bad debt-to-book ratio. Mark will talk about that a bit later. So for us, the quality of our sales and earnings is very important. This just really talks about GDP growth. And you can see an 1.8% in Q3 of last year. Absolutely no reason to get excited. That was on the minus 1.9% of the year before for the same quarter. I've spoken a bit about the government and their response to the execution and accountability. I don't think I have to go into that again. But certainly, in the weakening exchange rates doesn't do consumers in this country, any favors, whilst it might be unfavorable for importers -- for exporters, it hardly helps when we're busy damaging international relations, and I'm talking specifically on our relationship with the U.S. at the moment. Just looking at the competitive environment, as I said, the heightened focus on the value segment. It is the largest consumer segment in SA. And there's been a lot of post-COVID-19 M&A activity and certainly, the performance of existing competitors in that set has strengthened. Increased competition from traditionally premium focused players. They I'm are really talking about -- it also interlaces into some of that M&A activity that I was talking about. Obviously, companies in stronger hands, more stronger balance sheets. But it's not just that. There's also the non-apparel retailers. So FMCG guys that we've seen into this market, too. And it's not in the traditional homewares sector either. It's now moved into apparel. The homeware segment, in particular, there has been definitely a rise in competition there. I think the whole work from home and lock down the whole trend that emerged globally, was people spending money on their homes. So obviously, that in the last 2 years or so has set a very high base. But certainly, there's been a flood of new stores opening in the marketplace, literally hundreds no barriers to entry. So it's not just in the -- I'm talking about the large listed retailers. It's many of the smaller independents as well. So the comment that I made there and the point that I made, is really that's driving a lot of non-comp growth activity in the market, just to share a number of doors opening. So that is all the external. In the internal environment, we've had to navigate these conditions with, as I said, when I opened the presentation, 1 or 2 internal things that we are working through. I think in terms of the execution of our differentiated fashion-value positioning, we've executed it pretty well. I'll get on to stock and merchandise in a minute. But I'm really happy that we haven't stride from what we've done internally. We've had to obviously respond to the very volatile market conditions.Very, very extreme competitor activity in terms of promos and markdowns. And I guess, as everybody has to manage their stock levels, does create a very disruptive environment. The part of that repositioning, and I think a lot of what we had done leading up into -- there's a slide on it a bit later, certainly in the last 2 years. Some of this you could have -- we did anticipate. So what we have done in Sheet Street for example, in the homeware sector is just really putting into a more defensive mindset and making sure that we're not cannibalizing Mr Price Home we had gone and repositioned Sheet Street more as a price player, obviously, with very good quality backing that up. It's a small part of our group. It's less than 5% in sales and profits. And I think in that repositioning, we got some things right, and we didn't get quite a few things right. So to me, it's a real opportunity for us to bounce back there. The leadership changes that we have put in place, we had just spoken about the -- our org design process, those positions have been filled. And it's really to refocus on the execution of those 2 business units, that is apparel and homewares and the primary thing that those 2 gentlemen are focused on is comp growth, okay. Very, very important. That will also in the longer term support our strategy and premium with a bit of time to look at future growth, more long-term growth. But really delighted that those positions are in place. It's working. And of course, what that meant was another rotation in some leadership roles elsewhere in the business. We completed the Studio 88 acquisition as well, the 70% interest. So I think as you work through the income statement. Just bear in mind that all Studio 88's profits are included at a 100% stripped out brought near the bottom of the income statement, and that's where you see the reduction to the 70% ownership. But the point I want to make, it's a really high-performing business. And it's a business that's really never had to focus on H1, H2, being privately held. Take a view on the annual profits. And certainly, H2 is a very, very significant part of their earnings for the year. So we'll come to the outlook section of it later. We won't see the same impact in H1 going forward as we did that we have from H2, but nonetheless, great business, very profitable, and it's working well. So if you take what I'm saying about the catastrophic impact from loadshedding, I think we've all suffered from that. I just repeat, we are slightly on the back foot in terms of the rollout to all our divisions. Caught up, we're in a good place now, but there's no doubt that it had a very, very big impact on our customers. But overlaying that is the Oracle ERP -- merchandise ERP implementation that we've been through. And look, I mean, I guess that's why companies will only do this every 15 or 20 years because they're really disruptive. We're not alone in this. Others that have been through the same only have experienced the same, but they're really are high complex things because you're transferring out of legacy systems, and it's not just system changes, processes sometimes have to change as well. But if you can just picture it, it's in H1, our merchants, in particular, had to get to used to know the system, it wasn't familiar to them. Natural tendency that when information is coming out, can I trust it? Do I have to find a second way of verifying it? So there's this whole transitionary process that I think will certainly detracts from a time and effort point of view, and as I said, it was in that key merchant area. As you do that, what happens is that you really can't focus enough or require time and effort on necessarily all the preseason stuff. So seasons that are coming up, how are we reacting to trade and all the changes that we do in our model to react to what trade is telling us. So couldn't unfortunately do many of those activities. And I'm talking about allocations to stores adjusting pack sizes, managing our store grades, adjusting patents and print and all those kind of things that we do to manage trade. So that was compromised in a sense, but I am standing at telling you and I'll come to a little bit later as well, that we do not have product issues. So reading my hats off to everyone in all the users. And in terms of the eventual merchandise that we put out there, I'm very, very happy of what we've put out. Mark will talk about stock in a minute, but the only problem that issue that we really got to stock is we've got too much of it. But if you look at -- if you look at the actually -- the differentiated fashion value that I've spoken about, I'm very pleased where we are. So that's how it sort of played out in H1. Put in action markdowns for a while; put in action promos. Then sort of going to H2. So as I said, it suffered -- merchants suffered because some of those activities that now translate into Page 2, couldn't be done to their satisfaction. But I think when loadshedding intensified, the consumer fell off a cliff and all these other things compounded it have made for a very difficult situation. And there's no doubt that fatigue had set in. There's only certain things that you could do. And I think without the loadshedding and the consumer problems, we would have probably be in a pretty good place. But certainly, it was very challenging to say the least. But we're obviously then delighted that the project closed on the 15th of March. So we won't be talking to you about implications of ERP system again. And then the loadshedding response plan, we've spent some time talking about that, but obviously, it -- it was a high level of activity there. So I just want to bring this all together and how did all these things come into impact trading. Well, as I said a little bit earlier, first of all, I believe it impacted the value segment the most. So a lot that happened with grand payments, discretionary income being redirected into necessities. As I said, cost of -- and that was [ borne out ] about by the cost of living increases. Increased transport costs; and also don't forget that in terms of our own store footprint and I guess it's where we're located and is part of our model, is that we also had many, many locations relative to the competition that just went centered in regional and super regional centers. But very diversified where it wasn't all as backup power available. I think it's a really key point there. There's never a good time for loadshedding, but it -- all the consumer challenges. But unfortunately, it did escalate at the worst possible time, and that was the lead into our peak trading periods. So when you look at then our ability to trade with all those challenges on the go, and you've got a market that is highly promotional. You've seen the extent to which competitors have spoken about the stock levels, and it's not just the list, as I said, it means that this high level of promotion does play havoc on the market. It's not sustainable. So part of the reason that I'm feeling a more bullish sort of going into H2 is that people will manage their stock levels down over the next probably 6 months or so. And it's really critical that everyday low price, our EDLP positioning gets back to where it can be. Really what happens is that when we've got too much stock and just this myriad of promotions in the market, our EDLP and our differentiated product offering doesn't always stand out the way it should, results in clotted stores. And I think as well, I think, don't just perhaps look at what's happening at GP levels at a retail or a group level. I think you really want to see what's happening. You really got to get out of stores and actually see where those promotions are being actioned. So we certainly got competitors with 50% off almost across all stores and all products and that gives you a sense of the trading environment rather than just looking at group GP numbers. So I'm just going to rewrite again -- restate again. We don't have product issues. There were 1 or 2 comments in the lead up to this to, has there been any merchandise problems? Have we made some wrong fashion calls? Absolutely not. Merchants have done a fantastic job, as I said. It's all that other factors that we've explained that have had a much, much bigger impact on results. So these numbers you would have seen by now that's been talked to the translation of what happened to earnings at a group level. 17%, mainly due to the inclusion of Studio 88 for the full 6 months. Well, the second 6 months, as H2. EBITDA was positive. Obviously, once you strip out the interest foregone out of the acquisition, that's really one of the primary things that gets you down to diluted HEPS being down 6%. And as I mentioned a little bit earlier, EBITDA's pre-minority interest HEPS is obviously net of it. But very pleasingly, we'll talk about the balance sheet and how we think about cash generation and everything else a little bit in a short while. But directed to be able to maintain our dividend payout ratio and into the future, we don't see that changing either. I won't go through this whole slide. There's quite a lot of details here, but what [ does then start ] showing as compared to last year, how we traveled and then how -- what is the shape of those earnings and performance relative to H2. So if you just cast your mind down and I won't go through all the detail, as I said, but diluted HEPS, you remember that we came out with a 10% growth last year. And it must be stated we did have a higher base last year. I think our base was probably the toughest, if not one of the toughest in the market. We had -- I think it was on a 52- and 52-week basis last year. Our HEPS growth was actually 26%. So it certainly must be taken into account. But you can see the transition and what happened when I'm saying the timing of loadshedding, the timing of the consumer running out of cash and all the other factors I've just mentioned really came to the fall in H2. So as a business, we've actually been gaining market share for approximately 24 months post COVID lockdown. And certainly what we saw and we'll go on to discuss it just now, the market share shifts that we've seen have really coincided with these really traumatic events that I've just explained. Okay. So just then to -- for those who haven't identified at this point, H1 HEPS up 10.8%, very tough H2 down 15%. Okay. I'm going to hand over to Mark Stirton, our CFO, who's going to take you through some more of the details on our financial performance.

Good morning, everyone. Thanks, Mark. So I'm going to start off with just the shape of the income statements. You would have seen that from our H1 performance to the annual, the shapes changed slightly. Obviously, we pride ourselves on being and having a positive operating leverage. But obviously, in the second half, all the factors Mark spoke about, that impacted particularly upon our core business, with the introduction of Studio 88 definitely helping support the H2 results. Just from a cosmetics difference, you would have seen the last line of a ZAR 111 million, which relates to the noncontrolling interest change -- I'm sorry, reduction which took our profit after tax from the 3.6% reduction to the 6.9%, and that obviously flows down to your basic earnings. In line with our strategy, we said that we would buy the acquisitions in order to dilute the influence that, particularly our apparel division has on our overall group performance. And you'll see there our apparel segments gone to 74.5% from the 69.9% and that's obviously heavily influenced by the introduction of Studio 88 into the business, which now is represents 13% of RSOI in the group. You see on the far right-hand side, again, just to allude to what Mark said, but all segments were up against very, very strong base effects with apparel up against 30.9%. The Home division up at 15.6% and Financial Services and Telecoms up at 22 % or still that's really strong operating margins. But excluding Studio 88, particularly in the apparel division, you would see it comes down to 2.8%, and the operating margin at 4.6%. And for the reasons Mark said about our Home segments and the threats and attack on that particular segment, you would have seen that they fed worsen this in this climate. With RSOI 3.8% -- down 3.8% and operating profit down at 35.9%. With the Financial Services and Telecoms segment, the RSOI was heavily impacted in terms of the operating -- positive operating leverage on operating profits, and that was impacted by bad debt. I know that we had a comment around H2 expenses that came through earlier. It's our H2, and I'll take you through the bad debts and a little bit later when I take you through debtors, but our bad debt impact in H2 was quite a lot higher than H1, and that impacted that segment. From a channel perspective, our growth perspective, we've got some slides in the back of the deck around SA non-SA and SA and non-SA still remains pretty consistent. So we haven't overly gone into detail on that. And from an e-commerce perspective, the channel still remains a very important channel to us, but I'm not going to concentrate on that for now. Our store growth and what is very important, and we're quite proud of is that over the period, we added 1,000 new stores to the group to take the group to 2,702 stores. And the introduction of Studio 88 gave us 778 stores and they gave us during the period in which we owned them, they opened another 51 and our core business opened a 171 stores. That gave us a weighted average space growth, including Studio 88 of 16.9%, and the core business, excluding Studio 88 is 5.7% weighted average space growth. Our trading density is still very strong at ZAR 36,000 per square meter. And we still continue to -- in despite all the performance in the second half and well below our expectations. What I am pleased to say is that our returns on our capital that we employ in our new stores, there's still multiples of our WACC. And we'll talk about why we still believe we're confident to continue to invest in our cost base. And why a part of our capital allocation is our strongest returns do still remain in our core business. You'll see it was on the right-hand side, which with all the stores, you see our -- and the Power, the Yuppiechef and the Mr Price Money, which is really the sailor business, and all of those showing really, really strong weighted average space growth. But with the core business is still showing very, very good space growth up again we're still seeing very good space opportunities within them. From a GP analysis perspective, the group GP came down 150 basis points. The increased contribution of our high-growth acquisitions, coupled with the slower performance in our core business, obviously had an impact on that GP. Excluding the acquisitions, GP metric decreased 120 basis points, which shows that. From a merchandise perspective, Mark spoken about the higher markdown environment in H2. When you couple that with the ERP and the loadshedding, and just generally, the overstocking in the markets, it affected all everyone's merchandise GPs in that second half. I think everyone who's come out or the competitors have shown how margin in their second half was heavily impacted. We were no different. Not all -- we made a strategic call because of the Rand's depreciation of 18.5% over the period, despite being very well hedged, and you can only absorb certain amounts of inflation. We decided to protect our EBITDA low pricing leadership. Obviously, a lot earlier than H2, and we didn't pass all the inflation across, which also slightly impacted our merchandise GPs. From a Telecoms perspective, we're very proud to see there's 200 basis increase in the telecoms, and we continue to gain market shares in that space with a lot of road map for us, which we're quite excited about. From overhead expenses, again, the inclusion of Studio 88 does distort things. So what we've done is we've created a change, excluding Studio 88 and switch on the far right-hand side. So I'm not going to speak too much to the including Studio 88 numbers. And suffice to say that when you've got weighted average space growth and remember that most of your expenses come through stores, which is that selling expenses at 74%. So when you think about that and the introduction of Studio 88, 16.9% weighted average space growth on a 21.2%. Total expenses, you'll see that the delta is about 5%, which is very respectable in this climate. We take the expenses, excluding Studio 88, which is really the core business, including Power and Yuppie, we were managed to keep expenses at 6.7%. And I think which is very important, and we speak about a lot, how we believe we owe to shareholders quite as management and as across the teams. And that is that we've got a flexible remuneration structure that floats with the performance of the business. And you'll see a large portion of the reason why we're able to contain employment expenses at 1.6% is because of that variable remuneration structure. We have IFRS 2 costs that's to do with our share schemes. And if you strip out there was a credit in the base, we would have taken employment cost down to 2.1% -- declined 2.1%. Occupancy costs were obviously impacted by things like the increase from [ lessors. ] And also within this climate, we're finding that -- we -- a lot of -- when -- particularly in Studio 88, but also more so in our own businesses that some of our rental negotiations are going into month-to-month areas, which now falls out of IFRS 16 and would fall under that occupancy costs. Other operating costs is quite high at 19.8% for the core business. And when you strip out bad debts and you strip out our computer expenses, bad debts in particular, if you take this bad debts out, it would have come in under 10%. And if you take out our shift in computer expenses, and bearing in mind that we're shifting a lot to a cloud-based solutions out of fixed infrastructure, and those would have come in under inflation. So I think -- and that's also partly responsible for why depreciation and amortization has come down because of the switch out of physical infrastructure in our computer -- IT environment. From a group expenses as a percentage of RSOI, was 26.3%, including Studio 88 and it was 40 basis points lower than a pre-acquisition level. So despite including Studio 88, which is at a lower operating margin than the group, we were still able to keep the operating margin -- operating overhead costs as a percentage of RSOI in line. From a balance sheet management perspective, we obviously pride ourselves on our balance sheet. We believe we've got a very strong balance sheet, and we will be pride ourselves on our working capital management. That was heavily impacted over the period and with inventory up excluding Studio 88, up 18.6%, including Studio 88 up 85.1%. And that's obviously quite obvious because you've got nothing in your base. But from an excluding Studio 88 inventory was being -- was mainly impacted by those loss trading hours that Mark spoke about. The higher input inflation, we experienced because of the exchange rate, I spoke about a little bit earlier, there was about 9% or 10% input price inflation, and we had weighted average space growth of 5.7%. So if you strip all of those, the weighted average space growth, the inputs inflation out of the 18.6%, you probably got unit growth of about 3% or 4%, which we feel despite when you think about the loss trading hours, it's a reasonable result. Stock freshness also for the core business is at 83.4%, which is 0 to 3 months. From a cash perspective, bearing in mind, we paid ZAR 3.6 billion in cash outflows for Studio 88 in the second half. Our cash balance was ZAR 1.4 billion, which just goes to show the cash generation of the business, which was at 82% -- our cash conversion ratio was 82% and despite some of the changes in working capital, which I'll take you through right now. And we've got -- and it's mainly because of our cash contribution which is at 87.3% of sales. You obviously see the balance sheet cosmetically has changed quite dramatically from March 2022, and that's due to the introduction of Studio 88. From a working capital perspective, again, across the industry, this has been a challenge for everyone. And it has absorbed capital. And so -- but again, I don't want to reemphasize the inventory point again, but we obviously experienced bloated inventory as a result of some of our own internal challenges and -- but just the general market overstocking. What's our action plan? We have -- we've appropriated some what we called back some of our sales calls. Miss the process of real strength is chasing what we call chasing, where we actually call the clearances a little bit stronger. And what we do is that because of our supply base, which is very used to our business rhythms that they're quite -- they're highly responsive to our needs. And if we do feel that the sales are there, we'd rather chase into those good products. So that's going to be a strategy that we're going to employ strongly into this new financial year. And we're hoping that with the stability of the ERP, we'll enhance our stock placement and productivity. Bearing in mind when you do -- like Mark said, when you do an ERP change of this nature, a lot of your planning activities are highly influenced, which, for us, being an in-season trade business, that definitely we're hoping that, that will be a strong bounce back for us. From a trade receivables perspective, I think like much of the market, the demand for new credit was definitely there with everyone experiencing very high appetite for applications for credit. We, in the first half, did take on some new credits for what we call less than 12 months on book. And that did -- when we started to see the climate change, we did tighten that scorecard into the second half, but we did experience bad debt, which, like I said a little bit earlier, that impact our overhead expenses in the second half, in particular. Just with the rising interest rates, we went up 350 basis points over the period, that's definitely started to impact upon our customers' ability to pay. And -- what is very important, and I think we alluded to it at COVID is that for our business, in particular, in our customer, our stores remain a primary collection point for trade receivables. So when you've got disruptive trade, and people not taking as many shopping trips, all of that impacts upon your ability to collect. And therefore, you do have a tendency in your book to roll between periods. We feel like with the -- from an action plan perspective, we're going to keep our scorecard quite tight over the next 12 months. We've explored with this appetite for credit. We're exploring heavily -- an extension into our labor and buy-now, pay-later, which is a slightly longer-term solution, but there's obviously to try and get back to those customers and still facilitating the sale that those customers want. We want to improve our contribution of our greater than 12 months on book, I'll speak to you a little bit about the health of that book. It's a lot better than our less than 12 months on book. And so over this next period, we I think in line with first round that came out yesterday, they really want all the sector definitely wants to concentrate on its core customers that have got a proven credit history record. And I think that will be an industry-wide strategy. And again, we're just going to focus more heavily on our stores collection as our backup power solutions start to roll out or have rolled out. Our supply chain finance program continues to be a really strong program for us. We've raised over ZAR 900 million in working capital over the last 18 months. And this year, we hope to raise another ZAR 500 million. From a CapEx allocation perspective, when you have these type of climates and there's a lot of concern about where the future is, you've really got to look at your business model and the fundamentals of who you are as a business and how much of it is transitory and how much of it is permanent. And I think we -- despite the loadshedding. We did pull back some stores. And we have pulled out some of our guidance with regard to the CapEx that we were going to spend, and we spent ZAR 945 million over the period. But what is important is that we find that all of this out of our cash reserves. And we are -- what I didn't allude to on our balance sheet is that we continue to remain debt-free from all forms of long-term funding debt, which does give us the stability that we do grow within ourselves. And because of our high cash generation, we are able to fund these -- fund these capital allocation initiatives. From a credit growth perspective, I don't want to spend too much time on it. It's an important part of our business, but not the major part of our business. It only contributes 12.7% to our sales, but the credits grew 8.3% over the period, which was stronger. This is only the core business. Studio 88 doesn't have credit, which is a possibility into the future. But it obviously grew faster than our cash sales, excluding Studio 88. So whilst it did incur a little bit more bad debt than we would have liked it, it was an important credit channel for a -- growth channel for sales for us. And growth was driven, like I said, by the existing base was up 9.9%, with new accounts decreasing 6.4%. We see how we had to pull that scorecard back in the first half and how that influenced our new account growth. So our account approvals were -- was at 33%, and we had -- we came all the way down to 23% to reduce the risks. And as I said, our interest and fees supported by the interest rate increases and the book performance. And our credit growth was up 24.2%. Trade receivables, just to go a little bit more detail because it is a big balance, and we normally give more detail on this, it was up 9.3% for March -- on March. Like I said, that the new account growth did cause a lot of extra bad debt that we had to incur, and that took the net bad debt-to-book ratio up to 8.4% from last year's 6%. Likewise, we then have to incur -- we've increased our provision to 10%, mainly to be prudent into this next cycle. We actually when you look at the model, some of the model actually looks at the economic factors and say they're improving. We just believe in this climate that to remain a delta between our net bad debt-to-book of 8.4% and 10% is the right approach. What we are pleased about is that our book is 75% or there and thereabouts is in the current status, which is industry-leading according to TransUnion reports. And so we're confident that the trade receivables that we do have are in a healthy place. What we've got on the far right-hand side, there's the Principa Face of credit reports, which is the most recent report and you'll see that for every 1 bad customer, we've got 8 and the industry -- the rest of the industry has got for every 1 bad customer, they've only got 4 good customers. So we're almost 100% better or more than 100% better than the industry. And the same flows down to cycle balance is greater than 4 months. Financial outlook. Much what Mark said, inflation remains sticky, and while it remains sticky, interest rates are going to remain elevated. So we believe that's going to be around and the economists believe it's going to start coming down in towards the latter half of this financial period. So we do believe that consumers are going to remain constrained over the next 12 months. And that will just squeeze non-discretionary items within their share of wallet. And it's also going to start to increase promotional activity for the foreseeable future. We do and there's been a lot of market commentary about what is the next 12 months or at least the next 6 months of a winter loadshedding. If that starts, we seem to be in an okay place at the moment, but if that starts to escalate, we do believe that could weigh heavily on just the business -- on business in general and consumer sentiment in general. And it does -- winter is quite a terminal season, not quite as very terminal season. So any disruption to that environment could precipitate more promotional activity. What does worry us the most and Mark alluded to at this is the inventory -- the very high inventory levels across the industry at the moment and that definitely will start to impact discounting and promotional. So how do we feel as Mr Price. Over the next 6 months, we believe that our GP margin will be under pressure. It's the exchange rate, you would have seen what's done to the exchange rate just over this half -- it's another 18% just over the last 6 months period-on-period. So I mean, that inflation is definitely going to weigh on Mr Price. We are well covered, but it's covered at rates that are high -- under the current spot, but definitely higher than last year which -- and then we're also concerned about the highly promotional winter product that is in the market at the moment. Studio 88 in the first half will not be as supportive as it was in the second half, and this is in line with the historical trend. What can we do? We've got a strong internal focus on the inventory management, like I spoke about. We definitely are starting to tighten our sales calls and also our clearances, our cash generations imperative over this period. And that's why we've had the focus over the next while just to build a bit more headroom on our balance sheet from cash reserves. And obviously, it's our nature and our DNA is expense control. So what are our targets? I think Mark is going to allude to our capital allocation a little bit later in his slides. But our new stores, we're going to put down 260 to 280 including Studio 88, excluding about 90 to 100. We'll have weighted average space growth of 15% to 17%, including Studio 88 and between 5% and 7%, excluding Studio 88 and like I alluded to, we believe input inflation as a result of mainly the exchange rate could be up to double digits for most of the period. Thanks. I'll hand it back to Mark.

Thanks, Mark. And just on that input inflation, obviously, exchange rate is one thing. But pleasingly, we're getting very good negotiations with suppliers, which will offset some of that currency impact. So that's some good news. But I think let's just -- we've been in a lot of detail in the last hour or so. And sorry, we are running a bit in partly because of that disruption. So let's spend the proportionate amount of time that we have to in the future. There are some really important slides that I want to land here. So I'll speed through some. You can read them at your on leisure, but we'll dive in terms of some of the other ones. The first thing is nothing is not changing in our strategy. It's as communicated to you. Yes, there is short-term noise, but we think the strategy is still a sound one and we're executing in line with that strategy. But the page that I'm really talking about, whilst we're not going to go and discuss each of these strategic pillars now. There's a lot of detail in our integrated report. I think when you just take a look at what's happened over the last 2 or 3 years, and the level of activity that has been going on in the business relative to all the factors that we've just explained I think it really talks to a team that's got energy and clarity in what they're doing. So we've listed perhaps some of the more key achievements. I think gives you a really strong sense that there is a lot of activity. And amongst that, there are some very serious external events that have happened COVID-19 lockdown, civil unrest last year, the flooding and now the intensified loadshedding in a poor consumer environment. But I think relative to that, some of these things we could foresee happening. What is happening in the marketplace to a certain extent and a lot of the activities or some of the activities that we've done over the last 2 years, mainly in the growth area was a direct result of us having a view of the future and what those forces would bring. So -- and the thing I want to land on this slide is, there's a lot going on, the difficult environment, but this hasn't caused distraction to the team. There's clear responsibility in place. We have good management teams in place and we're executing very well. So it's more about all the other stuff. So over the period and all this activity, we've grown revenue 43%. As Mark has just explained, profit trajectory is not quite the same, but when I think medium to longer term, I'm quite happy and confident that, that profit trajectory will catch up with what's happened at the top line. It will start closing at gap. So once again, committed to our long-term strategy and don't forget, we spoke some time ago and 2 of the things that we're really focused on is diversifying our customer and our segment exposure, previously we've described our investment matrix to you. I think it's very clear there. So we've really been executing in line with that. And also historically, Mr Price Apparel has been so material to the group's performance that I think we weren't quite happy with that. Of course, we want to grow Mr Price Apparel as much as we can, but we -- I think it's an appropriate balance is probably what we're happier with. So there you see a 56% was Mr Price Apparel's contribution in '21. It's down to 45% and we've got a really exciting opportunity to tell you about that division, in particular, which I'll get on to in a couple of minutes. And so as I said, doing justice to that brand, which is a very strong brand, growing it as much as we can, but then obviously, all the other things that we've and exploiting opportunities and departments in each of the trading divisions and also the newly acquired companies. And key to that was, don't forget, positioning in terms of the broad middle fashion value segment and this goes down to the next item there, where we see 9 trading divisions as opposed to 6 and the positioning of 3 divisions in terms of that investment matrix. Yuppiechef much higher income customer, higher price points, different -- a very different customer. And when I start talking about the home sector, in particular, you'll understand why we took that move ahead of that. And then the introduction of Yuppiechef and Studio 88, then introduce the more aspirational customers or customers after more aspirational product into our mix. So where do we as a group, I think really in terms of our cash sales contributions, we're comfortable where it is. No plan to accelerate our credit growth to 20% or anything like that, although there are opportunities in some of the divisions to grow credit. Yuppiechef would be an obvious example, the cash business now and this -- we'll think about a credit offer in due course there. And then in terms of private label product, although we've introduced brands and I'll talk about them in a minute, certainly in terms of our total offer, still very much a focused private label assortment with the balance of brands. Okay. I'll talk about market share. And I think for us, the getting reason market share is obviously becoming a little bit more cloudy with all the movement that's happened in the market. So let's just start off with Stats SA and this is Type D retailers. Our market share increased by 70 basis points and quite notably and why Stats SA is important is that it's a chain that actually -- it's the reference point that includes all our trading divisions. The RLC market share was down 110 basis points, mainly due to the Homeware's performance but just don't forget that RLC doesn't include all our divisions. It doesn't include Mr Price Sport or Studio 88 group because there's no RLC for that and competitors won't include their information either. Under market share, I think it's also quite important to point out that we are after sustainable, profitable market share. As I said before, we've got an EDLP model and it means everyday low prices with supported by promotions occasionally and in specific categories. And we're after profitable market share gains, not market share gains at all cost. Mark spoke about what's happening on the store front a little bit earlier and just really looking at what our goals and our targets are there. We've got the appetite for it. We say that we're going to plan to open about 130 stores per annum, excluding acquisitions and acquisitions are including all 3 of those. And you can see the approximate split. So whether you're talking about apparel or home chains and even if home is under a bit of pressure performance-wise, we're still investing in those chains because there's still definite a; we are getting the returns and b; there are more locations we can go to. Then very importantly and I does talk to one of the slides I'm going to come to next the revamp program that we had temporarily halted because of our power backup solutions rollout will get new life in the new year. And remember, I spoke to you about this before. And when we did have that revamp, there was a real nice kick in sales and performance of those locations, bearing in mind when they were last revamped. So let's just talk about the apparel segment in totality first. And don't forget this is the lion's share, let's just call it, 75% of our business. We believe that the market share performance in the absolute short term has been temporary. It's not structural. So we come under attack in some of our categories. We've got a clear plan how to address that and all the staying one step ahead is certainly part of our DNA. So plans are well a foot on that. Just point out again that Mr Price Apparel was more affected by the headwinds that we've spoken about. But really it's a strong brand and it's working. It's got the highest brand equity in the market and the largest customer base. If we're seeing dilution in that, we'd be worried, but we're not. So I think on the apparel side, I'm feeling very confident about our strategy, where we're going to grow things and where we're going to go. And as I said, a very exciting thing that we're going to tell you about just now. The Homeware segment is slightly different. It's about 20% of our business. And when you piece together what I'm saying a little bit earlier, I think part of that shift in the market has been structural. So whereas apparel, we don't think it was. There's no doubt that with the market entrants coming into the Homeware segment in particular and all the doors that have opened, I think it's going to be pretty hard for us to get back to the 40% or slightly more than 40% market share that we had pre-COVID. Still investing in stores. As I said, there's still growth that's going to come out of those divisions and certainly hoping to get back some of the market share we have lost, but we don't expect to get it all back. And then financial services, which is 6% and we are very happy with what we're doing there. As you know, it's financial services and cellular, which is in many of our stores, but the stand-alone concepts or trading exceptionally well. We're gaining market share very nicely there. And in fact, the returns that we're getting our business is some of the highest in the group. So we're really going to go for it on that front as well. Margins, Mark spoke a bit about margins. And I guess the million dollar question is how do we see margins playing out in the sort of more medium term? And if you remember, some time ago, I said that when looking at our core divisions and this is publicly available information. You just had to go to integrated report. We were aiming for a gross profit margin of around 42%. And pretty much most of the core divisions were around that mark. And acquisitions, we are targeting 38% to 40% sort of in that range. I'm here to tell you that those numbers are still on for us. There's nothing changing there. Even in terms of the acquisitions, Studio 88 and Yuppiechef are just really knocking on that range that I just described is very slightly under, but it's the market conditions that we described so confident that we'll get into a 38% to 40% GP margin. Power is operating a little bit below those numbers. But in terms of how power is performing right now, I'm very happy that it will achieve those and certainly has been a mountain of work done in that division by a very experienced team that's given me a lot of excitement going forward. I'll chatter a bit just now. So overall margin is very happy. I think that, as I just said, then to reiterate, with Homeware, I think it's going to be more challenging than the apparel side, but there's a plan to address and look at how we're going to offset the impact of that effect. Then new opportunities. And when I was just really talking to the slide a little bit earlier about all the activity in the last couple of years, and I said there's no distraction. Also just wanted to iterate that those are all the things that we've chosen to do. There's old shopping list of things that we've applied our minds to that we've chosen not to do at this point and those will remain further opportunities. However, what's on applied at the moment and the focus on comp sales is taking priority. So we're not going to action some of those, except the very significant opportunity that we got in front of us now. And I think when you look back at the new opportunities and definitely a skill set that we possess as a company is a proven ability to launch and scale new concepts over time. So if you look at the next page, I think that really explains what I'm talking about. And it goes back to the early days, although MILADYS was an acquisition, really gain a surprise to what it is today from the early days. Acquired Sheet Street and grew it, but then all those other red Mr Price Home, Sport, Money, Cellular, those are all organic concepts that we've grown into what they are today and with the potential that they've still got today. Very pleasingly, so this is the core Mr Price business. And although we've got some acquisitions on the right-hand side, those businesses too, because they've had entrepreneur roots, they've got a similar story that they've delivered over the years. So when you see, for example, Studio 88 don't think it's one division, one company. We've previously explained to you that there's many retail chains within that stable. I remember, last time we spoke to you about Mr Price Baby and that there was a test process underway. In fact, in late 2020, we said that and we're giving it some time to see where it would settle. Working on the product mix, profitability, analyzing that and certainly, it's showing some great potential for us as a group. The exciting opportunity that I just want to then share with you and exciting from the point of view because of the natural scale that it will bring, the real rand value of the opportunities there. And also it impacts one division, but different customers in that one division. So what we've identified is a completely new model. And it's going away from the Mr Price Baby concept, which I just explained to you into a more holistic kids offer, okay? So this will be a kids-focused store. It's going to deal with from really babies from a very young age from birth in fact, right up until pre-teens, so probably about 12 years old. At that point, kids start making their own fashion decisions. And the real opportunity in kids right now, it's about a ZAR 3 billion business to Mr. Price. We believe that we can comfortably double that in the next 5 years. And I say comfortably, it's -- I think the constraint there is not is the opportunity in the market there with the product and the differentiation that we've got. It's more about can we actually identify -- not identify -- can we secure the trading locations. So it really is up to us partnering with our landlords. And I think if you then just take the sheer scale of things and we now said it could double to more than ZAR 6 billion. We've actually done a homework and we've identified the first 300 stores that we could trade out of. When you look at the sort of the year ahead, I think -- and it really depends on how the engagement with the landlord now goes. We've provisionally forecast only 20 stores in this financial year, but certainly then the ramp-up would happen next year. But if the [indiscernible] are available, then we'll certainly take them. So really looking forward to a positive interaction with our property partners there. The ideal location is that because don't forget in the Mr Price Store, stores are offering trading within themselves for space. So for argument's sake, Mr Price get currently got a very small footprint, competitors might have a much larger footprint and they're fighting for window's space and marketing spend and now they won't have to. So our deal strategy for Mr Price Kids is actually in the sort of the largest centers is to be completely adjacent to the Mr Price Store separated, but with an area that you could navigate from one side to the other or just a stand-alone store in hopefully, very close proximity to the mothership as well. So a great opportunity in kids is dependent upon store locations, as I said, but the real and why I'm being so confident about this is there's no testing involved. We've got the test under our belt. We know Kids Stores that are currently stand-alone are performing exceptionally well. We've got a skill set and although when I was talking about a GP margin of 42%, a bit earlier on. Kids naturally operates at a slightly lower GP margin. So our forecast of our kids business is around 40% but because we've actually got existing skills, existing teams, existing processes, although there going into the lower GP margin, the net profit margin will actually be quite similar. So that's the one exciting growth opportunity that we've got. And certainly, all our studies are reflecting that there's no reason that we shouldn't achieve our ambitions there but it creates another opportunity in the Mr Price mothership. So what our research has showed over the last year or so is that our junior fashion customer, in particular, so that's the 16- to 24-year-old whilst obviously very engaged. I spoke about the shopping numbers a short while ago, they were feeling that we could be speaking to them directly a little bit more. So that's just saying about marketing spend about store windows, navigation in the store. But as we then pull Mr Price Kids out of the mothership, that allows us to do exactly that, to talk to those customers directly on all fronts. And once again, the test that we had not in place there with additional space to the adult wear business has proved successful. So one great opportunity that solves for 2 different things at the same time. And yes, we're certainly looking at growing our market share over the next 5 years by probably 50% or even slightly more. So great opportunity. I can feel my phone buzzing in my pocket right now must be the landlords finding space for us, and we'd like to certainly beat the 2020 target that we've got. Then looking -- and there's quite a few pages and acquisitions in the interest of time, I'm not going to go through them all. I guess when we announced these acquisitions, there's a bit of skepticism in the market, have we bought the right business, what did we pay for them? How do you know there's still growth in runway and I'm very happy with how they're performing and the potential that they've got in front of them. If you need to look for less things to worry about. I think don't worry about these. There are great opportunities the accretive, as we've just said that the operating profits are around double what the interest foregone is. They've got clear strategic plans and we really excited about the opportunities of these businesses. The biggest learning is that some of these things do take time. So like the first acquisition power fashion, there's some detail in the slides that follow. We changed a lot of that team. There is a very high-class team that's been hard at work in the last 12 months, taking us into a new place with power. And I'm really pleased to say that it's performing well. So that's the one. As you know, the seller exited the business. That was all is by design. The Yuppiechef is a lot smaller in terms of scale, made some changes to that team as well. But I think the real opportunity in that high income segment for us is large and we're working hard at that. What it does mean in the short term is that you put investments into it, investments can be in technology, it can be in people and even just simple things like travel to go forward to new relationships with key suppliers or local alternative products or going to different categories like we have in Yuppiechef. So really excited about that. The Studio 88 model is really working well for us. In the first 6 months, we've really given them the space that they need to carry on trading in a very difficult climate. But certainly, having those owners involved allows you to do that. And I must say a very high-performing team and when I look at all 3 businesses, I'm full of confidence that we're going to deliver in terms of our expectations for those businesses. It really that does allow us to revamp to scale up and ramp up those businesses and the profits, the profits will follow. So I'm going to skip these next couple of pages. I would just ask you to just go and read them because there are some quite important messages there and opportunities and where we've been focused. Power Fashion, as I said, double-digit operating growth for the year that's just gone. They've been introduced to some of our processes. So I'm really talking about merchandise planning and buying. We've introduced them to suppliers. So here's a really good integration happening there. We've been involved in supply chain improvements there. And in the short term, we've grown that business from 174 stores on acquisition to 262. And just to reiterate, we did see an acquisition that the goal here is well north of 500 and that's definitely slow view. Yuppiechef have spoken a bit about there. Really excited about the new customer, the new opportunities and the products and certainly, what we -- what our offer is in terms of our store rollouts as well. Looking ahead, opened 14 stores, you could probably bank on that for the next, say, 5 years or so, that kind of pace of rollout. but yes, it's -- I think the opportunities are really good there. Mark was talking about capital allocation. And I don't want to reiterate a whole sort of capital allocation process again. But I think we've known for a couple of things. The first thing is we're quite cautious. So we invest in something, we want to know that those returns are going to come and it's probably why I've been more confident in our acquisitions, for example, then perhaps the market would appreciate, it's because we deep thinkers and we run things through the moat before making decisions on things. But if we're taking a long-term view on South Africa and it sort of ties up to my comment that I was saying a little bit earlier, you're the confident or you're not. And it seems like a lot of the talk out there is that we've got long-term confidence in Stats SA ability to turn things around, well, and we're certainly in that camp, as I said. Well, in the short term, if you've got that confidence, why wouldn't we carry on investing. So the reason that we're carrying on investing as Mark said, our store returns are excellent. We're getting the required returns that we want our thresholds. But just to be a little bit more cautious in this market, we've actually increased our return on capital employed targets. It will just make sure that we don't run the risk of any stores come into our fold that are marginal. But I think what it talks to is that all our brands have got opportunity. We're investing in ourselves. So rather than a share buyback, we're investing in our own proven concepts. And I think that's key, that generates strong returns and lastly, I guess, because we can. We've got cash. We're highly cash generative and that's going to certainly support our growth. If you consider the concepts that we've spoken about, focus on comp sales and obviously, the store opening opportunities, I think that starts giving you a lot more confidence about the medium to longer term. Our payback periods in our stores are very good, as you can see. We don't plan on any more significant acquisitions in the short term. We still got to acquire the remainder of 30% of the Studio 88 group, which is over the next 3 years. Okay. So apologies again for that disruption. I was on the capital allocation slide and we were talking about, we're investing in the future because of the strength of our balance sheet and our cash flow. I also had mentioned earlier that we're choosing not to do certain things in F '24. They'll remain longer-term opportunities for us if we wish to proceed with them but very key for us is to avoid shareholder surprises. Our balance sheet maintains us holding our -- maintaining our dividend policy and when it comes to debt and servicing our opportunities with debt or cash strong cash generative. So we don't see ourselves incurring any significant debt. So looking at the prospects and it's just really building on what Mark said a bit earlier, H1 is still going to be very challenging. Sectoral inventory carry, markdown and promotional environment, loadshedding is not in the base, although we've got a solution, but there's still very little in the base. We'll have to see how we go through winter trade and cost of living pressures are still real. We're expecting a better H2. A lot of those things will be in the base, people are trying -- competitors as well as the sales are trying to actively manage the inventory carries and things should start settling down unless there's no other substantial macro event that comes and takes us place. Our EDLP model that I'm referring to and I've referred to it a couple of times this morning. Our goal is to sell more full-priced differentiated fashion value merchandise. I think that fashion value is we've got real skills there. Others can come and compete on price more, but the fashion side of things is a real competitive advantage, but you just have to have the environment where it stands out and displays itself the way that we're expecting and that strategy move that we said in between kids and apparel is definitely one of those things that's going to aid in that. We're obviously playing our part in being involved in any local or central government interfacing initiatives in the long-term future of the country and are hopeful that anything that comes out of these forums is actioned. And a little bit about what I said about earlier. It's a very messy cycle we're going through now is either stand you're confident about our businesses and the prospects or not. And personally, I wouldn't be taking the risk that I'm taking about investing the way we're investing capital expenditure of over ZAR 1 billion in South Africa next year, [indiscernible] stores because the stores are performing, if I wasn't confident. I think it would have been reckless at me and a lot of the activities, whether it's the new concept or stores is based off the track record of how we've been performing up until even current times. If you in untoward then happens thereafter, we will obviously react very swiftly and curtail things. But as it stands now, the plans are on. I think we've got a resilient business model. It doesn't obviously reveal itself in a climate like this as chaotic as it is. We've got a very strong balance sheet. And certainly, our team, culture and the skills that we've got internally are definitely the team that's going to take us forward. That's it for me, and thanks for joining. I'll now hand over to Matt, who will now read some questions.

Great. Good morning, everybody, and thank you for joining, and thank you very much for all the questions. And apologies again, just for the technical challenges. [Operator Instructions] And I just wanted to start just with a number of questions around current trade and trade post period. We do have a trading update on Friday, the 21st of July. So it's just over 3 weeks from now. So we'll be doing a full -- the first 13 weeks of FY '24 trading statement, sales, trading statements on the 21st of July. So we'll talk the 13 weeks then. So just a question to start with regards to store growth. Is this brand-new store growth because existing stores are over trading? Or is it better use of space? Why add so much space in this tough environment? A similar question around lower GDP growth in the economy, but still expanding on space. And just linked to that, what supports the above WACC returns with regards to new space growth. So Mark maybe start with that and Mark Stirton can jump in if there's anything else.

I'll let Mark talk about the WACC, but I think I maybe covered the point in the presentation. First of all, the store growth that we're anticipating is I guess in the environment, you could take a view that it's risky. The GDP growth is low, but it is based on historical performance. So when we said we also tailored some of the shape of those stores into which divisions are performing better. We've actually reduced the areas that we're not as comfortable as the others. So we've taken that proactive step but it really is based on a track record of how we have performed. And quite key, I said how we've performed up to date. It's not historical 2- or 3-year averages and certainly the last financial year. So if the returns are there, and we've got a positioning and our brands are loved in the market. I mean, if you take the just take our biggest division, whilst we were talking about the impact that, that division has got on the group, in that division alone, we've identified and we've got just over 550 stores there. We've identified 400 locations in South Africa where we don't trade, but at least 2 of our competitors do. I'm not saying that they are going to be locations suitable for us. But I think the -- certainly take the growth over the years and the performance that we've delivered and the process to identify new sites and then to critically evaluate performance is something that we're very comfortable with.

Yes. Maybe just to add to that, why we're confident as we've remembered branch contribution over your capital employed, which is where you get your returns from and we historically have and even in this tougher climate in our core businesses, those new stores are still giving very, very strong operating margins. So while you still got strong operating margins within the climate where is constrained with all the factors we've spoken about and it's giving you returns of ROIC versus WACC of multiples and multiples of it, you realize it gives you a level of confidence that this is and you look at our historic, which Mark said, our historic track record, knowing some of their own self-help elements we've got in our own business. We believe it's the best allocation of capital for shareholders at this time, and we're confident in our brand. A lot of you guys have spoken to us around and why aren't you investing more in yourself. I think this is a great vote of confidence that we do believe in ourselves. Obviously, when you are adding new stores, you've got a fixed cost base that's also growing. And while you think we've got still great operating margins out of your store base, you've got to contribute to fixed costs and that's a very important part of us -- remember that a lot of these stores don't come with additional fixed costs. So that's also another strategy on how we're going to grow group operating margin.

Great. There have been a number of questions just around the home segment. How should we think about the Home segment margins relative to the historical margins and to discuss the competitive dynamics and what you mean by a defensive strategy.

The defensive strategy was really around Sheet Street. So historically, there's been, I guess, some degree of overlap between Sheet Street and Mr Price Home. Mr Price Home is a bit like apparel in the apparel sector, it's a fashion value. So in this sense of the word, home means contemporary taste. It doesn't mean high fashion. But that's clear differentiation and Sheet Street, we wanted to take a more defensive position on that. Bearing in mind, it's product categories that it's got and be more price player in terms of competing with its own set of customers. So then to talk about the margin opportunity. I think we're talking about operating margin here. Gross margins, I'm still comfortable with the goals that we've set ourselves, as I said a little bit earlier. And I guess, what happens then is depending on top line, if you're maintaining your GP, which I'm comfortable with at this point, it depends on what happens to the line underneath that. What we've done for the first time as well with the appointments that we've made in terms of the org structure. We've got 2 people or in fact, 3 heads, Apparel head, Homeware head and a Cellular and Financial services head and for the first time that I can remember, and I've been here 18 years, we've now got projects running across all those lanes to look for efficiencies in the way that we do things and I think even in the Homeware segment, that's one lever that you can pull that you can share resources, share structures, et cetera, that even if you're under pressure because we did say Homeware is probably structural. There are some structural levers that you can pull at the same time.

There has been a number of questions regarding inventory. So I'll just read one in particular that covers a number of the different components. Inventory provisions have been raised over the period, which weighed on GP margins, should we expect provisions to remain at these levels or drop as inventory has cleared into the first half? How should we think about GP margins into the full FY '24 and therefore, into the medium-term bearing in mind the competitive nature of the value segments.

Yes. Look, I think the quantum of an inventory provision is one thing. That's relative to the absolute stock carry that you've got. So if you then managing stock better. So for example, the 18% that we're talking about, we're targeting reductions or minuses at the half year and year-end. As you pull down the pure quantum of the rands of stock. And let's just say everything else being equal with the shape of the stock, the quality of the stock and some of that release will come through. But honestly, the inventory provision is at a point in time at 2 reporting dates, and it depends on everything that I've just said; stock carry, how old the stock is or how fresh, what's the performance been and therefore, has it been activity of identification of a markdown event and how we're feeling about the next 6 months. So it's depending on all those things. The second part of the question was more around the margin management. I think I've answered that question already.

Just a question for Mark Stirton, can you elaborate on the supply chain finance program where you've unlocked the ZAR 900 million and give some more detail around how the program works.

Yes. It's effectively, it's a program where we've extended our payment terms with our suppliers. And what we do is we have a back agreement through using our banks where they get to leverage our balance sheets and obviously being an ungeared balance sheet, they get superior borrowing credibility through that mechanism and that unlocks the delta between our borrowing rate and our supply chain borrowing rate, and that effectively pays for the additional terms. So most -- for the most part, most of our suppliers are no worse of position. They get to discount their invoices on day 1, which means that even the payment terms that they were getting with us, they're now getting their cash on day 1, which also strengthens their balance sheet, which we were always opaque around our own supply chains balance sheets. And I think we now, we've injected capital into their balance sheets a lot earlier than what they had in the past. And it also serves us because now we've got an additional payment terms through them.

A question with regards to Studio 88. Has Studio 88 been affected by large brands going direct-to-consumer in this period? Are you still seeing a preferred part? Are you still seen as a preferred partner to these brands? And what is your outlook regarding this?

Yes. I think the thing to point out that Studio 88 groups, that's all the brands are #1 in terms of quantities across all the major sporting brands that supply them with the exception of Nike, where they play second. So the track record, the relationships, this is really a place where Studio 88 does excel. There has been some speculation over the last couple of years and even in the press quite recently as to brands are making this move direct-to-consumer -- they're going to start bumping out partners. And I think, certainly, that's not our understanding at all. I think there's been some consolidation over the last couple of years. I think the brands have chosen their partners. And if you go back to Nike and Adidas most recent results presentations and knowing who's heading those businesses up, I think there's a move back to more the wholesale model. So in other words, all the reasons they're giving for their own underperformance was the D2C approach that had been taken. So our relationships are extremely strong. It's something that's one of the most important things that's on the slide that we were going to talk to a little bit earlier. So I don't see that happening at all.

A question to Mark Stirton, in the prior year results, it was said that the business interruption insurance claim was outstanding. Was it received during the current year? And if not, do you still expect to receive this claim?

Yes. So we -- it was ZAR 80 million on the balance sheet that we carried into this financial period and we released it into this financial period.

Okay. And then just in terms of keeping a number of different questions and so 1 team. Please can just share strategy with regard to share buybacks, either from this current period or your view on it from a capital allocation perspective moving forward?

I did speak to the capital allocation page. And I think with the environment as it is despite our confidence in our store performances that we've spoken about at length, we also can't rule out other disruptive events. So got ZAR 1.4 billion on our balance sheet shortly thereafter, well coming up in the next couple of weeks. Dividend payment will flow out. So we certainly do want to get back into a bit of a buffer zone and as I said a little bit earlier, by investing like well over ZAR 1 billion in capital expenditure that is investing in ourselves. And I also said that I can't share some of the other growth things that we're talking about. We've got to strike a balance between funding all that, maintaining a really strong balance sheet. And I guess, share buyback is always something that we factor into that equation. So they're never off a card. They're always discussed but it's always relative to other capital allocation opportunities.

Okay. And then I think just to end with this last question, talking to the kids opportunity, it seems significant. Does this give you more opportunity with regards to space as a group as you have another format in your portfolio?

Absolutely. In those sort of store targets that we were giving that's with, I guess, a forecast low expectation of kids space included and that just to be conservative, but it really does then come back to the opportunity to work with our landlord partners and really create an engineer that space. If we can, that's going to be -- it's going to be a significant chain all on its own. And as you do that, you also then have got the opportunity for giving our junior customers a much more -- more of a special process in the owned store. So as I said, it's a dual thing but with baby -- with kids, and if we get to ZAR 6 billion plus, that's going to be a very significant change in our division and in our group.

Great. So thank you, everybody, for joining, and thank you for all the questions. We've tried to get through as many as we can in the minutes that we've had remaining. And there have been a lot of questions and my aim is to make sure that all of those are answered for you in the coming days. So please do e-mail me directly or you can set up a call with me, which I'll field over the next couple of weeks. And just make sure that all your questions are answered. A number of the questions, I think, have been answered through the slides, just looking through what's come in. And so we do hope that we've done a job of doing that in the presentation itself but we'll certainly make sure that the time has given to you to answer questions in the coming days and weeks. Thanks very much for joining today.

Thanks, everybody.