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

Good morning, everybody. Welcome to the Pick n Pay AGM, which we are holding this year virtually. We have most of the Board members are here in Cape Town in our boardroom, and we plan on meeting as a Board straight after our AGM has concluded today. As you know, Pick n Pay is now 55 years old. And I think this must be about the 53rd AGM. And welcome, and thank you very much for attending. We have no formal apologies for the meeting today, and we have had enough proxies over the periods to make sure that this is a core AGM, but I'll deal with more of that in a few moments. The agenda for this morning is I will start off, as I have done for a number of years with the Chairman's address. Pieter Boone, our CEO, will come in with the general overview of the business. The Chair of our Social and Ethics Committee will present the annual report to the shareholders, and that will be Suzanne Ackerman-Berman. At that point, we will invite you to carry on then with your voting. And we'll ask you to start posting your questions. We will -- at the end of the Q&A session of the posted questions, we'll open the telephonic link and we'll ask anybody to ask any questions over the telephone link. The voting will be open until after all the questions have been answered, at which point, we'll close them. The votes will be finally tallied, and we'll give you the results of the votes. And after the AGM, those results will be posted as we have done in the last couple of years. So that is the agenda for this morning. And once again, thank you very much for joining. We're meeting at a time when our economy is under severe strain. Consumers are really struggling. Inflation is on the rise and interest rates have also increased adding to the consumers' burden. I've decided this year to depart from the convention and not repeat the items in my Chairman's report in the IAR and at our April results and announcements. The world is moving rapidly and there are important developments we need to consider. The company recently took part in the International Consumer Goods Forum Global Summit in London. It was an outstanding opportunity to review and remind us of the many challenges that are facing us. Sometimes it serves when will be out of a comfort zone or operating environment and to think deeply on things. There have been many consequences and lessons on courage. Perhaps the first lesson is our vulnerability to challenges, including new diseases and their ability in a connected world to affect us globally very quickly. The other important lessons include our need to work adhesively and solve global problems and our ability to work remotely. Some negative consequences of the COVID pandemic include the reemergence of myopic thinking and significant challenges in the global supply chain. Being at a summit such as this demonstrates to us where we have developed and where we have regressed based on a relevant global peer group. As the world recovers from COVID, we must be honest and conceive that in South Africa, failure to make the right decisions will result in us emerging weaker from this crisis. We're all good at congratulating ourselves in our job well done in coming through the pandemic. But the stark reality is that our decision-making will determine whether or not we're on the path to strong growth or not. One thing became abundantly clear during COVID, one of our key functions as a business is to feed the nation. Our role is to ensure that the customers we serve have access to affordable food. Consumers are currently bearing the brunt of rising inflation, not just in South Africa but across much of the world. This inflation has both demand and supply side drivers. In South Africa, we see the impact of inflation in rise of commodity prices. As Pieter will share with you, Pick n Pay and Boxer do everything to keep prices down despite rising input costs. We have an obligation to ensure that our customers get value for money and we are pleased that we are again reporting internal inflation below CPI Food. We operate in a highly competitive market orientation sector and we do our best to serve our customers in a challenging macroeconomic environment. Given other pressures of climate change and health, we also need to find ways for consumers to make sustainable choices more affordable. We must provide options to help consumers play their part in the solution without nutritional compromise. There are [ 1.4 ] people living in highly vulnerable areas, largely in Africa and Asia. Globally, 2/3 of consumers are negative about their country. To cope with the global population in largely developing markets, food production will have to increase by 70% by 2050. This is a very big flashing warning light. If we never internalized it before, we are part of the global economy. We've seen the worldwide dependence on Ukrainian and Russian wheat push up the price of bread. COVID lockdowns in Shanghai have driven up transport and import prices and there are many other examples. This means we need to sensibly accelerate our development of local industries, particularly in clothing and textiles. We need government to reduce tariffs on the imported fabric and yarn to encourage local manufacturing. We don't weave much fabric locally anymore, which makes many of the duties redundant. More change and challenges face the group. The push to omnichannel retailing is relentless. The consumer is increasingly saying, give me what I want, where I want it, when I want it at a price I'm prepared to pay. In addition, the different generations and demographic groups have different requirements, which we have to respond to. The younger generation are more socially aware. There are more lines to authentic brands, which enables us to accelerate our values and respond with vigor and innovation in our value set. Green consumers will increasingly flush non-sustainable players from the market. Customers will not compromise on product or price, but do expect products to be sustainable and to be clearly marked as such. We need to be making decisions from their perspective. To survive, we must embrace reinvention. This new era requires responsible growth. As Pick n Pay, we need to properly analyze our supply chains, products and systems to reduce waste. This will drive down costs and help us scale sustainably. COVID was a sudden shock to the system. The frog in the boiling water. Climate change is where you fail to nurse -- climate change is where you fail to notice it and so that's often too late. We need to move away from a linear approach we take in our businesses and increasingly move towards a circular economy. This is not an easy task. But the fact is that if you reduce food waste, you reduce your carbon footprint, being more sustainable means saving money, do it right and it's never a tradeoff. We're already seeing the introduction of carbon taxes. The cost of carbon and therefore, conventional energy will continue to increase as a result of policy changes and other impacts. Business needs to recognize quickly that governments are increasingly going to use this tool. It goes without saying then that decarbonization is going to be a key to safeguarding future profits. Those business are decarbonizing the energy sources and consumption will derive a competitive advantage. Our Chief Transformation Officer, David North, is our sustainability expert and will be on hand to answer any questions you may have later on this morning. In conclusion, as a country, we must simply look forward and not stand still or even worse, look back. We must learn from the mistakes of the past, we must focus on what is going to happen rather than what has already happened. There is no time left to do that. We have low levels of economic growth in South Africa, and we simply must find ways of growing the size of the cake rather than finding ways of cutting it differently. I'd like to assure you that through our Ekuseni strategy, Pick n Pay has its eyes firmly set on the future and the challenges referred to above that face us all. Retail is a confidence business and the business of the future will be more sustainable and digital. It will be a partnership with the willing. We will be a business embracing rapid change with Ekuseni, we will be a business geared to grow. I would like to pay a tribute to our people, to our CEO, Pieter Boone, and his management team and to our board. They have performed incredibly well in this difficult past year. Hugh Herman will be retained at the end of the 22 AGM, which is after this meeting, after 46 years with the company. Thank you, Hugh for the huge and ongoing contribution. It is really appreciated. Jeff van Rooyen will be staying on as a Director for another 1 year to assist Aboubakar Jakoet, who is taking over as Chair of our Audit Committee. Jeff will continue for the year as a member of the Audit and rem committees as well as the Lead Independent Director. Debra Muller will be retiring as Company Secretary after this AGM and will be succeeded by Penny Gerber. Thank you, Debbie. You've been amazing. My thanks also to my sister, Suzanne Ackerman, who retired as an Executive Director on the 31st of March and was appointed Nonexecutive Director and has remained on as the Chair of our Ethics -- Social and Ethics Committee. Pick n Pay has performed adamantly this past year, in a very demanding environment. This coming year will be an exciting one for us as we continue the process of implementing our strategy and bringing a new experience to our customers wherever they are. Through all this change, the one thing that will not change is our values. They've served us well for 55 years, and they will endure. Once again, I thank you all for attending and for listening to me. Thank you. Now if I could hand over to our CEO, Pieter Boone, who will run us through the general overview of the business. Pieter, over to you.

Very good morning, everyone. We are nearly at the end of the first half of the year. It has gone by quickly. We have made a lot of progress, and I'm extremely proud of what we have been able to achieve as a business this half. We've launched our Ekuseni strategy. We are testing the revised customer value propositions in stores. We're working to expand our supply chain capacity and we are investing heavily in our prices in order to offer our customers the very best. I look forward to being able to deliver a positive half year results in October. Today, I would like to take the opportunity to update you on our performance so far. Our group sales for the first 18 weeks of the financial year 2023, and that's up until the 3rd of July, grew by 10.7%. Our sales in South Africa increased by 10.5% with a like-for-like sales growth of 8.3%. Sales grew by 9.5% on a constant currency basis in the rest of our Africa division. Group liquor sales for the period increased 17.2% year-on-year. This is an impressive growth number, but actually reflects how important liquor trade is to our business. Up until week 17, we had liquor growth of 9.6%, which is also very strong. But due to liquor restrictions last year, sales grew by over 3,000% in week 18 pushing up overall liquor sales for the 18 weeks significantly. At the half year results announcement in October, we will disclose the segmental sales for Boxer for the first time. This will be a significant moment for the group as we will show the power of the Boxer business, which continues to deliver ahead of market sales growth. The Clothing division has delivered another strong performance. Hazel and her team are building and growing our clothing proposition in exciting ways. Sales increased with 17.1% for the 18 weeks. Online sales for the 18 weeks, including scheduled delivery, Click n Collect and asap! grew by 97.3%. This is a continuation of the rapid growth rate we have seen especially in the on-demand grocery since the launch of Asia. There is a significant amount of cost pressure in the broader economy. We are all steadily familiar with the impact of higher inflation through fuel prices and other costs in our daily lives. Trading in a high inflation environment take special care and attention. Inflation is up to 7.4% in June, and we have seen related price increases in the supplier base, specifically in commodities. We have also seen substantive increases in operating expenses, including rates, electricity, utility and fuel costs. We have seen other increases in insurance and security costs as a result of the civil unrest of last year. On a positive note, like the chair suggest that we have begun to emerge from the pandemic and the government has relaxed the related restrictions. Customers have begun to increase their shopping frequency and this gives us a great opportunity to win them over with our revised value propositions. We are maintaining a consistent price investment to offset the cost pressures. The group undertook a strategic purchase of stock of nearly ZAR 1 billion in February this year. This allows us to maintain some of our strong commodity pricing for longer. The group's 5% RSA internal inflation is well below the 7.1% CPI Food for the period. We anticipate CPI Food to accelerate further, and we will continue to invest in our crisis in order to support and win customers. For the third quarter in a row, customers have rated our pricing on par with our key competitors. This consistent competitive pricing is an essential part of our plan to service customers better than ever before. A brief reminder of our plan. We want to win with the Pick n Pay customer by becoming more targeted and delivering a clear value proposition for each segment through 2 distinct brands. We aim to leapfrog the market on customer advocacy and grow our Net Promoter Score by 20% per store. We want to grow Africa's best discounter, Boxer into a sizable business by increasing the footprint and doubling the sales. We want to build a market-leading online business using a commercial service agreement with Takealot to deliver a customer Pick n Pay grocery experience on the [indiscernible]. We will fund our ambition through our project future cost savings initiatives and are tying these bold ambitions to our KPIs and incentives for our people. This is an ambitious plan, and we believe in it because we have already started seeing some of the results of the key components. As you all have heard in our strategic update in May, we are reorganizing Pick n Pay into 2 brands, Project Red stores will service the rapidly growing less affluent and middle market segments whilst Pick n Pay stores will service the more affluent and some of the middle market. We have now launched these customer value propositions with customized ranges and layouts in 10 pilot stores that are 6 project Red stores and 4 Pick n Pay stores. Our 3 brands have distinct customer value propositions and are optimized to serve different customer needs. We are encouraged by the initial results from our pilot stores. Weekly sales of the initial 5 pilot stores grew by 18% on average since their launch. We have excluded the first 3 weeks of trading after the relaunch, where sales growth was considerably higher due to promotional activities. Sales growth in the pilot stores was driven by increases in both traffic and basket stacks. And we have seen good growth in the identified power categories in each format. The Net Promoter Score of the upgraded stores has improved by more than 25% on average in the 6 weeks since the launch. Our plan is targeting 20% growth in the NPS score across Pick n Pay company owned supermarkets over the term of the plan. We are taking a test-and-learn approach and looking to scale our plans as we increase our confidence in the performance of the new CDPs. Our objective is to have 40 stores upgraded to the new CDP by the end of this first half and over at least 100 stores by the end of this financial year. We have made progress on our commitment to reduce costs by ZAR 3 billion over the next 3 years. We have elected to close our consultant support office in [indiscernible] by December 2023. We believe that we can work more efficiently by making use of hybrid working and consolidating key support office functions in a smaller office. We are on track with our Eastport distribution center development. We plan to open this new DC in March 2023. This will add supply chain efficiencies and significantly increase our capacity to service the inland region. We are in final stages of discussions to unlock more flexibility and productivity in the workforce within Pick n Pay. Our accelerated store expansion plans are on track for the year. Boxer is on track to add further 61 stores in FY '23 and we have plans by at least 73 new clothing stores in this financial year. Our commercial agreement with Takealot is also on track. We will launch our Pick n Pay Food and Grocery section on the Mr D app in the very, very near future. Despite the challenges in the economic environment, I'm confident that we have the right strategic plan. Our Ekuseni initiatives will continue to drive sales momentum this year. We are in an investment phase as we revise our -- the customer value propositions and adjusted performance in order to better serve customers. The sales growth that we have seen to date is good but we expect the real rewards of our Ekuseni plans to come in the near future. Thank you for listening.

Thank you, Pieter. it's very good overview as to where the business is going at the moment. And after Peter's first year as CEO, he's got his feet very firmly under the desk and has the -- is driving the company in all the positive directions that you've been hearing about. So we will now hand it over to our Chair of our Social and Ethics Committee, Suzanne Ackerman-Berman. Suzanne?

Thanks, Mr. Chairman. Thank you, Pieter. Recently at the COP26 gathering in Glasgow, U.S. Secretary General, Antonio guterres has mentioned the private sector has a crucial role to play in building a more equitable and sustainable world. I think this reflects exactly what the Chairman's introductory statement said. And we, as a Social and Ethics committee are continually guided by this comment of the Union Secretary General as well as the awareness of the -- fruitiness in our society in which we serve and live. The group's social ethics committee meets 3 times a year. The core committee is comprised of 1 executive member, 3 nonexecutive members and the Company Secretary. Each meeting is structured according to a work plan, will bring recommendations of King IV and the Company's Act. That is reviewed and approved annually by the board. The committee oversees the organizational ethical and social practices of the group guided constantly by the 10 principles of the UN Global Compact, the JSE socially responsible index and the organization for economic cooperation and development. To ensure compliance across both our companies, Boxer and Pick n Pay, our key focus areas are based on 4 principles. One, we look at the economy, focusing on social and economic issues impacting the company and all its stakeholders, such as civil unrest, power outages and the COVID pandemic. Secondly, we look at our workplace, the labor relations, ethics management and BBBEE transformation as well as health and safety of products, of staff and all our stakeholders, amongst other matters. Thirdly, we look at environmental impacts. Environmental commitments, the tracking and the impact of these commitments on the company and on the society we serve. Finally, we look at society matters, the marketing, advertising and the communication of the brand and what we stand for to all sectors of society. To this end, the committee invites relevant senior managers, technical experts and advisers in their fields to present to the forum depending on all the agenda items. The discussions are usually extremely broad and usually extremely animated. And all of the matters discussed over the past year reflects the concerns and status of our society. I'll just highlight, Mr. Chairman, a few of these discussions, if I may. One, the ongoing social economic impact of the global COVID pandemic, has been an important agenda item where we have focused our discussions on the impact of the pandemic on all our stakeholders, in particular, the mental well-being of our colleagues. The committee recommended to management the implementation of pilot schemes to assist monitor the health and well-being of those deeply affected. Implementation was rapid, and I thank the various divisions involved as this will be an ongoing focus area for the team and the committee. Another focus in this past year was the impact to our stakeholders of the devastating civil unrest that occurred across KZN. The manner in which the company rapidly restore trading and continues to do so whilst ensuring we will offer an extensive support to staff communities most impacted by the devastation is truly remarkable and constantly reflects the values and our core founding principle of doing good is good business. Following the outcomes of COP26, the committee was briefed on the company targets to become a net 0 carbon business. Finally, another focus over the past year has been the review of the management measures put in place to ensure compliance to the extended producer responsibility. This places the obligation on producers directly. Our teams ensure that suppliers are undertaking the management and ownership of all packaging material from all products. Mr. Chairman, I'm honored to continue chairing this committee in a company that has, for the past 55 years, been a vital part of the fabric of the society. Thank you very much.

Thank you very much, Suzanne. And I think that concludes the report back from the executives as to how the company is going. And as you can hear, it's pretty positive at the moment. I will just remind the audience that questions are invited on all the resolutions. We are not going to stop on resolution by resolution. So we ask you to please post your questions directly onto the system. And once we finish the resolutions, we will answer them all, first the written ones, and then we'll have it open to the telephone ones that comes through afterwards. So if we can just move now into the formal part of the AGM. As I mentioned, this is our 54th one. I didn't get the number right at the beginning. It's the 54th Annual General Meeting of the company. Any apologies received from the shareholders will be recorded in the minutes by the Company Secretary. The quorum of this meeting is 3 members personally present and entitled to vote, who between them hold in excess of 25% of the issued shares. This is in terms of Section 20.15 of our MOI, and I declare that the necessary quorum is present, and I declare that the meeting is duly constituted. Because this meeting is being held in a virtual environment, I have arranged for a director who is also a shareholder to second all the resolutions. David Friedland has agreed to second all the motions at today's meeting -- at today's meeting. In light of this, with your agreement, I will dispense with the usual formalities of asking for a seconder for all resolutions. Are there any objections to this? Nothing is coming up on my screen. I nominate Computershare to act as scrutineers for the purposes of the poll. And in accordance with good governance practice, the voting on all resolutions at the meeting will be conducted by poll. This is to ensure that the respective shareholdings of shareholders are fairly and accurately reflected in the voting. Shareholders or their proxies or representatives present would have registered on the electronic platform to be able to vote on the resolutions. Once again, I ask you to please submit your questions in writing on the matters being voted on in this meeting. It is also possible to submit questions verbally. Please call the phone number provided and when we get to the question-and-answer session, you will have the opportunity to ask your question, which will be audible to all participants in the meeting. We will respond to your questions once the resolutions have been read out and before voting is closed. I just received a positive comment from [ Gran Blizzard ] who comments that we note and commend Pick n Pay for publicly disclosing the minutes of its 2020 and 2021 AGM as provided for in King and also that Pick n Pay has gone further and included the questions asked by shareholders at our AGMs and the responses from Pick n Pay. In our view, this demonstrates leadership and adherence to the letter and spirit of Q4 and sets an example for the many companies which do not make this disclosure. Once again, the questions and answers will be disclosed as part of the minutes of the meeting, which will be posted. Until voting has been closed to the end of the question-and-answer session, voting can be changed on the electronics side. Each shareholder or its proxy or representative will be able to cast its vote for each of the resolutions on the electronic platform. I will announce the results of voting immediately after the voting is closed and the results have been determined. The results will be posted on SENS after the conclusion of the meeting. The notice convening this Annual General Meeting has been in your hands for the prescribed period, having been posted by registered post to shareholders before the 28th of June 2022. The notice contains the full details of all the resolutions to be considered at this meeting. There have been no changes to the proposed resolutions. I propose that the notice be taken as read. The minutes of the last AGM held on Monday, the 28th of June 2021 were approved at the Board meeting held in October. The minutes were then posted on our website. Once the minute of the 22 AGM have been approved by the Board in October, they will also be posted on the website for your review. We will now proceed to the business of the meeting. I confirm, once again, that the electronic system is open for voting, and I now propose the following special and ordinary resolutions as set out in the notice convening the meeting. Given the length of the resolutions, I will take them as read and summarize them. Please will follow the resolutions in the notice as they will be proposed in the order as set out in the notice. Okay. Resolution number 1, to present the audited annual financial statements, the Director's report and the Audit, Risk and Compliance Committee and the Social and Ethics Committee reports of the company for the '22 annual financial period. The full audited annual financial statements were posted on the Pick n Pay website in May and are in the integrated annual report. The Audit, Risk and Compliance Committee and the Social and Ethics Committee reports are set out in the corporate governance report. The reports were posted on the Pick n Pay website on the 24th of June 2020. Two, ordinary resolution number 1, the appointment of external auditors and designated partner. The company proposes Ernst & Young, Inc. be reappointed as external auditors of the company with Tina Rookledge as designated partner. Three, ordinary resolution number 2, reappointment and appointment of nonexecutive directors. 3.1 ordinary resolution number 2.1, reappointment of David Friedland for a 1-year term. 3.2, ordinary resolution number 2.2, reappointment of Aboubakar Jakoet for a 3-year term. 3.3 will be -- resolution number 2.3, reappointment of Annamarie van der Merwe for a 3-year term. 3.4 ordinary resolution number 2.4, reappointment of Jeff van Rooyen for a 1-year term. 3.5, appointment of Suzanne Ackerman for a 3-year term. Ordinary resolution number 3, appointment of audit risk and compliance committee members for the 2023 annual financial period. 4.1, Ordinary resolution number 3.1, Aboubakar Jakoet. 4.2, Ordinary resolution number 3.2, Jeff van Rooyen. 4.3, Ordinary resolution number 3.3, Audrey Mothupi. 4.4, Ordinary resolution number 3.4, David Friedland. 4.5, Ordinary resolution number 3.5, Mariam Cassim. 4.6, Ordinary resolution number 3.6, Haroon Bhorat. Advisory note, remuneration report for the 2022 annual financial period. The directors table the remuneration report for the annual financial period. The full remuneration policy report is set out in the integrated annual report published on our website on the 24th of June 2022. In terms of King IV, we have split the advisory vote on remuneration into 2 votes, one for our remuneration policy and the other for our report on the implementation of our remuneration policy during the financial period. In the event that 25% or more of the voting rights exercised our cast against these resolutions, the Board will invite dissenting shareholders to engage with the remuneration committee and their concerns in line with provisions of the listing requirements. Advisory 5.1, advisory note number 1, endorsement of the remuneration policy. 5.2, advisory note number 2, endorsement of the remuneration implementation. 6, special resolution number 1. I propose that the directors' fees for 2023 and 2024 annual financial periods be approved. The CEO, the CFO and the Chairman have waived their right to a fee increase during the 2023 financial periods, directors' fees for the 2023 annual financial period have been increased by 2.8%, which was lower than the CPI increase approved by shareholders at the 2021 AGM. It is proposed that the Directors' fees be increased by CPI in the 2024 annual financial period. Special resolution number 2, special resolution number 2.1, provision of financial assistance to related or interrelated companies. Special resolution 7.2 special resolution number 3.2, provision of financial assistance to persons. 8, special resolution number 3, replacement of the company's memorandum of incorporation, 9 special resolution number 4, general approval to repurchase company shares. 10, Ordinary Resolution number 4, Directors' authority to implement special and ordinary resolutions. 11, Items 10 of the notice office to -- I'm sorry, we'll come to that. Sorry, Item 10 of the notice offers to transact any other businesses as may be transacted at an AGM. Are there any matters not already covered that members wish to raise? Those issues can be posted on to the Q&A and we will answer them when we answer any questions on the resolutions that I have tabled. Another point for noting is that last year, we had -- did not pass the rem advisory resolutions, and we had interactions with all the shareholders who so requested over the time. And we do specifically thank the shareholders who took us up on the offer to interface with us on a regular basis during the year, not only on AGM issues but on regular business issues. I think you added a lot of value to the reporting, as you can see in this year's reporting. And we want to make sure that this is not just a once-a-year effort. This is an effort that continues the whole year round. So we will continue to answer and interface with shareholders during the year. So if we now just move on to the questions.

Okay. The first question I have to ask -- the first question here is the rem com seems to place discretion in disregard to the remuneration policy. Examples of the awards given to Suzanne and the CFO. Suzanne was formulated an appropriate package of $3 million without disclosure on the metrics or the formulation of targets. The CFO was awarded 70% of her maximum bonus, which seems to be more at the discretion of rem com policy. Can the Chair of Rem comment on the discretion and the alignment with policy. This comes from [ Julie Cubero ] who by the way, thank you very much, before -- the interaction we had last time around, we found it very valuable. I'm going to ask Audrey if you can answer this question.

Thank you, Chair. Good morning, everyone. [ Julie, ] thank you very much for your question. At the start, the remuneration committee that I'm discussing to pay ad hoc gratuities and retirement of executives, but I'd like to start by actually just reminding us all that and thanking Suzanne -- Suzanne Ackerman-Berman graciously elected to take early retirement to provide great opportunity for transformation in the group's ESG team and the 3 million gratuity reflects Suzanne early retirement, but also had a valuable role in advancing the group's [indiscernible] I'm sure all of us are fully aware of feed the nation of an example and many others over the year in the history of Pick n Pay on that. So in that case, in terms of the discretion provided was within the role of the Remuneration Committee and clearly involved on Suzanne's part. So I'd like to thank her again on that. In terms of your question, I think that if I look at that Chairperson, there's also something around the CFO, I'm trying to recall on that.

Yes, and then they asked about the CFO was awarded 70% of the maximum bonus which seems to be more at the discretion of rem com on the policy.

Thank you. The remuneration committee acknowledged and again, if I look at [ Larena ] as well, they had work done. The committee acknowledges the exceptional work by the CFO in leading the group finance and the administration team throughout the COVID-19 crisis, the civil unrest and mainly to maintain, as you would have seen, group liquidity, but also targeting the available funds to restoring operations in [indiscernible] in a manner we should do that in a rate that are organized and transparent, but also able to get results from that. There was also an expedition and calculations that they should have ensured trends, and more important, which we're all very grateful for the reinstatement of insurance cover as far as possible for all our operations. In that regard, you will see that the remuneration provided, 70% is the maximum, in our case it's a reflection of the work and delivery at that point in time.

Okay. Thank you. If I just look at the next question, which is initially for Audrey, but I'm going to ask David North to come in afterwards. The request for greater clarity on the lumpy ESG targets was noted in the rem report without any changes to the targets. Given the sustainability headwinds that Chairman mentioned in his opening address, what is being done to give more clarity and credence to this now strategic components. Once again, with [indiscernible] asking the question. So Audrey, would you like to start and then we'll ask David to come in afterwards.

Thank you. I've also get our forward engaging here as well. First, I'd like to say everyone, ESG point of view, as requested in the past year, there has been actually greater transparency that's being provided, and we'll have to acknowledge as well that more and more, our Board -- our CEO, our CFO and quite a few of our executives have personally been involved in ESG targets [indiscernible] ESG strategy as well. And I'm not surprised that we do have a board also that's kind of component of directors who in the base role play a key role from an ESG point of view, but probably [indiscernible] share that we are confident and supportive of both of the initiatives around ESG, but more important from a remuneration point of view, the base strength that we have in form of our CEO, our CFO; in fact our Chairman as well and other directors. So thank you.

David?

Thank you, Chairman. Thank you, Audrey. Good morning, everyone. I think as Audrey has said, we have actually increased, I think, quite significantly our degree of disclosure around ESG over the past year. I think I prefer to describe our targets and our measures as comprehensive rather than lumpy, if I may. We have set science-based targets, in particular, the commitment to zero carbon being net zero by 2050 and also have comprehensive targets in areas like refrigeration, renewables, waste packaging, et cetera. And our commitment to transparency, I think, is clear from the integrated annual report and the separate ESG report, which we now publish on the same day to achieve greater consistency for shareholders and stakeholders. So I think as the team and as the business, we'd be very happy to engage with individual shareholders to understand better what they think we're not doing as well as we might be doing and what we might be doing better.

Thank you, David. The next question is for you as well, which is a little bit more complex. It says we commend Pick n Pay for publishing its climate and energy policy this year and for making its commitment to be net zero by 2050. This is excellent progress. Pick n Pay is the second SA food retailer to make it net zero commitments and the first to include a medium-term interim target. We note that the net zero commitment only relates to the company's Scope 1 and Scope 2 emissions and have 2 questions in this regard, which I would like to direct to the Chair of the Social and Ethics Committee. When does Pick n Pay calculate and report on some of its -- sorry, Pick n Pay does calculate and report some of its Scope 3 emissions. Most notably, the emissions associated with electricity usage has -- at its franchises. Why are these Scope 3 emissions at the very least, not included in the net zero by 2050 target and the interim targets. Two, we are aware of tracking Scope 3 emissions, particularly those related to purchase goods and services prevents a major challenge to the food retail sector. However, as your disclosures rightly point out, these emissions are a significant contributor to global emissions. In fact, the report published by [ Series ] last year states that companies cannot credibly address climate risk without disclosing and reducing the supply chain emissions. Can Pick n Pay commit to reporting in more detail on the steps the company is taking to track and set the targets of Scope 3 emissions, including for purchased goods and services [indiscernible]? I'm going to ask David if you could answer the question, please.

Again, thank you, Chairman. And thank you from myself and from the team, I think, to Emma and to -- just share for -- both for the detail and I think the thought that has gone into that question and also a big thank you for recognizing the progress that the team has made over the past year, in particular, on the, I think, considerable step that has been taken to set a net zero target for 2050 and indeed, an interim target that Emma and her team recognized. I think the points that Emma makes in respect of Scope 3 are perfectly valid, perfectly fair, actually. It is absolutely true to say that much of the work that we have done and our existing target setting focuses on Scope 1 and Scope 2. In other words, our direct commissions into Scope 1 and the -- essentially the electricity and other energy that we purchase and consume as part of scope 2. Scope 3, as Emma indicates in her question, relates to indirect emissions that arise in the value chain and indeed arise when customers purchase and use the products that we sell in our stores. We have again, as Emma said in her question, begun to report on Scope 3 in --I think it would be fair to say a limited way. In other words, it's not yet -- it doesn't yet fully encompass the breadth of what's in scope 3. So we do report, for example, on energy use in our franchise stores, the energy use for our online delivery fleet, our own car fleet and other transport impacts. Those are included in what we currently disclosed in terms of Scope 3. But Scope 3 is extraordinarily broad and it is actually, I think in my experience working on climate change for many years, it's actually, [indiscernible] implying their question, the area that will, in the end, make the defining difference on climate change. Scope 3 accounts at least 90% of total emissions. It's an extraordinarily exciting area, but it is a developing area in terms of calculation and in terms of the policy needed to reduce those emissions. And I think that's a long answer. But I think certainly on the question that Emma poses at the end, yes, we would absolutely commit to over time to reporting in more detail on the steps we're taking to wrap our arms around the challenge of Scope 3. And as always, we would welcome further dialogue with Emma and her team on it.

Thank you, David. I think you've given a very comprehensive answer on the company's position. But the question was specifically asked to Suzanne. Suzanne, have you got anything you'd like to add over and above what David has answered.

Thanks, Mr. Chairman, David. Thank you very much for the comprehensive answer. David does sit with me on the ethics committee, and we will ensure that the correct targets are constantly set and monitored to ensure that we do meet our targets that we want to set as a company. And we are working with our key suppliers at this very moment with our distribution team and with our merchandise team to ensure that we do meet those targets. So we will constantly monitor and measure and feedback. Thank you.

Thank you. I understand at this point that there aren't any more written questions. So I'm going to open it now to the telephone, and I understand that we have Chris Logan waiting to ask us a question. Shareholders who haven't voted yet to please cast your votes. After these questions, we will close the voting and announce the results.

Can we just ask the telephone conference facilitator, if we got Chris available. You must unmute yourself, Tony.

It appears he has dropped off. What we will commit to do is if he has dropped, we will find him after the meeting, get his question answered fully, and we will add it into the minutes of the agenda as an addendum at the back, just so that people can see what the question was and what the answer to the question was, if we can't get Chris back. So are there any more written questions that are coming in? If not, I'm going to ask that we close the voting. Okay, voting is closed and the resolutions have all been passed. Every one of them has passed this year. So I'd like to thank the shareholders for the confidence they have in the company. You have absolute assurance that we will continue to grow and develop Pick n Pay as we have for the past 55 years. The ethics and the values of the business are absolutely intact. Now 3 core values we're looking after our customers, our value of doing good is good business and the value of making sure we can be the most efficient business we can, is absolutely entrenched in the business. And you would have seen it in the various reports and the way we've answered the various questions this morning. So I'd like to thank you all for your ongoing support of Pick n Pay. I will reiterate the point that's been made a couple of times this morning, particularly by Suzanne and by David. So please engage with us. If you have any ideas, any things that you feel that we're not doing properly, please let us know. And we will obviously assess it and engage with you on that. We do appreciate your time this morning, and thank you very much for attending. If there's no other business, I would now declare that the 54th AGM is closed. Thank you very much, everybody.