Pick n Pay Stores Limited (PIK) Earnings Call Transcript & Summary

Good. Welcome back, everybody. I hope you enjoyed the good break that we provided for you. The coffee was good. The food was good, prepared by our innovation team. Let's dive into the juicy part now, which I think -- yes, hope, everybody will stay awake. I think you will. As you know, Pick n Pay is an iconic company with a rich heritage. When I joined the business over a year ago, I joined for that reason. My intention has always been to accelerate the growth in this business and build on this great legacy. I've spent time understanding the market and the business. And many of you have been following the company and asking us for more transparency on our performance and our strategy. Today, I would like to give you more transparency and share some exciting plans for the future. Over the next couple of hours, we would like to walk you through our strategy which is called Ekuseni. As many of you know, Ekuseni means, in Zulu, the morning. It's the new dawn; a time that we get up, refreshed to face the new day. In retail, this is especially important because it's when we open up our shops and get ready for our customers. This is a photo I took not this morning but yesterday morning, I think, out of my office. I think it sends everything about creating new energy. The upcoming presentation, we will structure into 3 sections. Firstly, I will talk about my candid observations from my first year as CEO of Pick n Pay and the ambition I have mobilized our team around. Subsequently then, with some of my executive team colleagues, we will share you how we plan to take Pick n Pay to its full potential. And finally, I will conclude the presentation by summarizing why I believe this is an exciting company with significant headroom for profitable growth. After that, we will open it up for Q&A. As you saw in the results presentation, we have a strong basis for growth. We have a dense national store estate of nearly 2,000 stores, catering all demographics and customer segments. We have the best loyalty program in the country with a wealth of customer data. In the last 12 months and despite the disruption that hit us severely, we have increased our sales with 5.2%; and we are seeing continued momentum. We are profitable. Our PBT margin is improving, and I know that we can and will and have to deliver more. I've been CEO of this great company for just [ over a year ]. I've enjoyed every day because of the great people in Boxer and Pick up Pay, the unique relationship with our customers and the opportunity to help and build and further develop this great country. I continue to be more convinced about the potential of this business and our core strengths. Pick n Pay is a loved and trusted brand in all regions and customer segments in which we operate. With Boxer, we have the most dynamic and fastest-growing discounter in Africa. Boxer and Pick n Pay together are formidable. The combination gives us proximity to a huge number of customers. Our community of franchisees is a queue -- true strength for us. They are committed, loyal, know the communities and are determined to serve them in the best possible way. They are an integral part of our success. Our Smart Shopper program is fantastic. The data informs our commercial strategy. And finally, we have a healthy balance sheet and a strong liquidity position. However, I'm fully aware that our share performance could be better. I told the shareholder -- total shareholder return has been growing in the last 12 months, but we are trailing key competitors. We know we will have to accelerate our performance to give shareholders better returns, and we know we have to disclose more in order to make our plans more tangible. I have deliberately taken a year to prepare my strategy. I could have spoken to you sooner, but a genuine plan takes time to create. First, my team and I took time to face the unvarnished truth about our business. We looked at the market, our competitors; and listened to our customers. We mined our data and performed more than 7,000 customer interviews and surveys. Customers are the key to this part of the journey. If you ask them the right question, they will always tell you the truth, good or bad. They will tell you what they love about you but also whether you trail competitors. We also took stock of the future growth opportunities that exist in our business and beyond. We looked at the latest trends across the globe and assessed how we can serve customers in a new and better ways. We investigated the discount format; clothing, online grocery and [ new ] online business models. We remain convinced of the fantastic growth prospects we have for our -- both our Boxer and Pick n Pay. We looked critically at our performance, confirmed our areas of strength and identified the areas where we need and will drive higher levels of productivity. And finally and most crucially, we looked at our people and our capacity to deliver. The best plan will not come to life unless you have the right team to make it happen. In this area, we have not been standing still and have -- we have made already significant progress. Let me share with you some of the facts that we uncovered in this journey. First of all, let's take a look at the market. I've worked in many countries around the world. Each has got its own dynamics, its own opportunities and challenges. Prior to the pandemic, GDP growth in South Africa was already low. Unemployment was already very high. COVID then delivered 2 of the toughest years in the country's modern history. The riots last year delivered a massive blow to the country's performance and its confidence. Unfortunately, we are not yet back to pre-pandemic levels of economic activity, but South Africa is a very diverse, energetic and dynamic country. We have a sophisticated and rapidly evolving customer. The market is highly competitive and is constantly adapting to changing customer habits and desires. The formal food and grocery market in this country is on a growth trajectory. Over the next few years, the market is set to grow by another ZAR 230 billion, this through demographics; urbanization; formalization of the informal market; and hopefully, in time, through sustained economic growth. Today, we have 16% overall market share in the formal market. The opportunity is everywhere but especially in the less-affluent part of the market. As I said before, we have talked to and listened to our customers and our franchisees. What both groups told us was that our Pick n Pay retail proposition needs to be more attractive. As a result of Project Future and other initiatives, we have improved our price perception in recent years, but there is more work to be done. Customers tell us too that often their Pick n Pay stores doesn't fully represent their needs. The product range and the assortment is not sufficiently personal to them or their lives. Customers tell us our shopping experience -- we need to simplify navigation; and have more consistency, look and feel. We have wonderful examples of our people going above and beyond for our customers every day, but I promised you the unvarnished truth. And the truth is that, too often in our stores, our service has let customers down. We can, have to and will do better. We will talk about Boxer later, but let me highlight our growth potential in the online grocery. The online grocery market is taking off and COVID has accelerated this. Penetration in South Africa remains relatively low but [ is set ] to almost triple over the next few years. Customers are warming to the convenience of online grocery. This is not only a growth opportunity for us but also essential. Online grocery will affect future market share. It will enrich our customer relationship, and it will enable us to build an ecosystem to meet other customer needs. We looked at our profitability. We know that we are operating below competitors. We also know that there are [ inflationary ] and other cost pressures. We analyzed our cost structure thoroughly division by division and know we have more opportunity to unlock. This journey has already started and is the continuation of Project Future that has delivered ZAR 1 billion of savings over the last few years. As I've said, the strategy is nothing without the right people to deliver, and let me pause for a moment to talk about my team. When I became CEO of the Pick n Pay Group, I inherited some great people across Boxer and Pick n Pay. Within the business, I've begun adding missing capabilities, getting clearer on goals, clarifying accountability, simplifying reporting lines and identifying emerging talent. I felt it was crucial to make changes within my leadership team, and I have already reshuffled or changed 20% of my top team. I'm confident that I have now the right team for the future. Some of the key members are here in the room with me today and I will be presenting them shortly to you. We are united in our vision for the business and the new ambition we have defined together. So what is our ambition? It starts with turning-around the Pick n Pay retail business and winning with the customers of our iconic brand. Customers tell us they want Pick n Pay to be their store of choice. Customers tell us the need to design their local Pick n Pay store around their needs. They want us to be more tailored -- have a more tailored assortment at the right price points, a store that is welcoming and has great service. Customers are looking for a refined customer value proposition. This means leapfrogging the market on customer advocacy. We want to gain 20 percentage points of Net Promoter Score. Net Promoter Score is the best measure of customer advocacy. It's strongly correlated with future growth. The Net Promoter Score is calculated through the answer of one simple question: Will you recommend our brand to a friend? Many grocery retailers have successfully implemented NPS over the past few years. And in my previous role, I personally experienced how NPS [ radically ] increases the customer centricity of a retail organization. Our ambition is also to accelerate the expansion of Boxer. A unique concept delights its targeted customers with simplicity, low prices and great shopping experience. We have significant opportunity ahead of us and the formula to capture the huge growth expected in the next few years. We want to double Boxer's revenues. As a result of the growth in Pick n Pay and retail and Boxer, we aim to gain 3 percentage points of incremental market share by 2026. We believe in an omnichannel future, and we will build a market-leading online offer and grow our revenues eightfold by 2026. We want to slash costs and reinvest in our business and fuel our future profitability. We believe that there is still a lot of potential for cost savings, and we have set an ambitious target of ZAR 3 billion in cost savings in the next 3 years. And finally, we want to build the best retail team of Africa. This means top-notch capabilities, new ways of working, agility and a more performance-driven culture. We will tie our incentives and performance management measures to the achievement of our Ekuseni goals of 10% sales CAGR over the next 4 years and a profit before tax margin above 3% by FY '26. Now that all sounds nice, so how will we deliver this ambition? Our game-changing plan was developed with the top leaders of the company in an engaging, intensive and high-energy process. Our plan consists out of 5 key pillars: first of all, rejuvenating our Pick n Pay customer value proposition; secondly, doubling down on and accelerating Boxer; thirdly, strengthening our online offer; fourthly, delivering the savings out of Project Future to fund the growth; and last but not least, building a winning team. Presenting to you today in addition to our CFO, Lerena, who was on stage earlier, I would like to introduce to you the following people: Thembi Mazibuko, our newly appointed Chief People Officer for Pick n Pay retail; David North, our Chief Business Transformation Officer; Marek Masojada, Managing Executive of Boxer; and Iain Bromage and Andrew Mills, who joined Pick n Pay retail from Boxer. So let's make a deep dive now into the Pick n Pay retail plan. As I said earlier, we started with what customers were telling us. We actively listened to thousands of them. We analyzed their behaviors and we derived what we needed to do better to serve them and fulfill their needs: in a nutshell, more differentiation, less complexity. The South African market is a very diverse one with numerous customer groups with specific needs. Our data suggested 3 distinct segments with different drivers for their shopping behavior. The trolley represents what could be a large month-end shop basket for each segment. Segment A chooses the store before -- because of its offers, the lowest prices, great promotions and excellent bulk deals. Customer segment B is looking for great value, promotions, availability and range. Subsequently, customer C is looking for high-quality products in convenient locations with a wider range and an exciting store experience. We see here as well that our competitor brands are focused on 1 or 2 customer segments. Boxer is very clearly positioned. It's focused on simple quality execution for 1, maybe 2 customer segments. Pick n Pay, on the other hand, is trying to cover all 3 segments and all customer needs with one single brand. This makes it very hard and challenging to achieve proximity. We have tried to be everything to everyone, and as a consequence, we end up losing relevance and differentiation. We must redefine our relationship with the Pick n Pay customers. When a customer enters their local store, the range, layout, service and innovation must feel relevant and personal to them. It must be consistent across the brand estate. We are going to make a significant change to deliver what the customer wants from us. Going forward, we are going to organize our Pick n Pay retail division into 2 customer-facing brands. Pick n Pay will become more focused, primarily aimed at serving customer segments B and C. And Pick n Pay Project Red, as currently the code name, will become a second brand aimed better servicing customer segments A and B. We will also redefine our customer value proposition for each of these brands. To demonstrate the progress of our brand, we will report turnover growth for the Boxer and Pick n Pay divisions separately as of the next half year results. You might be asking yourself, how will Boxer, Pick n Pay Project Red and Pick n Pay coexist? Will the overlap create challenges? We are convinced that propositions will be distinctive. The 3 brands have tailored propositions catering to very different needs. Boxer will continue to focus on a very limited range of roughly 3,000 SKIs (sic) [ SKUs ], with a drive to grow own brand and private label. We will offer the lowest price point. And the stores will continue to be vibrant, friendly and familiar. Pick n Pay Project Red will offer a wider range than Boxer, 8,000 SKUs. This is a reduction from the 12,000 SKUs that we currently have in our value stores. The focus will be in fresh with low prices and great quality. Stores will offer excellent service elevating the essentials. And finally, Pick n Pay will offer a deep range of 18,000 SKUs. This is still a reduction from the 25,000 SKUs on our current select stores. Stores will offer great value for money and the best quality with focus on innovation and freshness. These stores will be aspirational and powerfully fresh, but let me take a moment to say what we known -- have -- I'm sorry. But first, let me take a moment to say that we have now 3 brands. And we have 3 brand leaders with an end-to-end responsibility and accountability for our brands. Andrew and Iain will unpack our new customer value propositions a little bit more. Andrew will start with the world of Project Red stores. And subsequently, Iain will follow with the adjusted world of Pick n Pay.

Thank you, Pieter. And earlier, Pieter spoke about putting the customer at the heart of every decision. We have interviewed thousands of customers nationwide and gathered incredible feedback from them in terms of what matters most, the items which appear on the top of [ their till slips ] and the categories which drive their shopping behavior, across all customers throughout South Africa. We then systematically overlapped our very own customer Smart Shopper data to arrive at a clearly defined future value proposition. And now this information is completely customer centric, a world where we are now absolutely specific to the different shopper segments and their needs. The output of this research has enabled incredible insight and direction to ensure that our ranges, space and voice are perfectly positioned to deliver a customer value proposition that focuses our business around key power and traffic drivers whilst balancing the mix with those essential and opportunistic categories. And now we will be clearly defining the differences between our group's 3 banners. I will speak about Pick n Pay Project Red stores; Iain, to talk to Pick n Pay stores; and later, Marek, to talk about Boxer. Our Pick n Pay Project Red stores will satisfy the needs of shoppers they serve by delivering unbeatable real value all under one roof. Competitive pricing on items most needed is the foundation we'll be establishing our stores upon. Promotions will be market competitive, reinforcing the decision-making of consumers who choose this destination where lower prices never looked better. And that unlock is made possible due to an exciting atmosphere created within the 4 walls of our store. Formerly, our internally named value stores carried 12,000 SKUs. However, the shelves were cluttered, leading to the range not being ideally focused on satisfying the needs of the growing consumer middle market. Operationally, our availability on the leading lines came under pressure, while at the same time we carried an enlarged inventory. All we did, ladies and gentlemen, was disappoint the consumer until now. As a supermarket retailer, in Pick n Pay Project Red stores, we need to satisfy the needs of customer segment B and to a certain degree customer segment A. And this will be done with a repertoire of 8,000 SKUs. Now let me just pause at this point in time on that 8,000 SKUs, for a second. Pick n Pay Project Red stores have a range of 8,000 SKUs, a key differentiator from our discounter model within the group Boxer. And that is a focused range of only 3,000 important SKUs versus 8,000 SKUs in the Pick n Pay Project Red stores. Ladies and gentlemen, as we transition through precision to 8,000 SKUs, we have reduced complexity, made it better for all of our customers who will now get the right quantity of the right items to fill their baskets and their trolleys. This simplifies our operations, improves our buying and releases cash back into our business. Every product in store now has its specific role to play which is tailor made around the consumers' needs that are being demanded of us. In our Pick n Pay Project Red stores, there are 6 pillars upon which the foundation I have spoken to will be built. And these are: Fruit and veg. One never gets a second chance to make a first impression. And so our first pillar appeals to our customers' senses as they enter our stores, where they will walk through a fresh produce market filling -- boasting a relevant range that talks to a focus on bulk fruit and bulk veg. The low pickup prices will be complemented with a focus on improved product quality while ensuring that the "fresh from the farm" bulk savings are visually amplified through modernized ticketing and signage. Bakery. The power of the customer draw into our stores for bakery favorites is essential. And due to the demand, more space and new counters have been allocated to this draw card. The formula is absolutely simple, the best quality at the best prices, coupled with a range that visually lends itself into what can best be described as a bakery theater, from freshly delivered supplier bread to the carefully created confectionery and, of course, ensuring that every trolley that our customer pushes is accompanied with a freshly baked hot loaf of bread. Fresh and frozen meat. Well, the center of the plate for the shoppers we serve is this pillar of focus in that being the complete meal solution when it comes to protein, our butchery. Here, well-trained butchery staff have optimized their production plans to be able to absolutely focus on both quality [ meat cuts ] with bolstered service levels. The butchery is a hero area for us. And it enables the availability of bulk fresh and frozen meat deals in order for us to continue to satisfy our shoppers' needs while underpinning a low price perception, keeping shoppers to return to these stores to satisfy their protein needs on their next shopping journey to us. Cold drinks. It is essential that we give shoppers a reason to shop the perimeter of our stores. And with the cold drinks category, we have extended our carbonated soft drink displays. Coupled with a well-thought-out prominence in the positioning of key brands, we are ensuring that this zone is more focused on delivering better promotions across all of the flavors of carbonated soft drinks. Positioning is everything. And shoppers also realize the adjacency of our snacking world aisle alongside also complements those shoppers who deserve to spoil themselves and their families with both rewards and treats. Bulk and promotional. We speak here of 4 essential touch points that define the world of Pick n Pay Project Red stores, dedicated promotional aisles that visually reemphasize our lowest-price promotional products; exciting bulk displays [ or ] specials that echo the muscle of our low pickup prices; simpler promotional mechanics that are enabled, thanks to the power of the relevant Smart Shopper card that unlocks both smart prices and accumulates customers' points; and fourthly, the addition of color and vibrance to the experience of the Pick n Pay Project Red stores, where low prices look better. Commodities, our sixth pillar, is the dedicated space and bulk displays that are seen at the perimeter of our stores where the focus is on commodity bulk staples. Here we also drive value perception. And coupled with high on-shelf availability, competitively priced products and market-competitive promotions, this commodity power space is encapsulated with an exciting shopping destination that is found within the majority of most of our customer purchases that happen on a daily occurrence. Now each of these 6 pillars I have explained are consistently being reinforced with great customer service, nonnegotiable freshness and exceptional value for money. Ladies and gentlemen, these decisions we have taken have been based on what customers in segment B are asking for from Pick n Pay Project Red stores. And that is for us today to be able to absolutely elevate the basics. I will now hand over to Iain to speak about the stores that serve the needs of consumers in segment C and segment B in Pick n Pay. Iain?

Good morning, everyone. Thank you, Andrew. Wow, incredibly exciting. You've clearly laid out the brand and the CVP of the new Pick n Pay red. I will now speak to the mother brand, Pick n Pay. In our heartland Pick n Pay is a customer who demands quality, freshness, healthiness but underpinned by great value. Their basket will have all of the everyday basics at an incredible smart pricing, items such as milk, bread, cheese, meat, fruit and veg, just to name a few, but there's also a deep need for ranges that cater for those indulgent moments, moments for treating yourself and your family, a comfortable, aspirational, innovative and powerfully fresh shopping experience that has service at its heart. Over the forthcoming slides, I will guide you through the power categories and the big changes in our customer value proposition using our core Pick n Pay foundations. These changes will be at the forefront from this day forward; and a reflection of everything we do around space, around our range and around our assortment. I would like to remind everyone that these changes are happening in Pick n Pay right now as we speak; and Pieter will speak to, later, an exciting rollout plan. At Pick n Pay, we proudly source our power categories locally from South African supplier partners, something our customers spoke clearly and passionately about. We will highlight this key patronage in everything we do. So what are the changes? When you close your eyes and reopen them, you will see the power of fruit and vegetables; the quality and extensive range in our butchery; our incredible fresh and abundant bakeries with great bread and pastries, complete cheese and complementary wine offer; and the heartwarming destination that is our hot beverages and snacks. So let's start the journey. Immediately when you walk into the store, the power of fresh embraces you. Our world of fruit and veg has been completely enhanced and magnified. We've actively repositioned fruit and vegetables right at the entrance, right at the entrance. Immediately the customer sees the freshest fruits and vegetables, focused on fragrant and colorful seasonality, be it our citrus carnival or grapes, whatever is in season, at a great price and quality. You will see it every day right at the front of our stores. So as you walk around our fruit and vegetable world, we will showcase our incredible ranges and ease of shopping; clearly defined flows of fruit, salad and vegetables. We've created moments of great innovation. An excellent example of this is our salad shop. We've created an exciting shop within a shop offering an innovative range of [ pillow packed ] herbs and leaves that would delight our customer. This innovation is hugely exciting but at the core and at the heart of the fresh fruit and veg basics which is absolutely the cornerstone of our business. Our famous combos of any 4 for 100 offers incredible value and quality and will sit proudly at the heart of our offering. Once again, our sourcing of fruit and veg is 99.9% local and demonstrates the support for our South African farmers. As we continue the shopping journey, the next power category and big change is our meat and poultry world. The opportunity and market size in meat and poultry is incredible. Whilst Pick n Pay is highly indexed and we know there is a massive untapped market within this independent meat and poultry segment, our new meat and poultry layouts and flows make ease of shopping and selection a delight, these beautiful flows of product from poultry to pork, to our stunning marinades, into our lamb cuts, flowing into a great selection of lean and extra lean mince, into a wide selection of tasty words and finally our Pick n Pay steak shop. Once again, the "shop within a shop" offer of steak shop welcomes the customer to buy from a prepacked rump, sirloin, fillet, Wagyu or even dry-aged selection vacuum packed to perfection; or a steak cut to size by great Pick n Pay butchers. In Pick n Pay, we are passionate about delivering incredible [ hero ] meat and poultry lines at market-leading pricing. It is our obsession. We have some of the best butcheries and butchers in South Africa, with dedicated and focused regional and store structures to train our butchers to be the best in the land. And on top of all of this, we're proudly South African, supporting local farmers, again sourcing 99.9% of our meat and poultry locally. The next power category and big change is in our cheese and wine world. We have integrated our cheese flow into wine and will form the blueprint of a natural pairing of cheese and wine in close proximity. Our cheese world has been positioned either within a shop within a shop or right in the heart of the store. Our sourcing team has worked tirelessly to bring customers great ranges and specialty cheeses, this time from around the world, but also ensuring knockout pricing and retail space for the cheese-shopping basics of cheddar and gouda sourced from our local suppliers. Now what better to pair with a great cheese than choose from our world of wine, which will be allocated even more space with a dedicated wine cellar? It will enable our customers to grab or to browse at their leisure. We've reflowed products from champagnes, MCCs, sparkling to white; [ rosé ] to red, with different cultivars identified and navigational signage to assist. You will even find wine advisers to offer that added service in our bigger wine stores. We know our wine customer demands excellent choice but also great value. We offer incredible savings either through our wine club, Smart Shopper discounts or our famous by 6 bottles and get 10% off. It's something that brings the customer repeatedly back. Our support of the local wine industry is the envy of retail sector. We have many exclusive labels and Pick n Pay box range that are sourced and bottled from South African wine industry. Now the next power category and undoubtedly one of the most important and the biggest change as it appears on every customer shopping [ till slip ] is our bakeries. Incredible work has been done to create extra theater, stepping out -- counters out physically onto the trading floor, no more flat counters. Bringing the bakers to the floor will be a great talking point, adding color, wonderful aromas and great pricing. We've strategically positioned tables of delicious confectionery, pastries and breads to stop the customer and entice them to buy ranges that will follow clear flows from confectionery, biscuits and rusks, into savory pastries and into rolls and our bread range. Special love and attention, some may call it an obsession, be it in range, space and voice, will be given to our hot in-store bread and supplier [ plant ] bread. Our bakers and bakeries are backed and supported by regional and store training to ensure that we have the best bakers and bakeries in South Africa. Our bakery ranges are 100% sourced locally; and coupled with our bakery manufacturing facility, offers an outstanding range of bread, rolls and cakes prepacked for our customer. Now while the use of the perimeter of the store for our power categories has been very important, you will notice throughout the store we have used [ indented gondolas ] and power tables to accommodate these wonderful moments of theater where you can enjoy our power categories. An excellent and great example of this is our hot beverages. We've dramatically expanded our ranges and space of coffees and teas. As I spoke about, to accentuate the experience, we've created a hot beverage meeting point in our stores where you can sample and grab a special blend or a great special offer. This has been done, as I spoke about, by [ indenting our gondola ends on our ] aisle and adding a beverage power table in front to add the impact. And finally, to complement these irresistible hot beverages, we've created a snacking world. Now our snacking categories were dramatically under-spaced, an under-ranged and overlooked hero of Pick n Pay. We are now giving snacking the power royal treatment. We've magnified the importance of our snacking lunchbox, entertaining and indulgent snacking, doubling and in some cases trebling the space, a dramatic move to the back wall of our stores to drive footfall to the furthest corner, an aggressive move that will have customers raving about our snacking ranges and space. These snacking worlds will bring together extensive runs of potato chips; pretzels; ranges of soft and hard extruded [ naks ], puffs and strips but hand-in-hand with these tummy fillers, a fantastic range of super healthy snacks and nuts under our live well and kids range. Our role in making South Africa healthy is a big point of Pick n Pay focus. Now I think you all agree we're giving you an incredible taste of the CVPs of the different brands within Pick n Pay and the imagery that we've created and stimulates in all of your minds. And this will be so evident in the stores and in the hearts and minds of our customers from this day forward. We are excited to hand you back over to Pieter, who will take you through the rollout plan. Thank you.

Thank you, Andrew, and thank you, Iain, for that exciting description of the experience that we are going to create for our customers. We are currently already testing these customer value propositions in pilot stores across the country, a couple of here in the Western Cape, a couple of them in the [ Gauteng ] region, so we have not been sitting still. We will further refine these propositions and, in the coming months, begin a rollout to our full store estate as of the beginning of the second half of this year. A total of 150 stores is planned for the rollout for this financial year. We will measure our progress by Net Promoter Score. And as said earlier, we plan to raise the Net Promoter Score of these stores by 20 percentage points by FY '26. Now I would like to invite Marek, who will take us through our equal exciting plans for the further acceleration of Boxer. Marek?

Thank you, Pieter. I'm really proud today to represent the Boxer team and to share with you Boxer's Ekuseni plans and ambition for the next 4 years centered around accelerating the expansion of Boxer but, first, some background. This month, as said by Pieter, Boxer celebrates its 45th birthday. The slide shows some of the many highlights and the key milestones over our 45-year history: in 1977, humble beginnings, opening our first store, a very basic trading store, in Empangeni under the name KwaZulu Cash & Carry; 2002, joining the Pick n Pay family, now 20 years ago; 2012, the simplification of our name and our logo to Boxer; and in 2015, the opening of our 200th store but significantly the beginning of our transformational journey to becoming a discounter. It's been an incredibly exciting, eventful, sometimes challenging but ultimately very successful journey. This year marks our eighth as Southern Africa's favorite discount supermarket under our tagline, "Never pay more than the Boxer price." Boxer has now grown to 380 modern, vibrant stores across our 3 formats of supermarket, liquor and hardware situated throughout South Africa and Eswatini, with over 80% of our estate newly revamped to our latest spec. Our highly focused product range of 3,000 branded and powerful confined label SKUs sets us apart from our competitors as well as our project -- our Pick n Pay Project Red stores; and enables us to offer our customers market-leading value on the products and combos that they want, which is delivered to them by a highly motivated, customer-focused team of 25,000 Boxer employees who are led by an experienced, stable and results-driven leadership team. The Boxer model and customer value proposition is synonymous with market-leading low prices. We run continuous promotions with many exciting free deals. We give best value for product combinations and further value back at the till through our Boxer eCoupons, which drive loyalty. And we give back to our customer communities through the nurturing and the development of local suppliers, support of local schools and organizations, partnering together on property developments and providing significant employment and career opportunities. Boxer is famous as a destination for our basic commodities, our high-quality and best-value confined labels, many of which dominate the categories in which they operate. We have clean and fresh service departments covering butchery, bakery, fruit and veg and hot delis; and a wide range of relevant value-added services that add convenience to our customers' shopping experience. For Boxer, our group Ekuseni plan marks the next phase in our journey. We have a successful, efficient model with strong customer loyalty and advocacy in the market. We have the ambition and, I believe, the responsibility to take our Boxer stores and the value they give to more communities across South Africa. Ekuseni, for us, is the goal of doubling the Boxer turnover over the next 4 years. And the key components of the plan require us to open 200 new stores across our formats in the next 3 years. We have identified the locations we want to be in, and our property teams are hard at work securing premises. We need to maintain our market-leading like-for-like sales growth in our existing store base. And our commercial, marketing and store operational teams are passionately obsessed with continuous delivery of exciting, innovative and disruptive promotions to drive sales. Our supply chain will be expanded to service the new stores. This month, we opened our fifth distribution center here in the Western Cape. And we'll shortly [ go to ground ] on a second DC up in [ Gauteng ] to serve our expanding footprint. We will continuously improve our efficiencies throughout the business as we grow, using appropriate technologies. And we have some exciting projects underway, particularly in the area of supply chain planning. It's an ambitious plan. And key to our success will be working with new and existing property partners to meet our space rollout plan; ensuring that we develop and train a strong pipeline of staff for the many positions that will be created both in stores and support areas; working with communities and forming long-term sustainable partnerships; and importantly, strengthening the core elements of our business that make us unique, simplicity, efficiency and being the lowest-cost operator in the market. We are in an exciting place and moment in our history and energized for the next phase and the challenge of Ekuseni. Thank you. Back to you, Pieter.

Good. Thank you. Thank you, Marek. You have listened now to 3 of the building blocks: Project Red, Pick n Pay retail and the topic of the expansion and further acceleration of Boxer. Our 2 new Pick n Pay distinct brand propositions and Pick n Pay [ winning books of formula ] will lead over time, by 2026, by a market share gain of 3%, but there is one element that we need to add. And with this, I would like to tell you how we're planning to take advantage of the opportunities that online and digital have to offer. Earlier in this presentation, I mentioned the importance of omnichannel to the future of Pick n Pay. South African online grocery remains in its infancy. We will -- we believe that this channel will continue to grow exponentially over the coming years. As a group, we have set ourselves the ambition to build a market-leading online proposition. We have a strong asap! on-demand offer and a good scheduled delivery business, but we know we can grow faster. And we believe that joining forces and working with businesses who share the same commitment to customers is the best way to further accelerate our growth. Today, I'm extremely excited to announce that Pick n Pay and the Takealot Group have entered a commercial service agreement. The agreement means that, across South Africa, customers will be able to buy Pick n Pay food groceries and liquor through a new dedicated experience on the Mr D app. This is a perfect synergy, and we are energized by what this agreement will bring to our business. Let me outline why we believe this is a perfect synergy. Pick n Pay brings strong expertise in fresh food and grocery. We have been able, building our capacity to pick orders efficiently and successfully in our store network across the entire country. The Takealot Group has an industry-leading platform, technology and delivery. The new service will be available as of this August 2022, starting in the Cape Town area and quickly scaling nationwide by the end of financial year '23. I would like to invite David North to give us a little bit more details on how the agreement will work practically and will translate into a winning customer proposition, but before I do so, let me introduce Kim Reid, the Founder and Chairman of the Takealot Group. Kim, first of all, thank you very much for being with us here today. We as Pick n Pay are thrilled about the opportunity to collaborate with the Takealot Group. And we would like our investors to hear from you directly why you believe this agreement will be a successful one.

Thanks, Pieter. Thanks for having me here this morning. [ And I'm pleased they took their ] [indiscernible]. We're extremely excited about the opportunity to work with Pick n Pay on this. We've had a journey over the last more than a few months with largely Pieter and David and the team, Lerena. And we're incredibly excited because of the quality of people that we're dealing with and, I think, the level of trust that we've built up over this short space of time. Grocery is an area that Takealot Group has not really got involved in, in any large sense, but with this commercial agreement, we believe we're bringing the best of grocery, being Pick n Pay, as well as the best of online, being ourselves, together, 2 South African favorites coming together to build something which we believe will become substantial. Takealot Group today delivers more than at peak. In fact, our last peak, we were in excess of 5 million deliveries on a monthly basis. Many of those are what we believe the most difficult deliveries to make, which are fresh prepared meals to customers' homes. And we believe this is a truly customer-centric relationship that we're building here. We're combining the quality reach as well as the pricing of Pick n Pay, together with our proven ability to satisfy customers; scale platforms and technology, which is extremely important in this type of environment; as well as scale delivery which we've been successful in doing over the last 10 to 12 years, so happy to be part of this. Thank you, Pieter. And we look forward to a wonderful relationship.

Likewise. Thank you. Thank you, Kim. David?

Thank you, Pieter. And thank you, Kim. And good morning, everyone. Thank you in particular, Kim, for your extremely kind words. I mean I have to say it has been a journey over the past few months, but one thing that I've always said to my team is that, whenever we meet the Takealot team, we have to be at our best every time. And I think that has characterized the way that we've worked together over the past months. So let me, as Pieter has asked, highlight just 5 key features of what we believe is this groundbreaking initiative. First of all, it will, as Pieter was explaining, be a dedicated customer journey on the Mr D app. So what does that mean? What it means is that, for you as a customer, when you open the Mr D app, you'll be given the choice to buy food from restaurants as you might do at the moment on Mr D or to buy groceries from Pick n Pay. And we hope you'll click buy groceries from Pick n Pay, and then when you do, you will enter a completely tailored food and grocery experience. And what you'll then do is build your basket by browsing and selecting the items that you want. And through the technology and through our determination, the items on offer will accurately reflect what is available in the store that you're shopping from. And then once you finished shopping and you pay for the order on the Mr D app, the order will then be sent to the store, and a dedicated Pick n Pay member of staff will pick it and pick it quickly. And then once it's picked and packed by the Pick n Pay team, and this is the teamwork element of it, it is then collected by a member of the Takealot delivery fleet and delivered then to you. And our target will be to deliver within 60 minutes of you placing the order. And then last but not least, our Smart Shopper loyalty program will be embedded in the offer on the Mr D app so that customers can earn points when they buy Pick n Pay groceries on Mr D. And as Pieter was saying, our plan is that this service will be available nationwide by the end of this financial year. So to summarize. Through this agreement and through other work that we're doing, we are step-by-step fulfilling our ambition to build the leading online grocery customer offer in South Africa. And our goal, again as Pieter was showing you earlier, is to increase our online revenue eightfold by financial year 2026, so tremendously exciting. And if I may, what I want to say is that our work on online grocery is actually one facet of our omnichannel strategy and one part of our digitalization journey. And actually, investors quite often ask us to unpack a little bit more what we're doing on digitalization. Over the past 12 months, we've made great strides on that journey, which is to set out to ensure that the group fully embraces digital tools to achieve 2 things: first of all, to benefit customers; and secondly, to improve and make more efficient our own ways of working. Now obviously I haven't got time to go through that in detail, but let me just outline a few examples: first of all, our Smart Shopper platform. It is, we believe, we know, one of the best available in the market and so much so that other businesses want to use it as well, so we're now licensing it through a Software as a Service agreement both in this country and outside. And that is enabling us to monetize the platform. Secondly, advanced analytics and artificial intelligence. And these are powering our forecasting and category management capability to new levels and actually and just as importantly transforming the way that we personalize the offer for customers. Thirdly, automation. This is the key to unlocking efficiencies in our processes, whether that's in the store, in our supply chain, in our finance operations or in how we administer infrastructure. And I think the best way of looking at it is that, the more you automate your processes, particularly where those processes are repetitive, the more you're able to free up your colleagues to focus their talent and their ingenuity on what really makes a difference in the way that they do their work. Fourthly then, improving our engagement with customers. And our value-added services will soon be available on all of our digital channels, and we're also looking to expand those services. For example, in the coming weeks and months, we're going to launch a self-scanning app for our customers to use in store. So that will be exciting. And then fifthly, monetizing data and retail media. Smart Shopper generates more than 1 billion data points each day. And so to make use of that and to apply that, we've recently launched a customer insights portal where suppliers and other partners pay a subscription to access aggregated data and the insight that derives from that data. And there's plenty more value to be unlocked in the future. And in addition, we're also growing our revenue from our retail media platform. Finally, cloud operations. Over the last year, Lerena talked about it in her results presentation this morning, we have completely migrated or completed the migration of our infrastructure, all of our infrastructure to Amazon Web Services. And what this means, again, is 2 things. First of all, we no longer have to manage our own data centers and Lerena's particularly pleased about this. We no longer have to handle, manage the depreciation in the value of the technology. So now that, that migration is successfully behind us, we're extending into other cloud-based applications. So I hope you can see that in these and actually in other ways that I haven't got time to talk about today, digital technology is key to the way that we run our business, is key to improving our offer to customers and will be key to delivering the future ambitions that we're talking about today. So thank you for that. And my job is now to hand over to Lerena to talk us through the really important work that is Project Future Phase 2. Lerena?

Thank you, David. And again, good morning, everybody. All of these plans that we've listened to this morning cannot happen if we don't find the way to fund them. Greater efficiency is a priority for every retailer, but never more so than now as we are facing the macroeconomic cost pressures in all the markets we traded in. Project Future seeks to deliver efficiency, not only to mitigate these pressures, but very specifically to deliver savings to reinvest in our customer. This is an essential enabler of the overall plan. We have made good progress over the recent years, delivering ZAR 1 billion of Project Future Phase 1 savings, as I've detailed in our results presentation this morning. However, our benchmarking indicates that there is much more for us to unlock. Project Future Phase 2 aims to deliver ZAR 3 billion in savings over the next 3 years. Our first focus area will be store productivity. Through simplifying and modernizing our store operating models, we can unlock the value of a more flexible workforce and, at the same time, deliver better customer service. Supply chain optimization is an ongoing priority for the group. And again, as I've indicated this morning, have delivered significant gross profit margin efficiencies to date. We will continue to take the learnings across both Pick n Pay and Boxer into our supply chain and apply to the group's entire logistics infrastructure. We will step change the efficiency gains through our new Pick n Pay Eastport DC, scheduled to go live during FY '24, as Pieter discussed this morning. Pieter indicated that we believe we will decrease our cost per case with 12% through the Eastport. We are also targeting further working capital improvements of more than ZAR 1 billion over the next 3 years. As we execute our new CDP strategy, this will deliver further interest savings. The same CDP strategy, as detailed by Iain and Andrew, will also unlock value from commercial initiatives as we work with suppliers on collective win-win opportunities as we buy for less and sell more. My personal opinion is that one of our biggest opportunities is in goods not for resale. We have significant opportunity to buy better and improve specifically utilization of consumables and capital spend across our organization. We also have untapped opportunities in better leveraging technology to save on these costs. We want to create a better, slimmer, simpler and more effective support office. Our objective is to create an efficient and effective office environment that will leverage the benefits of hybrid working and automation as we accelerate digitalization across our business as just set out by David. Lastly, we will continue to leverage our flexible store estate to best serve our customers, while at the same time, tackling rising store operating costs. Our goal is a sustainable as well as a flexible estate. And I want to focus briefly on the relevance of delivering our environmental goals as part of this overall plan. Everybody will agree that ESG must be embedded in any strategic plan of this scale. We, however, start from a very strong position. One of our founding principles is that doing good is good business. There is a very clear linkage between our EKUSENI ambitions and our environmental program, the E in ESG. By using less energy, we reduce waste. We help the environment and we reduce our costs. Let me illustrate this by outlining some of our goals on resource emissions and waste. Our goal across both Pick n Pay and Boxer is to be a zero carbon business by 2050. And to achieve a 60% reduction in carbon emissions by 2040. Reduction in energy use is key to this. And I'm pleased to say that we are currently tracking a 35% reduction in energy use per store compared to our 2009 base. Our new Eastport DC will be an example in terms of energy efficiency and solar generation. We have similarly bold targets to tackle: food, plastic and general waste. Waste is literally a waste of resource and a major unnecessary contributor to greenhouse gas emissions. That is why we are targeting a 50% reduction in food waste by 2030. We are already almost halfway there based on our 2018 baseline. We are serious about all the targets outlined on this page and a firm plans behind each of them. This work will be a significant contributor to the ZAR 3 billion Project Future savings ambition. To support the delivery of eco saving and to enable Project Future Phase 2, as I've just detailed, we've embarked on an accelerated capital investment plan. The Board has approved a ZAR 3.5 billion for the FY '23 financial year. ZAR 400 million to fast-track our digital and technology agenda, ZAR 1.4 billion to accelerate our Boxer business, as Marek has detailed, and the remainder to grow our clothing business, open new stores and deliver the Pick n Pay customer value proposition, as well as ensuring that we have the necessary funds to enable the Project Future initiatives. We believe that this fund is what is required to step change the business. The group's strong liquidity position with access to more than ZAR 10 billion of cost-effective facilities along with free cash flow generation and the working capital improvements of ZAR 1 billion that we are targeting will support the delivery of our strategy with some increase in the medium term. Our Project Future Phase 2 goal is to deliver the ZAR 3 billion in savings. Our objective would be to spend the ZAR 3.5 billion capital where we can get the most returns. And in order for this to be successful, we have to reinvest in our customer value proposition. Greater business efficiency enable us to contribute more. We will deliver stores, supply chain, and it is a board office environment that is singularly focused on serving the customer and delivering on our environmental goals. This will be supported by the accelerated capital investment plan in the medium term, and we'll ensure that we spend the money where we get the most return for our shareholders. I will now hand over to Thembi to take us through the plans to focus on the most important asset in our business, people. Thank you.

Thank you, Lerena. We are a business of people. We serve millions of customers, people, a month. We provide business and trade for our suppliers and the thousands of people they employ, and we employ over 90,000 people across the group. And it is them, our people, who will deliver the strategic plan. Our people plan is a key enabler to deliver EKUSENI. However, the work at hand is to build a winning team. We're building a team that has the capacity and the capabilities to deliver on a future retail operating model. We essentially want to create a step change in our customer and store experience. So our build has to start with our people and an honest assessment of our current teams is ongoing to ensure we have the right people in the right seats with the right skills. Our EKUSENI targets are crystal clear. And these targets are being consistently cascaded to every level of the organization, to ensure that we execute and deliver. As we know, we're trading in a volatile, uncertain, complex, ambiguous world. And we need to have people who bring capabilities and the capacity to adapt and be agile. And while our core value of our business is promoting within, we so therefore, we'll be growing our own talent to develop better butchers and bakers and skills across the organization. And we will also source future skill sets from outside our business in the areas of data scientists and U.S. designers. We strive to create a diverse workforce across our business, and in particular, to transform our leadership levels. And as we build out those teams, we must create an inclusive culture that retains the best of our people and attract the best in the market. We are seeking to generate a very different experience in store. And therefore, our training, mentoring and development is going to be laser-focused in supporting the new customer value propositions that Iain and Andrew have outlined, whether it's in customer service or in agile ways of working in our support office. The adoption of e-learning tools during COVID has really allowed us to reach more people, train across more disciplines and save more costs in our learning and development programs. Consumer demand has shifted. Therefore, the way we work has also shifted. And the pandemic has accelerated these shifts as we know. We learned skills of remote working during the COVID. And we also learned that teams perform better when we are together. It enables better collaboration, coaching and creativity. Our hybrid policy seeks to combine the flexibility of working from home, and the social connection and collaboration of the office environment. We, as a business, are committed to hybrid working ways into the future. As Pieter indicated, EKUSENI is a multiyear journey, and we need to bring our people along on the journey. We have prioritized staff engagement in our strategy and structurally have brought alignment by bringing the communications division under people, thus ensuring that engagement is part of the people plan. Pick n Pay is a value-led business. And our engagement seeks to always be clear, consistent and delivered with compassion. But we're fortunate we have a young workforce, mobile-enabled, 91% of them own a cell phone. They speak 2 to 3 languages. And therefore, we are able to really adopt new modern ways of engaging with them through e-learning, mobile-first approaches and the simple act of just talking to our people more. We will continue to listen, listen to our customers, listen to our employees, listen to our stakeholders and act upon the feedback we receive, the good and the bad. We're steadily also making the shift from communication to engagement. And that shift is one that demands an iterative process. What you do has greater impact than what you say. Therefore, after all we've shared today, we must hold ourselves ruthlessly accountable to delivering the results. And we will track our progress against the performance-linked rewards that will only be payable upon achieving the 10% sales CAGR and a minimum PBT margin of 3%. Our progress is a significant improvement of customer service in store. And therefore, the introduction of NPS across all stores is a key enabler, simple, clear, measurable KPIs linked to our EKUSENI goals. And lastly, we are reviewing every aspect of our employee benefits, whether it is our compensation, right to the spaces that our employees occupy. Simply put, a better employee experience must deliver a better customer experience. Pieter says, and we believe that we are in the business of people. And our people plan is a critical enabler to delivering profitability, an engaged staff force and a great shopping experience for our customers. Thank you, and over to you, Pieter.

Thank you. So this is our strategic plan. It's energizing, it's exciting and it will set us up for a bright future. Let me now give you a quick recap of the plan. There are 5 main parts that you have to take away. First of all, redefining Pick n Pay's relationship with the customer through 2 brands with a distinct new value proposition for each respective brand; secondly, the further acceleration of the growth of our Boxer business, already the leading discounter in Southern Africa; thirdly, a step change in our online offer. We have announced today a game-changing supply agreement with Takealot Group, which will see a dedicated Pick n Pay grocery journey under Mr D app; fourthly, the delivery of our ZAR 3 billion efficiency savings through Project Future. This will make us a more efficient business and will deliver even better value to the customers. And last but not least, building a winning team. My team is refreshed, energized and together, we will deliver this plan. To hold ourselves accountable, we have set out goals to be achieved for the 4 years of the plan. Our ambition to deliver by the following financial year 2026 is a 20-percent-point improvement in the Net Promoter Score of the Pick n Pay stores. We will say more in the coming months about how the current Net Promoter Score and how we will roll this out; secondly, the doubling down of our Boxer and doubling the sales in Boxer. And through the renewed Pick n Pay and the accelerated Boxer, our goal is to deliver 3% market share growth by FY '26. We are aiming for an eightfold increase in online sales and accelerated by the announced agreement. We are committed to the delivery of ZAR 3 billion savings through Project Future. And lastly, we will tie our incentive performance management program to 10% CAGR over 4 years and crucially, the delivery of a profit before tax margin of above 3%. We will hold ourselves accountable to these goals, and we will measure ourselves against them. As we progress on our journey, we will also give you, our stakeholders, additional clarity on our progress through additional disclosure of our segmentation turnover between Pick n Pay and Boxer as of the first half FY '23 onwards, our Net Promoter Scores for Pick n Pay from the first half of FY '23 and the progress in delivering against our Project Future cost savings goals. Let me be clear. Delivery of this comprehensive plan will not be instantaneous. It is a strategic plan, not a PR initiative or a quick fix. It will take time to deliver, and that's why this is a 4-year plan. As you all know, we're also not launching the plan in a vacuum. We have been operating in a turbulent global and local environment for some time. And unfortunately, the outlook is not different. We said in our financial results presentation earlier this morning that are potentially significant [ inflammatory ] and other cost pressures. These reflect international factors, in particular, the situation in the Ukraine and its impact as well as local factors, including higher insurance and security costs following the civil unrest and costs required to mitigate the impact of load shedding. Stakeholders should not expect immediate returns from this strategic plan. However, we do expect an acceleration of returns from FY '24 as the benefits of the plan will materialize. In guiding your expectations on timing, I do, however, want you to be confident about our ability -- our ability and determination to deliver the plan. As I mentioned before, we have not been standing still. Boxer has outperformed the market for some years and plan and our plan sets out how it can continue to do so. We have delivered renewed growth in Pick n Pay retail and continue to see trade momentum in this financial year. Through Project Future, we have begun our efficiency journey. Investing the savings in lower prices, we are improving customers' confidence in our prices. It is early days on our new Pick n Pay brands and renewed customer value proposition. However, we are very encouraged by the positive customer feedback that we have received so far in our pilot store. So let me finish summarizing the investment highlights that I think you stakeholders should take away from this presentation. We have made a comprehensive analysis of every aspect of our business. We have listened to our customers, and we are confident of the following: we do operate in a growing market with significant opportunities to grow further. We have an excellent store network, including a highly committed and entrepreneurial franchisee community. We have a measurable both but believable plan to accelerate growth and grow share. We have proven growth engines in clothing, Boxer, and online with much more to come. Our ambitious savings program will improve our competitiveness and our profitability. And our plan is already in action, and we have momentum. We have a rejuvenated management team with the will and the skill to win and the willingness to go the extra mile. With that, I would like to thank you for listening to our presentation. First, take a sip of water, and then we go into the Q&A. Thank you.

Good. Thanks, Pieter. Maybe we can start with some questions coming in from the webcast. We have almost 500 people online. So quite a few questions coming in. I'm going to try and group them if we can, so that we can get a cohesive answer. And perhaps starting with inflation. Post period sales momentum has been strong. Is this being driven by a rising retail selling price inflation? Given the sales growth improvement, has this resulted in a normalization of inventory levels? And an associated question for how long will Pick n Pay be able to shield customers from rising food inflation? And then what selling price inflation would you reported if you exclude price investment that took place?

There are 4 questions here, if I understood correctly.

Yes. All in one.

All in one. Let's start with the second one, and that is the inventory levels. I think what we have done and anticipated already as of the end of the last calendar year, by taking a strategic initiative between both sales lines in order to anticipate on the upcoming rise, especially on commodity prices. And I think compliments to Marek and Iain and the team that we anticipated, especially on some key commodities, to build up stocks and that has been reflected in our increase in inventory levels. And the way we procure, and I think that's the strength of the group, we continue to look for opportunities in that. And I think a recent example, I think, was UHT now, if I'm not mistaken. Roughly around about the value of ZAR 100 million for the retail part of the business. So that's one thing. Secondly, I think we have been able to demonstrate that our internal inflation is substantially lower than the CPI food inflation that has been reported. We continue to invest in the customers and in our pricing and price perception, especially price perception is a key driver in that. As highlighted by Lerena as well as by myself, yes, there will be continuing to see some more pressure ahead of us. And I think we have to deal with that. We continue to make, I think, proper decisions and as much as possible, avoid that we pass on those increases to our customers. And I think at the end of the day, and I would like to take this opportunity for both commercial teams in Boxer, in the retail part, in the clothing part as well when it comes to the great collaboration that they have achieved so far with our vendor network. And then I missed definitely one that you're going to answer.

I think it's the one about how much our internal selling price inflation would have been if we didn't reinvest in the customer. I think the data point there is the 0.8% in our gross profit margin. So we have really ensured that we do a significant incremental investment. I think it's important to also understand that with -- even without that investment, the team is absolutely focused on keeping the prices where they were at the end of last year wherever possible. So our selling price inflation is now less than half that of CPI, and we will continue to focus and target those levels going forward.

Questions on Clothing. The first one is -- has the shift towards local sourcing and clearly impacted the cost of products in line, perhaps with offshore pricing? And then also a question on clothing from whom do we believe we are taking market share?

Second one is, I think, more difficult to answer. What we know is we take share from different parts. I think it all goes down to what [ Hazel ] and her team have done by creating a very clear value proposition and customer proposition in relation to different segments that we would like to serve. Coming back to your question is, okay, have you been able to be less dependent as a consequence of the fact that you go into local sourcing? I think we have been able to mitigate that. Of course, there's still -- it's 40% of what we sell, we locally source. There's still 60%. We have been affected given the fact that there is disruption in the supply chain, especially if you look at the ports, Durban that was closed for a period of time, the cost of containers in order to win. So we will continue to explore to see if we can -- if we can continue to further increase that part of local sourcing. All with the objective to reduce what I call risk.

Perhaps some questions for Lerena on CapEx. Please could you provide CapEx guidance post FY '23 or a target ratio for CapEx across sales on a sustainable basis? And then another question, there's some concern that our CapEx is not generating a sufficient return. And that our competitors appear to be generating much higher returns on CapEx.

So I think the guidance that I've just given for FY '23 itself is an escalated level up to ZAR 3.5 billion to support the existing plan. We are seeing, foreseeing similar levels into the medium-term future over the plan period. I absolutely believe that we will be generating superior returns from these investments. I think from the presentation today, you will see that there is a lot of detailed thought has gone into where we should be investing. Firstly, into expansion in our current growth engines, specifically Boxer. We didn't expand that much on the Clothing business today, but that also is a very important, very capital-efficient growth driver for us. And then lastly, to focus in on the CP and enable those Project Future initiatives for us to deliver on the digital and innovation as well as that ZAR 3 billion savings, we would need to invest in the automation that David North has detailed. So in short, elevated levels in the medium term. However, I believe you will see the returns through the commitment of the sales CAGR and PBT margin targets that Pieter has put out.

And maybe to give a little bit more color on that because I can understand the angle of the question is that we have created what I call a CapEx Approval Committee meeting, meaning to say the teams have not received a blank check. Every business case that is being presented has got ROIs, and we will measure those ROIs not only when it comes to the business case itself, but also at the moment the business case becomes operational. So what I call postmortem. I think that's a much more important measurement over time in order to start measuring the returns. The team of Boxer is fully in line with that. We do that within the retail part, be it on the refurbishment, be it on the opening of new stores, but as well as when it comes to the clothing part of our business. And I think you should take away 1 positive element and it is the amount of transparency that we have been providing to all of you this morning. Those 66 stores of clothing, as an example, are signed locations. Meaning to say it's a matter of getting them operational. It's a threefold compared to what we have realized in the last financial year. And let's face it, what you said, Lerena, on clothing, it's a relatively limited CapEx investment.

There are quite a lot of questions on the Takealot agreement. Perhaps David would like to answer some of those. The first one being, can you give us some guidance on how the operating partnership will work? Will Takealot, have live access to inventory data? Or will there be some kind of dark store network to service the Mr D app partnership? And how many SKUs will be listed on the Mr D app? There are other ones for David after that.

Thank you. Some quite detailed questions there. I mean, fortunately, the -- fortunately, the offer, as we were explaining, doesn't go live until August. So some of those things need to be worked out. But let me -- let me emphasize a couple of points. I mean, in the way that I set it out, it's a commercial services agreement between Pick n Pay and Takealot. So there are things that Pick n Pay does and things that Takealot do through the Takealot Group does through its Mr D platform and it's Mr D offer. So the inventory part of it is for Pick n Pay to manage and to administer. And as I then explained it, the customer orders on the Mr D app what they order is then sent to the Pick n Pay store and that is a real store, not a dark store, certainly at this stage. And then the Takealot delivery fleet is responsible for delivering. I think -- was there a second question somewhere in that, Tamara, which was about Smart Shopper?

There wasn't, but there are additional questions about Smart Shopper in terms of POPIA and also in terms of the number of Smart Shoppers that we currently have as active members.

We've got to close on 10 million active Smart Shopper and everything in our Smart Shopper environment is POPIA compliant.

I think it will be an important element as well. So we have been working on this agreement for 11 months. First, it started as a new company we have some cups of coffee. And this was a cup of coffee that tasted to say, okay, listen, let's have a second cup of coffee. So I think the chemistry that I developed with Kim over the first months, especially to say, okay, are we able to create a joint value proposition for the South African consumer led to this agreement? We should realize is that we have made great progress with asap!. But by working together with the Takealot Group, we are creating -- we're adding a platform with 2.5 million active consumers. So it's a substantial opportunity to further penetrate this market.

I have further questions on Takealot for David. If we're looking to 8x online revenue by FY '26, will this JV Takealot be profitable by then? And if so, to what extent? Will customers have a limit on the number of items they can purchase on the Mr D app? If so, what is it? And then how will prices on Mr D app compare to prices in store and how much will delivery cost?

Okay. Your -- can you hear me? Okay. You're testing my memory there, Tamara. The first point is it's not a JV. It's a commercial services agreement in the way that I set it out. Maybe run through them 1 by 1 because I'm trying to answer all of them, and I managed to forget each of them. So kick off with the first one.

The first ones regarding the Pick n Pay Takealot partnership where customers have a limit on the number of items they can purchase. And if so, what will the limit be?

It's an on-demand service. So it's a sort of 1-hour service that characterizes on demand. The nature of those is that there will be a limit simply for the purposes of practicality. If you look across the market, if you look at our asap! offer, it's around 30 items at the moment. So we can expect that there will be a practical limit on the number of items that a customer can order.

And then how are prices on Mr D app compared to prices in store and how much will delivery cost?

Prices will reflect to the price that you get in store, and it will reflect the promotions that you'll get in store. So we want to give the customer the experience that they would get in store in terms of pricing and promotions. In terms of delivery, I don't think we've got that far yet, actually, have we in terms of -- but it will be competitive. It's going to be exciting.

And yes, a question on the 2 brands that Mr D and asap!, would that be confusing to consumers? Or how will that work?

I think as Pieter has explained, we're very excited about this, and we think that Pick n Pay available on Mr D is going to be a big thing for South African consumers. And we don't want consumers to -- we don't want customers to miss out. And therefore, until that offer takes off, and until it grows in the way that we envisage it. And until -- as we were explaining, it's rolled out nationwide, then rest assured to customers that asap! will still be available to them.

And then perhaps a last question for now. Please could you highlight how the financials will work with Takealot?

I don't think I can actually. I mean a lot of that is -- I mean that's a sort of commercially sensitive question, but there was one that I've forgotten, I just remembered, which is, are you expecting to lose money, breakeven or make money? And the answer is that currently, when you look at our on-demand service through asap!, we are close to breakeven. And therefore, our goal with what we're doing in this commercial agreement is that we will, over time, make money from it. And -- and as the economies of scale build and as we improve the offer and it gets more efficient, we're confident that we'll be able to achieve that.

So another question on our -- the performance of our e-commerce channels. Please comment on the performance of the various components of our e-commerce channels, asap! versus traditional, scheduled versus Click n Collect. Has the return of workers to the office had any impact on how customers are shopping?

I think David gave enough insights on the on demand of our value proposition. If you look at our scheduled business, that's a business that we have operationally at least for the last 10, 15 years, it's a decent business. But definitely, if you look forward, I think there's a big opportunity there as well to further scale that. And that will require some additional homework. I think overall, over time, the pie when it comes to scheduled is bigger than on demand, and that is something you'll see as well in the rest of the world. In relation to Click n Collect, and that's for me, a surprise in this country as a newcomer. I would have expected that Click n Collect would be much more wider already introduced in this country. And I think we, as Pick n Pay have a huge opportunity with the fact that we have a dense network of almost 2,000 stores. So it's definitely an opportunity that we would like to pick up.

A few questions on the 3 different entities within Pick n Pay announced today. How will you ensure minimal customer overlap between Boxer, Project Red and Pick n Pay? What is the target private label participation in the Project Red stores?

I think, first of all, they are 2 very distinct offers. And I think both Marek as well as Andrew alluded to that in relation to it. Boxer is clearly a limited range discounter with a very high focus on combo deals, the best and the lowest prices and a high participation when you talk about private and confined label. And what Marek highlighted already, there are categories whereby we do exceed 35% penetration. I think the way Andrew explained project Red as we speak, he talked about the range of 8,000 SKUs. So the entire customer journey that you do provide for the customer when it comes to creating commodity offers, having lower prices but also when it comes to the freshness from an assortment perspective, I think, clearly will demonstrate. And I can only make it more tangible by inviting you to visible stores for the differentiation. Of course, there might always be a certain level of overlap, depending on the shopping mission of the respective customer because everybody, once in a while, would look to have a fantastic bargain. But rest assured, we will offer them in all 3 different brands that we have across our group estate.

Some more questions on Project Red. When do you plan to start rolling out the Project Red store brand? Will you be opening completely new locations or converting existing Pick n Pay stores? And then perhaps some clarity for 1 of the people who's written in on the name Project Red and the fact that it's a holding name rather than a brand?

Right, it's a holding name. You can only have learned, you can only make a SIP tech line because let me be clear, we will not change Pick n Pay. Iconic brand, great brand heritage, fantastic brand equity. And under the leadership of Andrew, we start testing a SIP tech line in order to correlate what we stand for in Project Red, the code name in relation to the value proposition that we are offering. But I've learned one thing. You can only make once a change. And therefore, we're testing what we do, where we listen to 7,000 customers when we started building a strategic plan. We do the same now with customer panels. I want to get feedback from the customers rather than Andrew and I are going to sit down on a whiteboard, scribbling down a few names. So that's one. To be and viewed, rest assured in the next months to come. When it comes to the rollout plan, the following: we deliberately took the approach by 7 stores only in different demographics in order to test our value proposition. Those 7 stores are ready. Some of you here in the room will be given the opportunity to be with us tomorrow when we make that store tour. It will give you the touch and feel and the difference when it comes to the experience that we create. But we're still in the engine room, which I know that we don't have yet and have to prove business case. It always requires fine-tuning. Let's go back to Marek. 2015, a game-changing year for the Boxer colleagues. It took them years, well years, it took them some time as well to get the value proposition right. Started, if I correctly 2, 3 stores and from there on into the rollout mode. The same we have planned for Blue and Red. So May, I would say, till August, being in the engineering room, we have lined up the next batch of stores where we think we can roll that out quickly, too. And the objective is to roll out over 100 -- well, 150 stores as of the second half of this financial year.

Quite a few questions coming through post results. Please talk to your outlook for the year. Revenue growth seems to be robust. Would you expect to see trading margin improvements in FY '23? And then could we provide some insight on the key category drivers behind growth post period?

Post period it's end of financial year?

Yes.

We have seen strong performance in both sales lines. So that is in Boxer as well as in Pick n Pay. And that applies for all categories, I have to say. That is the short answer.

Yes. And I think maybe to add specifically from the trading margin perspective, I think Pieter, as indicated in his closing remarks, that we are foreseeing some significant cost pressures coming through in this financial year. And we will maintain our objective to invest in price. So we do foresee that the initiatives that we were discussing this morning would really start bearing fruits in FY '24 onwards.

And a related question, please, could you provide some insight on the consumer basket trends post period and relative to the past 2 to 3 years?

The basket size and customer counts are slowly but surely starting to return to similar levels than pre-COVID, although we are still seeing, on average, a higher basket and a lower customer count. And that's a trend that seems to be persisting. But on average, the volumes are still there.

And I think what's important to highlight is that the different sales lines, we do see on key categories come back to commodities and fresh, good unit growth. But I want to -- again, and it's not the first time, a word of caution. I think I've highlighted this in December as well as I think you alluded to that as well. The cost of doing business, unfortunately, is increasing. We're still paying the bill for increased security costs across our entire store estate as well as when it comes to the extra cost that we have to take on to reinsure our business. Subsequently, I think we all looked at the news yesterday, we are going to see an extra price hike increase on petrol. So with the amount of load shedding that we unfortunately face in this country, that will have an impact as well on the business as well as, of course, we need to transport goods from our DCs as well to our stores. But again, rest assured, the team is sitting -- is not sitting still, we have initiated mitigating actions in order to delimit our exposure as much as possible.

Some questions on Project Future. I think to a degree, some of it was answered in the presentation, but perhaps a refresh. How should we expect the ZAR 3 billion cost savings to come through over the next 3 years? Will most of these savings be invested in price? And can you provide some guidance on cost savings expected in FY '23? And then how much of Project Future ZAR 3 billion savings will be invested in price and innovation, so more or less the same question.

The Project Future savings is absolutely aimed on reinvesting in the customer offer. It won't only be in past. It will absolutely be in the voice to market. So you've already seen in my presentation of this morning that we have increased our advertising spends. And it would also be focused on specifically the in-store experience and the customer experience as well. So the broad Future initiative is an enabler of EKUSENI. And therefore, ultimately, the value will come through in the 10% sales CAGR and through volumes. That is our focus. We will be focusing on the customer and through that process, ensure that we improve the price perception and deliver across all the brands.

A question on how our association with Time Bank is working?

It's a very strong partnership, yes.

Yes, a strong partnership for which I think both parties are very proud of and we went through a good learning curve with each other.

What are some of the enhancements or changes to the KPIs of the reshuffle and reorganized senior leadership teams?

I think what -- and plan doesn't go without proper KPIs attached to it. And I think as of day 1, and that's something -- KPIs are very, very important in order to create a performance-driven culture in the organization. And that's something we started with ever since I've arrived. I can only share with you that, that has been very, very well and positively received because you create much more transparency in the organization in relation to what are the goals and what do we need to run after. I think very important as well is that this plan requires multiple years. So the targets that we have set as well as performance targets will be related to that plan. And that will be, to a certain extent, common KPIs. But as well, everybody will have some individual KPIs as well.

And then performance on [indiscernible].

And every plan has risks. And I think -- no, but I think it's a fair question. And I think we had a good discussion in the Board about that as well. What we have created, I think, is a good framework when it comes to continue a risk assessment when it comes to the execution of the plan in relation what's working and what's not working. And that is something I've shared with you as well. We, as a team, will be more open and transparent about the different levers of our business and how they perform. You should understand that in an organization of our size, all these parts of the business that require a little bit more focus, fine-tuning and uplifting. I think with the presentation, I hope that with the presentation, we have provided you with more clarity on how we are going to do that, be it in the rejuvenating of our refined Pick n Pay value proposition, be it in the acceleration of our growth drivers, be it Boxer, clothing and the new partnership agreement that we have signed with for our online value proposition. But at the end of the day, the people make the difference in order to realize this plan.

I'm going to try and summarize just the last one. How many Project Red stores to we foresee?

If you look at our total store network identified at this moment, it is what I call, 40% around and about has been classified as Project Red. But again, also there, rest assured, it is all fact-based, and we continuously reassess our entire store network.

Perhaps the last question on supply chain. How does Pick n Pay's culture and supply capability support the group's ambition for fresh? And then your ambitions will need improve supply chain to deliver the required experience. What needs to be done here?

The -- we have a state-of-the-art fresh supply chain. We are extremely proud of our fresh offer. And I think in Iain's presentation and the photographs and even the photograph that's up on our Q&A, it absolutely illustrate that it is a pivotal piece of our CVP. And we're very, very comfortable that our fresh supply chain can support that. And with Eastport DC that we are launching in FY '24, that will be further supported. So definitely, we've got the necessary capability. Tamara, just the second part of that question again?

The supply chain efficiency to deliver on the strategy.

Absolutely. So I think we gave some data points. Firstly, we will keep on applying the learnings across both Boxer and Pick n Pay across both supply chains to optimize the learnings. And I think we continuously illustrated that over the last 2 years, and we still believe there's more to come. Boxer will be opening also more infrastructure through that process. We're seeing efficiencies in their operating model. And then again, Eastport DC being a very big enabler for us, where we believe we'll be reducing our cost per case by up to 12%, which is a significant reduction.

Maybe there are some questions here in the audience that people would like to ask unless you're very busy on your model. Yes, please go ahead.

Maybe just a quick question on how the franchise operations fit into the Project Red and the Takealot.com announcements?

Again, as I said before, the franchisee community is an integral part of the Pick n Pay family, entrepreneurial-driven, for me, a source of inspiration every time again, that I visit one of the franchisees. We have not gone to market without presenting this plan to them. So they were fully part of the plan. We're fully committed to the plan as well. In relation to the number of stores classified as Red in the franchisee community is a very limited number. And on the online value proposition that we will carry out, a part of the family as well. So that will be an integral part of the value proposition. We don't make a distinction there.

My question is related to the change in disclosure. Do we get line of sight in terms of clothing as well? Or will that stay within Pick n Pay?

So far, ever since I've arrived, I've listened, I think, well to the audience, including yourself, at least they can expect that you requested more disclosure. I think the disclosure in relation to the 2 main sales brands are key, and that is something we will do as of the first half year. We have been disclosing growth figures in clothing as well as in liquor. That's something we will continue to do. But you have to understand that part of the overall retail value proposition that we offer. You also have in-store concepts in our super and hypermarkets as part of clothing. Yes, that's it.

Sorry. Maybe just a last one. In terms of value-added services, will there be anything else that will be added to this table or because it seems to be doing quite well?

It's definitely a growth driver for us and a key area for the future. And I think through our digital and technology agenda, we will definitely be focusing on that as well to support the plan.

When you spoke about the 3 -- or say 3 divisions, are you -- if -- is there going to be a name for Pick n Pay Project X or it's going to be called Project X? And my other question is with regards to clothing. There's been less emphasis on clothing in this strategic presentation. So you did mention that it's an engine for growth. So where are we going to see that growth amongst the 3 brands? Is it going to be in Pick n Pay Project Red or Pick n Pay or Boxer?

Let me give a little bit more color. I think on Pick n Pay, Project Red coming back as we will unveil the SIP tech line for Project Red in the coming months. I think it was very important to highlight here to the audience and to the viewers as well as this will only work if you give the brand leaders full end-to-end responsibility. Maybe that didn't came that clear in the presentation. But Marek, Iain and Andrew have full end-to-end responsibility from when it comes to defining the customer offer, how we merchandise it, how we price it, how we execute it, and they're very well supported by an excellent leadership team around it. And of course, we will utilize the synergies that we have within the organization, be it on marketing and be it on procurement. So that's one. Secondly, in clothing. Clothing is a growth driver, and I think we made it clear during the results meeting as well as in the strategy update for our business. It's a gemstone. And Hazel and our team are doing an excellent job. The fact that we didn't give more color in clothing doesn't mean that it is an important element. But at a certain moment, you have to decide, okay, you only have the ability to keep the audience awake for 2.5 hours. So rest assured, there is a strong plan in place for clothing. And Hazel presented that in October to the Board, if I'm not mistaken. So there is a 4-year plan there as well.

We have one last question, if you don't mind, that just come in from the gallery. How much has Pick n Pay spent so far in digitizing its infrastructure? How does the Smart Shopper platform fit into your digital and technological agenda? And how many Pick n Pay customers are using Smart Shopper? I think that's been answered. Last four, they're all in one. And then how will Smart Shopper be integrated into the Mr D app?

So maybe back to France, the Smart Shopper will be integrated into the Mr D app. And customers will be able to earn Smart Shopper points. We absolutely believe that they will be a key enabler for customer take-up. So very excited to have that integration. The Smart Shopper platform is a key part of our digital strategy. I think David's alluded to that as well. But more than that, it's also a key enabler for us to focus on the customer value proposition across the entire landscape. So I think it's for us, we have got the oldest loyalty program in -- as a retailer in South Africa. So we have got a vast amount of data that we can utilize to make sure that we serve our customers best. And I've guided that we will be spending ZAR 400 million in FY '23 on our digital and innovation platforms.

In terms of your current CapEx expenditure, what percentage are you planning to spend on the ESG agenda? So that's the one question. The second question is on the commercial agreement with Takealot. You mentioned that they have an existing customer base of 2.5 million customers, active. Are you planning -- do you think you're going to acquire additional customers through this commercial agreement? Or is the commercial agreement just an enabler to deliver the online proposition?

I think both the last one, I think both. I think we will be able to penetrate the market faster, try and increase the scale of tapping into 2.5 million active customers on the platform. And we have seen the popularity of Smart Shoppers within our own business. So I can imagine as well that you will have customers that are not yet on Smart Shopper, say, listen, I would like to take the benefit of the great deals that Pick n Pay with its online grocery demand offer has to offer.

And on the ESG and CapEx-related question, we haven't specifically guided a number for the ESG initiatives. The color I can give us that each of them will be self-funding. So each of them will have an ROI. There's definitely a component in our Eastport DC CapEx, the ZAR 1.2 billion we've guided for the overall project with significant infrastructure investment in that environment. But again, they're embedded in those numbers. So our ESG spend has become something that absolutely is self-funding. I think I mentioned that waste is the problem, but waste also results in costs for us. So each of those projects have gotten ROI and will repay for itself over time.

Good. Then I think we have spent almost 3 hours of quality time with each other. I really would like to thank all of you for your time and dedication towards Pick n Pay this morning. I think there is something outside for eat -- to drink and to eat. But I also would like to take the opportunity to thank my team for the great performance of today. There's been a lot of hard work, a lot of long nights in order to get it down to where we were and we have been able to present it today. We did a good job. Thank you very much. Looking forward to see you outside in an informal basis.