Pepkor Holdings Limited (PPH) Earnings Call Transcript & Summary

Well, good morning, everyone. Really it's quite a happy occasion for me to see some real people at this presentation. In -- for the past 2 years, as you know, we've done it virtually so you've only got a couple of screens and then 1 or 2 people running around trying to fix the screens and get them to work. But seeing people face-to-face is really -- shows the progress that's been made. And hopefully, that's good signs, not only for the business but also for the country going forward. The format that we'll use today is very similar to the one that we've used in the past. So we'll look at the 6 months in review. Riaan will talk about the financial performance of the business. I'll do a segmental performance discussion on each one of the businesses. And then just a very short outlook on what we expect in the next 6 months to a year. Just 2 things that I would like to point out before we start. There are 2 terms that you're going to see or hear about quite a few times, and I thought maybe just before we start, then I'll clear that up. And I don't -- we don't have to do it every time that it's on the screen. The first is that we talk about normalized numbers. Many of you will remember that in 2018, we provided for a guarantee for BVI loans. Fortunately, through the Steinhoff global settlement, those -- that amount has been recovered, the net amount, ZAR 429 million. And what we did to normalize numbers is to take that out in certain instances so that you can see the normalized number and use that as comparable numbers in your calculations and models. The second thing is there's quite a few occasions when we talk about 2-year growth figures. And the reason we use that is because of COVID, as you all know, COVID had quite an effect or volatile effect on numbers. Initially after the COVID initial lockdown, our business did exceptionally well. Obviously, then the next year, you have to work against that base. So the 2-year number is just normalized numbers, so you can get a good reflection of what the performance was like over the 2-year period. Other businesses added the other way around. They battled initially, then did better. But I mean, whichever way you look about it, we've now got the 2-year annualized period over, and that's why we use that number to give you a good indication of the performance over that period. Just the highlights, and many of you would have seen that on the SENS this morning. So there you can see a 3.3% increase in revenue to ZAR 42 billion over a 2-year period, 12.7%. So obviously, last year was a much better period, but that created a relatively high base. If you look at growth in operating profit, there you can see the number, 19.1%. And then the normalized number, if you take the BVI number out or the global settlement number out, then you can see that normalizes at 10.1%. Over a 2-year period, the growth in operating profit, 31.2%. The HEPS number, 28.3%. If you normalize it, 12.1% and over a 2-year period, 80.5%. But then 3 years ago was quite badly affected by cover, so that number obviously a bit inflated there. Cash generation still very good, 93% of our sales is on cash. We opened 144 new stores. And if you read the newspapers or the media, you'll -- it sounds like doom and gloom, but we still have the ability to grow and grow profitably. And we'll talk a little bit more to that a little bit later on. Market share gains, which are very important. If you look at all the categories that we operate in and you get an average market share gain, that's now RLC, which is the Retail Liaison Committee, and GFK, then 189 basis points increase in market share. And then also in the 6 months, a milestone for us. We acquired the Avenida Group in Brazil. I've spoken to most investors about it, and the rationale behind it, but I'll refer to it a little bit later in the presentation again. So that's just a highlight for the 6 months results. The graph on the left-hand side there, just to explain that. After the first quarter, our sales growth was 1.3%. If you exclude John Craig, 1.8%. The second quarter growth was 5.8% or 6.1%, if you exclude. So the second quarter, much, much better than the first quarter, which we predicted at the time. And then if you look at the full year results, you can see there 3.3%. The one on the right-hand side is the total sales growth, again, it's over 2 years, quite happy with the performance in all the main divisions of the business. You will see there, 12.5% for PEP and Ackermans. Speciality, 25.3%. JD group, 25.8%. And the Building Company, 13.1%. The Building Company number is after stripping out 2 businesses that they sold, which is Link and B4 business for Africa. But I think very happy with the overall performance across all the categories in the group. From a market share perspective, the graph at the top there, if you look at the shaded part of the graph, that will give you an indication from -- of the market share growth since COVID started. You'll see there, March '20 was when COVID started and now exactly 2 years later. So 130 basis points. This is the gain only on CFH over the 2 years, something that we're quite happy with. So initially, as I would have pointed out at the previous results presentation, initially huge gains and then normalizing a bit in the second year as you work against that high base again. If you look at other numbers and some of those numbers are highlighted below there. The total market, that's the number I referred to a little bit earlier, 189 basis points. That's for all the categories, not only RLC or not only CFH. Schoolwear as an example, still growing despite a lot of market activity, still a gain of 274 basis points. Home, you can see, is big branded footwear, also very, very good, cellular. And then very importantly or not importantly, but very impressively, consumer electronics gaining 562 basis points. That's Incredible Connection, Hi-Fi Corporation, et cetera. If you take the CFH number, just for interest sake, and if we had not gained the 130 basis points, that would have meant sales of almost ZAR 5 billion less than we made. So it just shows you the growth that we had able to achieve and how it contributed to those numbers. And then it's become customary at Pepkor that there's always something that influences us or some sort of a crisis every year. And you can go 4 years back on that pattern. And every year, there's been something different. Quite recently, we had the floods in Durban or in KZN, and our DC, as we reported on a couple of occasions, our DC was affected. I'll show you a few pictures of the impact there, but also then the recovery. So that's the DC the day after the floods. You can see in the foreground there is the SAPREF, which is a oil surplus storage facility and ourselves, the DC there in the background. This is during the flood -- the evening of the floods, you can see that the water was about 2 meters high, and at that level, went through the DC. This is what it looked like, and this is not an indication of how we manage the DC, but this is after the water went through and you can see there's a relative chaos in terms of the cartons that were ready to be sent out. Mud went through the DC in most levels, up to 1 meter high in big parts of the DC, so that obviously caused a lot of damage to the equipment, et cetera. Once again, here you can see the chaos of the merchandise, it was at ground level. This is when they started to get the damaged stock out of the DC, using that type of equipment. But then this is how we've recovered, and that was the first indications after about a month, and that's the DC now. So the good news is that we've recovered. The DC has started operating again, although at a limited level, we're hoping that by the end of June, we'll be operating at above 50% of the normal levels and even higher. So very impressive how the teams have worked to solve the issue here. Obviously, there would be effects of this in the stores in PEP only. Remember this only is a PEP DC. It's 1 of 3 DCs in PEP. There's one in Johannesburg and one in Cape Town as well. So obviously, the throughput through this DC was influenced. We had to relay all the inflowing stock through to the other 2 DCs, but there was an impact on service levels. Our service levels went down from about 85%, down to -- at one stage, about 65%. It's now recovered back to over 70%. And hopefully, we'll get it back to 80% or so percent very soon. When you see something like this, obviously, one almost cringes because of the damage that was caused. But I can tell you, yes, that is how we felt. But I can tell you when you see the positivity of the people that were involved in fixing it and the team that were involved in running the project to get the DC cleared up and up and running again, then one gets a lot of encouragement and faith in the future because the contribution of the people is just enormous. So yes, you're going to get these crises from time to time, but then you must just fix it and go on. And I think we actually limited the damage on the overall number. Fortunately, we are insured for it. We insured for the stock that we've lost, but we also insured for the business interruption. So that helps a lot. But yes, congratulations and thank you to the team for what they've achieved there in a relatively short space of time. So that's just a very short overview of the first 6 months. Riaan will now deal with the financial numbers, and then I'll return for the rest.

Thanks, Leon, morning, again, to everybody. As Leon said it's very good again for a change to see at least some faces in front of me when I talk, and not just stare at a blank screen. So just very quickly, and leon already touched on some of this, but just to confirm some of the key KPIs or highlights for the 6 months under review. Revenue, as we said, up 3.3%. We've definitely seen an improvement in the second quarter of the 6 months and the current range that will hopefully continue. Also that 3.3%, as Leon mentioned, very much impacted by a very high base in the previous comparable period. So the 3.3% takes us up to a ZAR 42 billion revenue for the period. Fortunate thing is we have seen an improvement in the GP for this period. That's mostly influenced by an improvement in the financial services, GP or specifically the books GP, and I'll unpack that a little bit more in detail later on. The guys really went, did a very good job for the 6-months period to really control expenses, keep the cost down on a very difficult circumstances, specifically around our salary costs and our rental costs was very well controlled, meaning that excluding debtors' costs and excluding depreciation, our costs only increased by 5%, and that includes 144 new stores. So if we look, that then translates because of the higher GP in a very favorable operating profit growth, overall, 19.1%. But as Leon mentioned, if you exclude the impact of the Steinhoff settlement, that number then drops to a 10.1% normalized growth. overall, operating profit up to ZAR 5.7 billion. If we then look at the HEPS, that's up further by 28.3%. Again, if you exclude Steinhoff impact, that's 12.1%. The HEPS very much influenced by the fact that our finance cost was consistent during the period, very much in line with last year with no growth. But also, we've seen an improvement in our effective tax rate, and that's the reason why our HEPS growth was 28.3% versus the 19.1%. Overall HEPS up to 19.5 ((sic)) [ ZAR 0.915 ]. If you exclude the one-off impact of Steinhoff, that number comes down to ZAR 0.80, which will also unpack a little bit more detail later on. Cash generated, as Leon said, slightly below our expectations that we normally have, but still very good cash generation during the 6 months. And still, the majority of the sales happening via cash, the growth in the books and the impact of that very much in line with last year. And then also, as I reported last year, we went through a process of refinancing ZAR 5 billion of our debt. Very happy to report that was concluded in March, and we've seen a 70 basis points improvement in cost on that ZAR 5 billion that was refinanced. And we've also spread it much evenly over the next 3 to 5 years, and I'll show that as well to you later on. So if you first start again where we are in the process of the insurance claims on the civil unrest that happened in July, August, last year. So maybe just an update. Last year, I reported the total SASRIA claim would be ZAR 1.2 billion for the group. Our final number that we've only recently, after quite a lengthy process, signed off of the loss adjusted will now be just over ZAR 1.03 billion. The business interruption claim where we initially reported will be just over ZAR 700 million. Our latest estimate is that it will be a minimum of ZAR 440 million. There's still some discussions of some of those items, it will probably end up slightly higher. But we do anticipate it won't be lower than ZAR 440 million. So just to confirm what have we physically received from the insurance company. We have received an interim payment of ZAR 500 million. That was already accounted for in the previous financial period. As I said earlier, we do anticipate to receive a further ZAR 530 million in next 2 weeks or so from SASRIA. That will then conclude the final amount on SASRIA and then that will be out of the way. On the business interruption side, if you remember correctly, we received ZAR 171 million already as an interim payment in the previous financial year. We did reserve -- receive a further ZAR 132 million in this year. However, it is important to note that ZAR 132 million only relates to the quarter from October to December during this financial period. So there's still a portion of about ZAR 60 million that we still will receive as a further interim payment in June that relates to the period January to March in this financial year. So our profits are actually understated still by that ZAR 60 million that we have not received for the 6 months period. Again, to recap, 479 of the 550 stores have has already been opened. And we do anticipate that eventually, there will be about 30, 40 stores that we won't open and it will be closed for the next couple of months. As we said, early insurance cover reinstatement, Leon already referred to the flooding that happened in KZN. So we're very comfortable that the flooding that happened in KZN, we've got more than adequate coverage -- insurance cover to all of that. We're still trying to finalize that amount and it changes on a daily basis. The only indication I can give at this stage, the total insurance claim will be above ZAR 1 billion, is our current estimate for the KZN flooding. On the Steinhoff global settlement, as Leon mentioned, obviously, the net impact of that was ZAR 429 million. There's 3 different components to it. The first one is we raised the provision in 2018 already for the guarantee of ZAR 440 million. That guarantee was then converted to a loan in June 2020. At that stage, the value was ZAR 529 million. We've now received that full ZAR 529 million plus interest from BVI as part of the settlement, so that full amount has now been reversed by ZAR 529 million. You could also remember in 2018, we raised the provision of ZAR 60 million against Pepkor fund loans that was granted to individuals to invest in BVI, that was later increased by another ZAR 40 million in 2019. So the total provision that we carried was ZAR 100 million. With the settlement, half of those shares that was transferred to BVI was able to be sold. So the final [indiscernible] in a lockup. So the majority of those individuals now received a distribution of cash or shares from BVI, and the majority of them was -- all of them received, but the majority of them was able to now settle their Pepkor fund loan. So that's why we reversed ZAR 80 million of the ZAR 100 million. The rest we should receive in 3 years' time when the final settlement is -- or the final sale of the shares that's currently in lockup in BVI will be able to solve. Then we also decided during this period that part of this process, we really wanted to settle all litigation and costs relating to the 2018 events that happened post the settlement, with quite a few litigations integrated against us predominantly by the ex Tekkie Town owners. So we decided we rather want to use this opportunity to settle all of that, move on, and the net cost impact of that was ZAR 180 million that we had to pay to settle that. So the net impact of all 3 of those amounts is the ZAR 429 million, that you'll see as a one-off item, or a ZAR 0.12 HEPS impact on the overall result. We then move on to revenue growth. I already commented on the 3.3%. Leon also mentioned in that number 3.3% last year, we had the John Craig still in. So if you take the John Craig impact out, that increases to 3.7%. And then you also see on the FinTech side, like we reported in the first quarter, FLASH still grew negative for this period, and that's because of a change in product mix in the FLASH environment. We previously -- they used to sell airtime vouchers to the customers. We used to account for the full amount. Now they sell easy airtime, we only account for the commission on the sale of that product. So that does mean there's a negative growth of 10% in FLASH. If you normalize that, the overall growth for the impact on the group would take it up to about 4.5%, which is more in line with expectations. If we look at the different segments within the group, the Clothing and General Merchandise, up 4.9% million. As we mentioned earlier, that was still impacted by the flooding and the looting, where not all the stores was opened for the full period under review, specifically more impact in the first quarter. And then as we already mentioned, obviously, the very high base that we had up against last year. But specifically under that, the good news is in the Speciality division, and also Africa really performed very well under the 6 months over under review. On the Furniture segment, very happy to say we've seen the continuous trend of Tech division still doing very well there. And also further assisted by good growth we've seen in the insurance business that we've got in the Furniture segment. The Building Materials segment, as Leon mentioned, we closed 2 of the smaller businesses in that specific segment, meaning the main reason why we saw a negative growth. But it has helped -- and I'll show it to you later, has helped to improve the overall profitability of this segment. The FinTech segment, as I said, mostly impacted by the minus 10% growth on FLASH. We did still see positive growth from Capfin, but the net impact that you saw a negative of 8.7%, giving you the 3.3%. Again, as I mentioned earlier, very important to note, the majority of our sales is still in cash, 93%. We have seen a bit more of a higher growth in credit sales, now that we're slowly but surely starting to see growth in the Connect book, and to a lesser extent, on the Tenacity book, means that we have seen a higher growth. However, what is important for us is really that over a 5-year period, we've got a compounded growth rate of 8.4%. If we just look at different years. This is really what Pepkor really stands for. We believe that we always give consistent growth rates over a number of years since listing. And that's why, again, it reemphasizes the defensive position that we have in the market. We will probably never be the highest growth, but we'll definitely not be the lowest growth. We will be year in and year out give you a consistent growth rate in a high single digit number. So as I mentioned, on the gross profit margin, fortunate to see an improvement overall of 100 basis points. Most of it came from the financial levels of the books. The fact that last year, we really cut back on credit granting. We've now started to slowly but surely open that up again. So we're granting more loans. We've also seen an increase in the interest rates, which also assisted this business further or businesses further, meaning a 90 basis points improvement. On the merchandise side, very much consistent. We have seen a small improvement where the GP in some of our smaller businesses, Speciality Africa and the Building Company, have improved compared to the previous period. So the overall increase of 10 basis points, taking us up from the 34.3% last year to 35.3%. Our long-term average is still around the 34.5%, 34.6%. So this is sort of an impact for the specific period because of the financial services improvement. Other income, as I mentioned earlier, this was very much impacted by the insurance claim, the BI claim, of ZAR 132 million that we received during this period, taking the overall increase up by 47.7%. If you strip out the ZAR 132 million, the growth was 12.3%, up to ZAR 419 million. And the majority of that, you'll still see comes from bill payments, where we have started to see an improvement in bill payments, where post-COVID we saw a drop there, but now we're back to more normalized numbers on the bill payments that we do in stores. Cost of doing business, as I mentioned, still very well controlled. The fact that our salary increase was only 4.5%. That takes into account that our overage salary increase between 5% and 6%, and we opened 144 stores, as I mentioned. So we were able to keep that down to 4.5% is really because of productivity and efficiency gains. Property costs, still well controlled, grew by 3.1%. So there is a slowdown in the negative rental renewals, but we're still seeing the trend we've seen previously where we're fortunate to get good rental negotiations with the majority of the landlords. However, overall cost of doing business, you would have seen because of our expenses growing faster than our top line, it's now up to 25% compared to the 24.2%. But we're still very comfortable that compared to our peers, especially on the clothing and general merchandise, we're still best in class compared to the majority of them. Operating profit, how did it play out. As I said, normalized base is 10.1%. Clothing and General Merchandise, up by the 6.1%. But as I mentioned earlier, that's mostly influenced again by the insurance claim. Although the divisions that did do well, as I mentioned, it is really Speciality in Africa showing a nice profit improvement compared to the previous year. FinTech, as I mentioned, doing very well. Overall, up by 60 -- or sorry, the building -- the Furniture segment, up by 64%, mostly driven, as I mentioned, by the insurance business and the improvement in the profitability of JD overall. The Building Materials up by 26%. As I mentioned, although the top line was not good. The fact that we closed some of those unprofitable segments mean that they saw a significant improvement in profitability. And then FinTech, and this is where the new product mix that I mentioned earlier on the flash side is actually more profitable than the old product. So the fact that our top line is not growing at the rate we anticipated. It has translated in a much better profitability. But FLASH on its own, the profit grew by above 20% and Capfin also contributed to positive growth in profit for the period. So overall, giving you the 10.1% is important to note is we've always got an internal target of getting operating profit to above 12%. So you'll see it is now at 12.5%, up from 11.7%. Also important to note is that the contribution from the Clothing and General Merchandise segment is now 82%. It used to be 85%. So slowly, but surely, the other segments are contributing more to the overall profitability of the group, which is obviously something we would like to see. Net finance costs, I said, very much in line exactly the same numbers last year. If you look at overall. If we take out the finance costs relating to IFRS 16, there is a 13.5% growth and that's mainly due to the higher level of debt that we had at the end of the period compared to last year. But also then the overall increase in interest rates that was announced over this period by the Reserve Bank has resulted in that 13.5%. Effective tax rate, as I mentioned, very happy to report, ended up just below the 27%. Normally we would operate above the 30%, closer to 31%. The main reason is really relating to that one-off impact of the Steinhoff settlement, which is not a taxable amount. So that's 200 basis points. If you add that back into 29%. But we've also seen improvement in a lot of the other structures in the group assisting us to get our overall effective tax rate down. So one of the key items that you will notice this period on the balance sheet is our inventory went up. We always communicated in the past that at the end of last year, our inventory levels were still below the level we anticipated and we should get back to pre-COVID levels. So part of it is getting into a more optimized level. But what we have also seen in this period, because of the uncertainty in the international supply chain, the impact on China, a conscious decision was taken during February and March and moved some of the -- pulled some of the orders forward that we normally receive in April to make sure that we've got sufficient stock in the system to be able to deliver on our sales. And that has worked to our advantage during the April period. And then, of course, also with the acquisition of Avenida in February, there's a further ZAR 290 million impact on inventory levels. If we look at the health of the different credit books. Again, as I said last time, very happy to report, we're still very conservative around our credit granting. We have started to do a bit more on the Capfin side and Connect side specifically. You see the Connect book went up to ZAR 1.6 billion from ZAR 1.5 billion last year growth. And the Capfin book went up from ZAR 1.9 billion to ZAR 2.1 billion. So we are slowly but surely granting more credit specifically in those 2 areas, with limited increase in Tenacity. But as you'll see, they're still very comfortable with the level of provisioning and the level of nonperforming loans still coming down, even with the growth in the book on the Connect side and the Capfin side. So that resulted, we could release some of the provisions specifically on the Connect book. And then also as a first indication on the size of the Avenida book, this is the active book ZAR 700 million, 43% of the sales in Avenida is done via their book. And you'll see the credit in the provisioning level very much in line with Tenacity similar type of product around the 20%, which we're also very comfortable with. So how does that play out in the income statement? It means that our overall debtors' cost increased by 15.9%. Physical write-off of bad debts, as you would see because of the good collections, the nonperforming loans going down has decreased by 30%. But we've got last year, we had a much larger release of provisions post-COVID. We were comfortable with level this year, our provision release is only ZAR 95 million resulted in an increase of 15.9% compared to last year. Cash generation, as I said, still good cash generation of ZAR 4.1 billion. It is below our normal expectation from a cash conversion. Our normal target is 80%. So for the 6-month period under review was 53%. But if you calculated on a 12-month rolling basis, it's still close to our normalized level of 80%, ending up on 71%. As I mentioned earlier, the main impacts by the increase of the inventory levels playing out in the net working capital, ZAR 2 billion of that is because of the increase of -- in the inventory levels, as I mentioned earlier. Net debt levels said it did go up from the ZAR 6.1 billion last year to ZAR 8.9 billion. Mainly driven, as I said, by that increase in inventory levels, but also because of the acquisition of Avenida. Total investment in Avenida is ZAR 2.8 billion, giving us the 87% share in Avenida, taking us up to ZAR 8.9 billion. However, we are still within the targeted levels as I communicated in the past. We really want to operate at a level between 0.5 to 1x net debt to EBITDA. So we ended up for this period at 0.94, so in line with that target that we've set for ourselves. Also seen on the right-hand side, because of the refinancing that happened on the ZAR 5 billion. You'll see we've got a much more evenly spread repayment profile over the next couple of years. We -- previously we had a significant amount that we had to repay in 2023, it have now been spread over the next couple of years at, as I mentioned earlier, at a much more competitive rate. Capital investment, we're getting back to more pre-COVID levels. Obviously, post COVID, we cut back significantly on CapEx spend to protect our cash flow and balance sheet, also cut back on a number of stores we wanted to open. Now we're back to more -- the 2.1% of revenue. It's more in line with what we used to do in the past. We're still investing in the building of the PEP Hammarsdale DC, ZAR 201 million. That will mostly be completed in the next 6 to 8 months, the completion of that DC. So there still be further spend in the next 6 months on the DC. But you'll see the stores still takes up 55% of our CapEx spend. Historically, we've always spent 60% of our CapEx on stores. but also a much larger contribution over time now being invested on IT spend as we continue to improve our systems and look at more digitization in the group. Just one thing to note, you'll see the ZAR 88 million of CapEx was spent to reinstate the stores that are part of the looting. That amount is obviously claimed by insurance claim from SASRIA, it's a one-off item. So just to confirm, as I always said, our capital allocation process, where do we spend our CapEx and where do we want to invest. As I mentioned earlier, our main growth drivers still organic growth, opening a number of stores, targeting more than 300 stores per annum. So majority goes into infrastructure and stores. Investment, as I said last time, we'll continue to look at merger and acquisition opportunities, with the investment in Avenida of ZAR 2.8 billion, being one example of that. We did a very small share buyback, last year, I communicated we want to do ZAR 1 billion in share buybacks. So we've already spent close to ZAR 800 million of that at an average price of ZAR 19.98. And then finally, on our dividends. As normal, we don't declare an interim dividend, we only declare a full year final dividend. Our dividend policy is sold 3x cover. But that will, again, obviously be reviewed at year-end. So that's really my story. Thank you very much. I'll hand back to Leon to continue.

All right. So we're going to deal with all the different segments and a little bit of color on the different companies in the group. First segment, the biggest one, Clothing and General Merchandise. We always have a grouping of PEP and Ackermans. That's for the investors who do the modeling on it. So there, you can see 3.4% growth in sales, 12.5% over 2 years, which I'm quite happy with. From a like-for-like sales growth perspective, 2.4%. As you know, most of our stores, and it's normally about 70% of the stores that we open are PEP and Ackermans stores. That's where we get our best returns. That's where we understand our model is the best, that's quite robust business models. And a lot of open -- quite a few openings in that regarding PEP and Ackermans. Space growth was 3.2%. Selling price inflation, 4.6%. That's similar to what it was the season before as well or the year before. So over the past few years, that's been a relatively consistent number. Market share gained in these 2 businesses over the 2-year period of 111 basis points. If we look at PEP on its own, you can see business is still growing. PEP, the conventional PEP stores, 1,637 of them, and you can see there the cell and home numbers, which are now starting to become very sizable business. Cell, we've got 557 stores. And in the Home business, 332, with a lot of expansion in the home format over the last year or 2. From a price point perspective, always, as you know, in the -- specifically in the case of PEP, we have to be very aggressive when it comes to our pricing. Best price leadership, which means that in all the prices that -- all the products that we sell in PEP, how much of them -- how many of them are we equal or better than the opposition in terms of price. And you can see that, that leadership position or BPL as we call it, is still 97%, which is a remarkable number, I think, in any terms and in any country or industry. So very happy with that. The gap between -- if you take a group of products or a basket of products in PEP and you compare it to a basket in the rest of the market, that gap is 26%. You'll remember or you might remember, probably not, but you might remember that last year, that was 28%. So that's down a little bit. So that's motivated the guys in PEP to make sure that they keep very price competitive on a broader range of products. FMCG is still growing well over the last few years, have done exceptionally well, 11% growth there. Just for information, 42% of the sales in FMCG category is private label, where our margins are higher. So on a profitability level, they contribute much more than the 42%. So very good development of those private label products and a very good impact in the market. PAXI, we've spoken about quite a few times before, that's now up to 11,000 -- on average, 11,000 parcels per day. I'm sure all of you -- if we look back at that, that's far exceeding our expectations a couple of years ago and still a lot of opportunity in that business to expand and also quite profitable. So it's really contributing well towards the PEP profitability figures or profits. Smartphone unit contributions up to 61%. You can imagine that at a value level, it's even more than that. So yes, smartphone is really the preferred choice of our consumers. That number changed dramatically over the last 2 -- or let's say, 3, 4 years, and we see that trend continuing in the future. The sales growth in PEP Home, 27%. And when I say PEP Home here, it means the home category for the whole PEP business. We opened 38 new stores. That's quite a big part of the 72 new stores for PEP over the year, but quite impressive there. And the results in home has been very, very good. It's really built up almost like a cult following on social media, and I think there's just so much more potential. The growth has almost been too fast to keep up with the stock levels, but the teams are working at that. In the case of Ackermans, Ackermans still a very good performance. Especially if you look at Ackermans' performance over 2 years, they had a very good previous year. So this year, it was a little bit lower than they would normally be -- normally have. But if you look over the 2 years combined, still probably the best retailer in the industry in South Africa. They've made good progress on the cellular side. You can see there that over a 2-year compound average growth rate of 21%, which is really impressive on that side. Interestingly enough, the phones that they sell are slightly different, higher price levels than those of PEP. So there's not too much cannibalization, but really making good progress on that. 29 new stores. Some of those new stores were Ackermans Woman stores. We're really, really happy with the progress in Ackermans Woman, up to 42 stores now. So it's becoming a significant part of the business. And yes, still, in my opinion, a lot of opportunity there. As we progress with this concept, there's certainly a lot that we still can improve on. So besides the fact that there's a lot of new stores that we can open, I think there's a lot of opportunity just in sort of not perfecting is maybe the wrong word, but improving the concept as it is. Ackermans has also started opening a few cellular stores, cellular plus iPads and similar products. There are now 10 of them open, performing exceptionally well. So the -- by the looks of it, really a good concept. Again, different from the PEP Cell offer in the customer base and in the product base, and obviously selling a slightly higher price point level than the PEP Cell business. The credit mix has come down to 16%. In the previous reporting period, that was 17%. So a slight drop there. It's something that we're working on. We would like that to remain more or less or at least at 17%, but the guys are working at that. And then they've now rolled out the click and collect system. So you can basically order on -- you can -- not basically, you can order online and then get it delivered to any store in South Africa. And that makes a huge difference because in a small town where there's a limited range or assortment of product, everybody can now get the full range of Ackermans products, and I think that's a very positive development. It's a slow start as one would expect with this. But as we continue communication and promotion of this channel, I think it opens up opportunity for a lot of customers as well as for the business of Ackermans as a whole. In PEP Africa, Africa has had a relatively good year so far. You can see their sales growth in constant currency and also the like-for-like, 3.1% and 4.9%, respectively. But when you look at actual currency, so for once the currencies in the countries that we trade in Africa have improved compared to the rand. And there you can see a 13.3% increase in actual sales, actual currency sales. Still at 283 stores. We -- the number of stores, I think, reduced by about 13 over the year. As we communicated before, we're consolidating in Africa. We're not allocating a lot of cash, but -- and one thing to get the efficiencies up and especially sales densities. Cash repatriation, just to confirm, that we don't have major issues there. It's actually been a little bit easier than in the past. And as far as profitability is concerned, Africa has actually had a very good first 6 months. And as I've said before, the one thing about Africa is that a lot of businesses are moving out of Africa. We're still there. But if you look at how we're performing and how we have performed since we've entered Africa, it's always been quite positive. So yes, there are difficulties, but we've been able to manage it very well. Speciality results are very good. You can see their sales growth for the 6 months of 7.6%. But if you look over a 2-year period, 25%, which is very impressive. Like-for-like, very similar to the sales growth there. Increase in operating profit over a 2-year compound period, 19% and 16% for the year. So you can see that we've really, over the last few years, improved this business and they've really progressed in the customer value propositions that they have. And those are really impressive results. And again, have a great foundation to work from. As you get scale and volume and profitability over time, we'll probably increase even more. So we're very positive about developments in the Speciality division. 13 -- only 13 new stores, which is not many, which brings them up to 840 stores. I think we're at a point now where a lot of these businesses are geared -- or not geared, but prepared for a little bit more investment in growth. And some of the brands will definitely get some investment or capital for further investment in stores. 3D integration, 3D integration is basically 3D technology that's used in the buying process, as I say, left off the purchase order. That helps you to differentiate on product. It helps you to have consistent spec, spec is specifications on product. It helps you with the communication and interaction with your supplier base to make sure that consistency prevails. Eventually, it leads to a reduction in lead times, increase in cost savings, et cetera. So a lot of work has gone into that -- in the Speciality division, and they've done great work there. Just in the PEP business, just by the way, also a lot of progress on this. But it takes time to develop it. And essentially, what it's all about is getting a better fit and more consistent product quality levels for your consumers. And very good developments in that. I thought I'd just mentioned Code. Code is quite an exciting new brand that we've got. 23 stores now, that's going to go up to about 30 stores in the next 6 months or so. We -- the team there has taken it slow since we acquired this business to sort of -- to prepare the business for -- and the business' infrastructure for the future. You can see there, as it is now, ZAR 45,000 trading density or sales per square meter in the business, which is very good indication for the future. 85% of the buyer is local. That's the sort of legacy we took over in the business and that we want to continue. Fortunately, the volumes and scale of this business and the product range is suitable to a more local production. So that's very good news. And then just a matter of fact -- as a matter of fact, average selling price at ZAR 141. Code is aimed at the younger, more fashionable consumer and sells mostly jeans, T-shirts, flip-flops and jackets, that sort of stuff. The everyday wear type . And the Code brand as a brand has really took off quite phenomenally, and we're quite positive about what we can achieve in the future. Then we -- as I mentioned earlier, the Avenida acquisition. So we're talking about 130 stores that the business had. It's an established brand, started 42 years ago. The sons of the founder of the business are still in the business as -- one is the Director of the business and the other is the CEO. So it's really established and a family story or family legacy that runs through the brand. It's got a proven business model despite lots of setbacks over time, private equity investment and involvement, et cetera, the business model has survived and has always been proven to be quite profitable. So the team has done a good job of keeping it going despite some tough times. It's also got a discount and value focus, just like our brands. Very much positioned in the same positioning in the market as PEP has and to an extent, Ackermans. And the discount and value focus that they have is one that we will continue with and probably strengthen through the leverage that they can get from Pepkor as a whole. The local management we've retained. I mean if you look at the past challenges that they had in terms of capital and availability of capital, then the management has done an exceptional job in running the business as it is. So we're happy to still have them on the -- in the business. We have given dedicated Pepkor support. In other words, we've got 2 members of the executive will be Pepkor people that we sent over from here. They have already arrived there, and I'm sure their contribution in -- mainly in getting good cooperation and collaboration between the brand in Brazil and the brands in South Africa will be enormous. So we're very positive about that influence and support that we will be able to give them. From a cultural point of view, this business very much like ours. The people are very much like ours. We get along well. They -- coincidently, 40% of their sales are in the adult category, so that's men's and women. And -- but where we can really help them and support them with is to improve the sales and improve the contribution of babies, kids and cell. That's where our businesses are strong. So a lot of leverage to be gained and quite exciting opportunities. The good thing about this business, it's relatively small in the bigger context. If you look at the -- what we paid for the business, I mean it's less than 4% of the market cap of Pepkor. So it's not a huge exposure, but it's got enormous potential. The market -- the CFH market in Brazil is huge, 1 of the top 10 biggest markets in the world. The population in Brazil is 211 million people compared to South Africa's 60. And that just gives you an indication of the huge potential that's in Brazil. We've started slowly. We're opening 5 stores within the next 6 months, where they've already been approved, so they're opening very soon. Another 15-plus after that or in the next financial year. But we're taking it slow initially, just to prepare the business for growth. But once we've got the model the way we want it, once we get the leverage that we want, then we can accelerate that expansion potential. And then there's obviously a lot of best practice and synergies that we can share. The team has been here a few times. Our team -- some of our team has been there, and that's stuff that we'll explore over time. Just a very early indication. The early indications in the business are very good. Firstly, from a stock perspective. Now normally, when you buy a new business, you take a few years just to get rid of the old and the redundant stock. In this case, that's not the -- in this business, that's not the case at all, fortunately. They've managed their stock over time exceptionally well. They've only got about 4% of their stock that's older than 18 months and about 11% that's older than 1 year. And that in retail terms, very good numbers. Since we've been involved in that since the 1st of February that we officially take -- took our share, the sales growth, and that's on a like-for-like basis, has been 55%, partly due to the fact that we capitalized the business that we've got -- that our investment in stock is higher than a private equity business would have done. So these numbers are extremely positive. And it just shows you the potential that there is in this business. So going forward, very, very optimistic about the potential in Brazil. The Furniture business, mainly obviously the JD Group. Sales growth of 8.1% for the 6 months. On a 2-year basis, 25.8%. As I mentioned earlier, and I think Riaan also mentioned, really an impressive number. The first year after COVID, obviously, a lot of the good sales were due to the fact that people worked from home more, stayed at home more, et cetera. We expect it to be up against it in this year compared to the previous year, but the good growths are continuing, which is really impressive. If one looks at that market share gain number that I mentioned earlier, it's approximately 560 basis points increase. That is a good indication of how this business has done and why you see these figures as it is here. The 2-year CAGR on profit growth is 41%, which is very good. So the whole -- and we've lived through the whole sort of transformation of this business as it came out of a big loss into the profits where it is now, so still good growth there. Credit mix has improved from 16% to 20%. We've always been extremely conservative on credit allocation in the JD Group, and especially in the Home section of the business. We've opened that a little bit. Remember, we come from 2 years ago about a 30% contribution of credit, 30% is probably where this business can operate at. We were maybe a bit too conservative, but nevertheless, we're moving that up again. But still being quite cautious of allocating credit or allowing credit in the business. Then from an online sales contribution in the Tech division, Tech division is incredible connection. And Hi-Fi Corp. I think probably one of the leading businesses in South Africa in terms of online contribution. 10% of their sales are online now, which is another 49% growth on the previous year. So that's really improving every year as we -- as this business is almost a center of excellence as far as online sales in the group is concerned. And then if we exclude the Tech division, if we look only at appliances, then another 264 basis point gain in market share. So overall, the JD Group doing exceptionally well, gaining a lot of market share, good growth in sales and profits. Building Materials. Riaan alluded to it. Sales growth, not great. Part of that sales growth that's not great are the 2 companies that we rationalized or disposed of. But still over the 2-year period, again, they benefited quite a bit initially from post-COVID and money in the market, especially. So over the 2-year period, quite a good growth or very good growth. But for this year, obviously not that impressive because of the businesses that we took out. If you exclude that, it's still only a 0.2% growth. So it's a bit of rational. Consolidating business. There's a good growth plan for the business. We believe that there's a lot of potential still. We've moved away from this sort of consolidation mindset. And as you know, the business was up for disposal at one point in time. We're now reinvesting in the growth of the business to a larger extent, and we believe that there is potential for us. Part of that growth plan is the growth in the Timbercity brand. Timbercity, we've now bought all the Timbercity franchises back from the independent owners that had them before, and we've taken charge of this brand. And there's potential to open quite a few Timbercity stores, externally and internally. In other words, stand-alone stores as well as Timbercity store within stores in the BUCO store. So a lot of potential there and the team there are working hard at it. Over the last few years, they've done a lot of good work in rationalizing the whole portfolio. And we believe that there's good opportunity for future. Growth in operating profit at 26.4%. FinTech business, FLASH, Riaan alluded to it and he -- well, he mentioned it, but increase in operating profit of more than 20% and just to give you some comfort about the decrease in revenue. As Riaan explained, that's mainly due to the mix change between airtime vouchers and Eezi airtime, so we're quite happy with developments and growth in this market. The informal market, very important for us in Pepkor, FLASH's presence in that market over many years gives us a good sort of base to work from for further exploration of the market and further penetration into the market, especially from a business-to-business perspective. We believe that there's still a lot of potential and we're working hard at exploring those avenues for the future. The number of traders very consistent to the last number. The focus at the moment is not on increasing the number of traders so much, but rather making sure that the quality of the traders that we have on our base, that they keep improving. You can see there the average turnover per device increased by more than 10%, which is quite an impressive number. Also, in the FLASH business, remember, this business operates 24/7. It goes into areas where you can't take stores. And therefore, we believe there's still a lot of growth potential in this business in the format that it's operating at the moment and in other opportunities that we are exploring. So a lot of good work here. Also a lot of work into the digitization of our customer base. We know that the customers are changing, that their behavior will change over time. And in the FLASH business, a lot of work is being done to then be -- to adapt so that they can still serve their customers on new platforms and new channels. The Capfin business, positive book growth. You would have seen the number from ZAR 1.9 billion to ZAR 2.1 billion. Collections have been above expectations, so very good work there. From a back office point of view, a lot of good work has taken place to reduce costs by consolidating the business with Tenacity. So trying to use, in some respects, the same back office. So that's helped with the profitability of the business. Most of the loans, we still -- we manage this book conservatively as well. 42% loans are 6-month loans, the others are 12 months. So we've only got any loans higher than that or longer periods than that. That's a model that we feel works for us. And normally, the people that go into 12-month loans are ones that have proven themselves as consistent on the 6-month loan. So it's a very good base for the guys to work from. They've done an exceptional job over the last few years to stabilize this book and get good growth out of it. The growth in operating profit, a little bit understated at 5% or larger than 5% for this -- for the 6-month period, up against the high base and last year some provision releases, et cetera. So the potential of the business is higher than that would indicate. 251,000 accounts now, which is an increase in the number of accounts of 17%. Just a little bit on the outlook for Pepkor going forward. A little bit of the weather report, as we always call it, just the consumer remains under pressure. That 35.3% unemployment rate is up from 28% before COVID. I'm baffled to understand why that hasn't recovered more or hasn't started reducing as the economy has opened up, but that's the number that is being reported by the statistics services. I think what it does point to, number one is that there's still a lot of people in South Africa that's battling. And -- but it also points to the fact that the informal market is becoming more important. And obviously, we've got -- there's some opportunities there. Inflation is going up. Inflation in South Africa is at the moment actually relatively low compared to the rest of the world, but there's normally a bit of a lag effect on this number for us. So I think we all know and expect the inflation to rise -- to keep rising. And household incomes are still very limited. If you take a business like PEP as an example, about 55% of the PEP customers have incomes of less than ZAR 5,000 a month as a household. So the operating pressure or the operating environment pressure is still there. It does also give us opportunity because that's the market that we are good at. And with the defensive market positioning that we have, there's a lot of opportunities that we can still explore in this market segment. Supply chain disruptions, I mean, supply chain has had almost a perfect storm. It started with the initial lockdowns in China. Then the COVID that spread all over the world, that sort of exacerbated the challenges that they were in the supply chain. It caused huge cost increases in container and shipping costs. The fortunate thing is that those, there seems to have been sort of a turnaround or it's turned a corner, and those costs are coming down again, but not at the same rate that it went up. That's how it always works with these things, but at least the trends are positive. The other interruptions were due to the port issues that we had in Durban, the flood issues that we had in Durban, et cetera, et cetera. So a lot of pressure on the supply chain, and that's caused big challenges for the business. As Riaan mentioned earlier, before Chinese New Year, we pulled forward quite a bit of stock because before that, we had quite -- we had big delays in deliveries. So it's been quite challenging, and that's why -- that's one of the reasons why the stock levels are quite high at the moment or was at the 6 months end, but we believe we will work those stock levels down to more normalized levels by the end of the year. I thought I'll just give you what's important going forward. And if you look at inflation, if you talk about the pressure that our consumers are under, it's becoming more and more important for us. It's always been our obsession. Our obsessions have been to keep our prices as low as possible for our consumers and to operate at the -- and to do that, we've got to operate at the lowest cost of doing business. So I thought I'd just share with you a few of the examples just to give you sort of a feel for this. But PEP school uniform is now cheaper than it was in 2020. This year, if somebody could dress their child for just, well, only ZAR 60 in a PEP, which is an unbelievable number, thinking about a school uniform for ZAR 60. What else can you afford with ZAR 60? So it just shows you the effort that's gone in. And especially in school uniforms, which is almost an emotional department for us. There, we've made great progress and we've been able to help people in our communities make it -- by making it more affordable for them. 20% of the products in PEP, as an example, has been -- is the same or lower than it was in 2020. So that's also a remarkable number. And again, just shows the effort that the teams put into making product affordable and prices affordable for consumers that are under pressure. These are just a few examples I can mention, literally hundreds of examples, where the guys have done exceptional work on pricing. That's the way we can help our customers. Volumes and scale helps you. Here's, just a few examples of the scale that we buy at. We sold 5.4 million babygrows last year, 8.1 million school shirts, 17 -- 40.5 million t-shirts. Can you believe that? And 17.5 million denims. So these are huge numbers. One doesn't always realize it, all the stock, all these units. We sell more than 1 billion units of stock in a year in PEP core. And all that has got us to go through a supply chain and the distribution network, and that's something that we really value and are quite proud of. Just a last slide on this subject. I mean, we take our business to our customers. We've got the widest reach of retailers, in Africa, 5,500 stores. We literally are in -- they say that a town cannot be called a town if there's not a PEP in it, and that's the truth. 25% of PEP stores trade where no other retailer trade, as an example, which is quite a remarkable number as well. Then we also are realizing that it's not only bricks-and-mortar, we believe that there's still a lot of potential for bricks-and-mortar, but that we also have to develop our business through our digital offer. We've got one voucher, which is basically digitization of cash, which allows our customer base to also trade online. We've got the FLASH network or distribution network of 205,000 traders. And then also quite an impressive number is that we do 1.8 billion virtual transactions. So on the bricks-and-mortar side, we're taking our business to our customers. But we also realizing that, over time, things will change to the more digital environment. I battle with that word every time. But -- and we've done a lot of work to develop that, and we see great potential there for PEP going forward. Just from a last slide on outlook, sometimes it looks like doom and gloom in our environment and our economy, but I believe there must be pluses as well. The resumption of tourism and events has to help us. The tourism sector, I read the other day, that we are almost back to the numbers -- occupation numbers that we were in 2 years or just over 2 years ago, which is very positive. If that happens, there's so many related industries that rely on the tourism industry. And certainly, that's a plus for us going forward. Also events have been resumed. Remember, almost feels like long ago, but it wasn't so long ago that there were no weddings or hardly any weddings, hardly any other events, no soccer matches, no football matches, and so I can go on and on and on. And a lot of the PEP customer base work in these, let's call it, nonpermanent jobs that is provided by the events industry. And that's now starting to resume. I know a lot of the events, we're not back at full capacity levels, but certainly, that's very positive and we are very positive about the impact of that on our business. Then just to remind you that we have some positives coming up in the second half of the year. Last year, we had the riots and looting in July. And obviously, that base gives us an opportunity -- or lower base gives an opportunity of a slightly improved base this year. We hope, we see that. We might lose a bit of sales and units in the PEP environment, which might counter that, but at least that base or lower base gives us an opportunity for good sales growth in the second year. Product inflation will be there. Inflation is going up everywhere. We haven't pinned down exactly where our product inflation will be, but it looks like -- but it's anywhere between 6% and 10%, probably a little bit more towards the 10% depending on which business we're talking about in the group. So that there will be inflation on the products that we sell. We will try to mitigate that as much as possible by reengineering of product, by buying more into lower price points, entry price points. So there's a couple of actions that our buyers always launch when you get inflate or high inflation numbers. Inflation can sometimes help the business as well. But it's important for us to make our products affordable to our customers, and that's why it's so important to find ways of mitigating that inflation. So a lot of focus on product affordability, like it's always been. But when you -- obviously, when you get to inflationary periods, there's an added focus. The DC resumption, as I said earlier, very positive within 5 or so weeks. We got operations to resume in Durban, and that makes a big difference. So hopefully, very soon, we can get those service levels and PEP up to normalized levels. Also the DC, there's a new PEP DC being built in Hammarsdale, which is just outside of Durban. And that's progressing, and we hope to be opening there or have the DC completed by mid-next year. The -- in the same area, we opened a Ackermans DC -- an Ackermans DC a number of years ago. And Ackermans now operating at very high efficiency levels, very high throughput levels. And we're confident, of course, that we'll get the same from PEP. And then our growth mindset remains. Despite all the doom and gloom that's reported, we still believe there's a lot of opportunity in South Africa. There's a lot of opportunity for our brands in South Africa. In fact, a lot of these tough challenging environment, environmental circumstances are things that make -- that has made PEP -- so PEP and Pepkor so strong in the past and really circumstances that can benefit us. We're -- this financial year, I always talk about opening about 300 stores per year. This year, it looks to be closer than 350 stores, which is very positive. Again, it will be mostly in the PEP and Ackermans brands, which is also -- those are, as I said earlier, the robust, strong, good return brands, which is very positive for our group as a whole. So to summarize, I mean, the results that we announced, I'm very positive about them, quite happy about them. I think the fact that on a very high base, we still managed double-digit growth in operating profit. That's quite important for us, and that's something that we're very satisfied with. Let's see what the second half of the year holds in for us. As I said earlier, we're quite positive about a lot of things happening in the market that will benefit us and our positioning in the South African retail. And yes, quite positive about the next 6 months as well. So thank you very much. Thanks for listening to us, and see you at the end of the year. Thank you.