The Foschini Group Limited (TFG) Earnings Call Transcript & Summary

Good morning, everyone. A very warm welcome to all of you joining us for our interim results presentation. In addition to all of our shareholders and the investment analysts who normally attend our results presentations, we have again extended this invitation to all of our head-office and regional office staff across our different operations and a very warm welcome to all of you as well to this morning's presentation. Before going any further, I'd just like to start by acknowledging our nearly 35,000 staff, both in South Africa and in our international operations, for the extraordinary contribution that they've made to the group since the start of the COVID-19 pandemic. Many of them have been showing up pretty much in the front line serving our customers every day at a time where, frankly, most people, I think, would have preferred to stay at home and kept as much social distance as possible. It's a huge thank you to all of you for your efforts. You've allowed us to continue trading in a, obviously, a very difficult time in our history. Again, today, we have a fairly packed agenda. After my strategic overview, I'll be handing over to Bongiwe Ntuli, our Chief Financial Officer. She'll be followed by Jane Fisher, our Group Head of Credit. And then today, it's my great pleasure to be introducing Shane van Niekerk for the first time, the head of our newly acquired Jet business, and Shane will be sharing his vision for the business going forward and taking us through some of the details of the underlying strategies. We'll then be crossing over to Ben Barnett, the Head of TFG London. And then finally over to Gary Novis; and Dean Zanapalis, the CEO and CFO of TFG Australia. We'll try and keep the formal part of this presentation to around about 90 minutes. We'll have a short break at the end of that, and then set aside roughly half an hour for Q&A. When I last presented to you, which was roughly 5 months ago, we tried to articulate the key strategic actions we'd be taking both this year and into the future, really to position TFG as a stronger business than ever before just to go back and reflect on what those strategic areas were and then to give a bit of an update on what we've been busy with over the last 6 months. Firstly, we said we were going to further fast-track what was already a very strong e-commerce space within our business and equally fast-track our broader digital transformation efforts. In terms of what we've actually done. In the first half, we launched 2 new apps -- shopping apps. All international research has shown that online shopping is migrating very quickly to app-based shopping. In many cases, up to 75% of online shopping is now moving up to -- across to an app platform. So we launched a new myTFGworld app as well as our first brand-specific app, a Sportscene shopping app. I'll take you through a bit more of that detail later on in the presentation. We also launched the last 2 of our South African brands that weren't yet online. That was American Swiss and Sterns. And again, I'll give an update on that later in the presentation. One day ago, we soft-launched first pure-play brand in TFG's history, Galaxy & Co. I'll again share some more information on that. But I think a pivotable moment in TFG's history as a traditional bricks-and-mortar retailer choosing to launch a pure-play brand with absolutely no bricks-and-mortar behind it at the moment. And then internationally, TFG Australia launched Johnny Bigg, our plus-size menswear business online into the U.S. and Europe. It's very early days. In terms of that launch, it was only about a month ago. But the initial read in both of those markets has been extremely positive. Secondly, we said that we would continue to invest throughout the cycle. That's very much been part of our philosophy in the past, and we've continued to do that through many tough economic times in TFG's history. Clearly, a lot of that investment, as I've already indicated, has been on e-commerce and on digital transformation. But at the same time, we haven't forgotten about store estate. During the first half of the year, we invested in opening a number of stores for some high-growth opportunity brands. And that's where they find themselves currently in their life cycle. And for example, we opened 10 RFO stores in South Africa together with another 18 Sneaker Factory stores. We also were able to repurpose a lot of our existing space with the brand portfolio that we've got as well as the size by real estate. We have roughly 800,000 square meters of trading space, excluding Jet. That goes to 1.2 million square meters of trading space in South Africa. We have the ability to move brands around as appropriate. And for example, we transitioned a number of our Donna stores during the 6 months into high-growth Relay stores. Thirdly, we said we needed to ensure that our balance sheet was well-positioned and well-insulated against all of the uncertainty that COVID has brought to the outlook economically and for retail specifically. We successfully concluded our rights offer and raised a net ZAR 3.8 billion. We were overwhelmed by the support from all of our shareholders, and I'd just like to take this opportunity to thank all of you again for your support. In fact, we received over 99% shareholder support to continue with the rights offer. The rights offer itself was 2.3x oversubscribed. And the net proceeds of that rights offer, combined with very tight cost control and CapEx control, together with strong cash generation through trading, has allowed us to dramatically reduce our net debt, down from ZAR 8.4 billion in March 2020 to just ZAR 2.3 billion at the half year. And this means that we're well on track to reach our net debt to EBITDA target of 1 to 1.5x by the end of FY '22. We also anticipated that there were going to be market opportunities. As we saw consolidation in the retail sector, both in South Africa and internationally, and you, I think, are all aware that we successfully concluded an opportunistic acquisition of the Jet business. Again, I think this is a fundamentally important strategic acquisition for the group. It's the first time that we now have a real anchor into the true value sector in South Africa, something that we've sought for many years. At the same time, we continued to invest in our local manufacturing capacity, both in terms of capabilities and actual volume capacity. And I'll share some more on that later on as well. In terms of the environment that we've had to operate in, needless to say, all 3 of our territories have been in deep recession during the last 6 months. It's really only the depth that's varied. Consumer confidence and consumer spending are pretty much all-time lows. We've seen both initial lockdowns and now, unfortunately, further lockdowns internationally. And lest we forget, we've also had the hangover of load-shedding in South Africa. That's something we tend to forget about, given how severe the COVID impact has been. But nonetheless, it's really been the last thing that anybody needed during the first half of this year. One of the things that impacted us right from the start of the COVID pandemic was the disruption to our global supply chains, initially, factories that supplied us in the Far East, particularly in China, were closed but then started to reopen. The reopenings were staggered. They weren't all smooth. And in many cases, factories have produced for us and had dependencies on other factories and other supply chains for the trims that went into the clothing. So there was a slow ramp-up initially, but we then got back to more or less normalized production out of China. We then started shipping containers of product to our various operations around the world. In South Africa, in particular, however, we had significant port delays, mainly related to COVID restrictions in terms of the number of people working. And we had many instances of ships sailing into Cape Town or into Durban, taking a look at the congestion in the port and then choosing to sail off for 3 or 4 weeks before returning, and clearly, that's really highlighted yet again the importance of a flexible local supply chain. In respect of that, we've increased our proportion of locally procured product, and that's now up to 34% of our TFG Africa units, if we exclude cellular and cosmetics, which are clearly pure imports. And we often talk about apparel and then forget to talk about some of the other categories that we procure locally. For example, @home has increased its local procurement from about 20% four years ago to over 50% prior to the lockdowns taking effect. And that's now risen another 10% post the lockdowns easing. So in essence, @home's almost become a locally sourced business. And then just looking forward in terms of our commitment to flexible supply chains and local procurement. We anticipate our local procurement increasing to, I think, a conservative ZAR 4.5 billion by FY '25, possibly more than that. Clearly, given the disruption to trade and the loss of turnover that we experienced, we had to be incredibly tight on both trading expenses and cash. Our trading expenses decreased by nearly 23% during the 6 months. Bongiwe and the finance team did an unbelievable job in terms of cost control. And literally, we were sitting in evenings going through piles of invoices and deciding which ones to pay first, second and third. Some of those cost savings are going to be permanent in nature. Bongiwe will give an indication of that in her part of the presentation. And some of them clearly are once-off like some of the government-related support and rental concessions that we managed to get from landlords. From a head-office perspective, we've continued with our business optimization program and taken out another ZAR 100 million worth of otherwise fixed costs from our head office during the year-to-date. I think during all of this time, we've had an absolute focus on the well-being and the safety of our people. And by that, I mean, our employees, our customers and our suppliers, we prioritize them in every decision that we've made. And for example, we continued to pay all of our staff in full throughout the lockdown. That has engendered a significant degree of loyalty from our staff, and I believe it was not only the right thing to do from a society point of view. But equally, we will get the benefits of that through staff loyalty going forward. In terms of the actual impact of COVID on the half year, I'm just going to share a couple of key data points. In terms of store trade, April through to September, we lost 26% of our normal trading hours in TFG Africa and coincidentally in TFG Australia. That's a staggering amount of lost trade over 1/4 of what we could have done. That was only surpassed by TFG London. They lost 39% of their available trading hours. That happened both in the U.K. itself and then equally in Europe, both of whom have been hit very hard by COVID. Our best estimate is that's cost us approximately ZAR 5 billion in loss turnover, and that's very obvious when you look at our turnover numbers for the half year compared to last year. I think our response to all of that has been that we've been able to capitalize on our previous digital investments. We've had a massive shift to online, which we'll unpack for you. And equally, a lot of our digital apps and digital workforce management software in the background has allowed us to restore operations post-lockdown far more quickly than we ever could have in the past. I've mentioned the impact on global supply chains and sourcing. I think I'm very pleased if we look at our inventory metrics to see that our stock days are only up 2 days on the same period last year. I think you'd expect that to be significantly higher given how many trading hours we actually lost. The real number though, I think, to look at is the actual group inventory levels, down 7% on last year. That really has come through making sure that we clear whatever inventory we needed to during the 6 months by remaining flexible on supply chains and probably going -- trading through the 6 months a bit light on stock. A bit of an opportunity cost there, but a far better position to be in today rather than sitting with stock that's built up and that's kind of jams up our supply chains going forward. As I said, our local procurement has increased by 4% since last year, and we really have benefited throughout this period through that local supply chain flexibility. From an e-commerce perspective, we've always been a proponent of the concept that e-commerce is going to become more and more significant in all of our businesses, even in South Africa. I think we've been a lot more bullish than most. But I think even in our own case, the increase that we've seen from May through to September has exceeded even our expectations. E-commerce turnover grew 152% for TFG Africa, which is really a staggering number, and I'll show how that was achieved later on in the presentation. And that's now taken online contribution at a group level to 14%. A year ago, that was 8%, and again, for what was traditionally a bricks-and-mortar retailer 4 or 5 years ago, to be sitting at 14% online turnover is, I think, just showed us how quickly that, that has evolved. And we definitely are reaping the omnichannel dividend of those past investments. In terms of our employees, we've encouraged and enabled as many of our staff to work from home as humanly possible. That sounds simple, but in our case, that meant taking computers, in many cases, not laptops, physical, big-sized computers, back to people's homes, making sure they had the appropriate dongles, the appropriate IT security and data to continue to operate seamlessly from home, and all of that was achieved literally over a couple of days. And where possible, we are still encouraging our staff to work from home. When we reopened our stores, as I mentioned, we were able to use a lot of our digital apps and to preposition people, get them the right permits to be able to travel and shop for work, do the training on safety and hygiene protocols. And certainly in South Africa, we were probably the fastest of the reopening of the retailers. And then as I've mentioned, we continue to pay full salaries and benefits throughout this period. And our real focus has been to protect the most vulnerable. In our case, those are our store staff and our more lightly paid staff and organization. Then in terms of some of our learnings, which I think are very relevant in terms of how we position the business going forward. There's been a lot of international research on the impact of COVID on shopping habits, consumer preferences, et cetera. We've taken all of that into account, but we actually got our data analytics team to conduct a survey of our own TFG-specific customers in South Africa. We surveyed just over 4,000 of our customers during the month of August. And we've got a very detailed report out of that, but I thought I'd share just some of the key takeouts. The first, I think, is fairly expected. 73% of our customers experienced a loss of income during the 6-month period. Obviously, the extent of that varies quite considerably. But I think the implication for TFG and for retail in general going forward is that consumers are going to be increasingly seeking value for money. This isn't new to us. If we reflect on South Africa's last 5 years, we've had negative per capita GDP every year for 5 years in a row. And in simple terms, that means South Africans on average have become poorer in rand terms every year for 5 years in a row. COVID's obviously going to make that worse. Our response to that has been to make sure that every one of our brands, regardless of which LSM they sit within, has been offering better value for money wherever we can do that. If you go back over the last 5 years, we always publish our product price inflation or deflation. And as a general rule, where we've been in an inflationary environment, our inflation has been less than half of the rest of the retail market in South Africa, and where there's been deflation, it's been roughly double. You'll see in our reported numbers, product deflation for this first 6 months for apparel was about minus 3.5%, which again, I think is a tremendous achievement given the rand has been particularly weak over the 6-month period. And that's something we're going to continue to focus on. Then in terms of consumer mindset, we saw that, within our sample group, 55% of our customers literally can't wait to return to some form of socializing as soon as lockdown regulations were lifted. That's a wide range of different social activities. But what it's telling us is that people are wanting to go back out. They're going to be seeking fashion. They're not all going to be sitting at home, wearing track suits forever and a day, and we've seen that already in our trade. We also saw that 38% of our customers said they couldn't wait to get back and exercise and partake in outdoor activities. The 38% is a little bit misleading. When you categorize those into individual types of exercise, anything that's outdoors like running or cycling, et cetera, was in the high 70% or 80%. As I said, we've already seen the rebound in both sporting and fashion apparel. And I think that augers well for the future. Then in terms of working from home, again, not overly surprisingly, 43% of our customers said they were going to try and work from home for longer and try and negotiate that with their employees. I'm not sure all employees will have exactly the same attitude to the same extent as the people surveyed here. But I think clearly, what it does say to us is that workwear is going to take a bit longer to come back. I'm sure once we post-COVID, most people will go back to their offices, maybe not quite to the same extent as before. But the cautionary tale there is we don't want to leap back into too much formal and workwear in the short term. And then from a Nielsen survey, we saw that 29% of South African consumers are now shopping more online than they were before the pandemic. I think in our own case, as I've already indicated, our growth has been significantly more than that. We were up 152%. And I think that's really on the basis of the strength of our individual brands, people really want to buy them and, secondly, because of all the innovation and investments that we've made in our e-commerce platforms. And we expect that online demand to continue to grow. There's been quite a lot of talk that, once lockdowns lift, online will drip back to where it was before. It's certainly not our experience. And again, we think that this is going to continue to grow exponentially in the future. Just to illustrate then the impact that COVID has had on footfall in our traditional bricks business. If you look at the left of that bar chart, we've stratified the drop in footfall that we've experienced in different types of shopping locations. And clearly, the hardest hit were taxi and commuter centers, and that was when people weren't able to travel predominantly during lockdown periods. But then the overwhelming trend is that your larger super regional and major shopping centers have been the hardest hit and continue to be the hardest hit in terms of reduced footfall, and we really only get into any kind of neutral or positive growth when we get down to smaller convenience neighborhood centers, really saying that people don't want to travel far from their homes. They want convenience, and they want to avoid places where they perceive there's going to be a higher COVID risk because of the number of people milling around. Just to contrast that, at the bottom, we see 152% growth in online sales, which I mentioned previously. But if you just look at the 2 side by side, it really just does show how things are shifting. In terms of that shift to online, just to unpack this from a TFG-specific perspective, we now have 12.2 million social media followers, which is a staggering number. That's a group number. That's resulted in 67 million visits to our various websites during the first half of the year, which again, is a hard number to get your head around. That's resulted in 1.2 million orders, roughly 2.5 million individual items sold. TFG Africa turnover up 152%; Australia, up 67%. Ben will unpack the U.K. online in his presentation. That's a bit more complex, depending on which channels you look at. But overall, we've now moved, as I said, to a 14% online contribution at the group level. And in TFG Africa, we've now got all of our brands online. Only one that will have to follow now is Jet. They weren't online at the time we acquired them. We're looking forward to taking them online, and we now have our 2 shopping apps with more to follow in South Africa. Just dealing with the social media following. Again, we believe this is fundamentally important because it drives both the strength of the brands, and it drives people to shop online. That's TFG across the top there broken into Facebook, Twitter and, with increasing importance, Instagram. And you can see the rest of the major South African retailers listed below us. You'll also note that some of those are not pure fashion or lifestyle brands, and they include groceries, in some cases, et cetera. I think this just shows the -- again, the strength of the brands and the degree to which our investments in digital media are starting to pay off. Then in terms of online traffic, which is very much driven by social media and the strength of those brands. If we compare ourselves to our traditional bricks-and-mortar retailers in South Africa, you can see us having 37% of all online traffic in South Africa, which is a staggering number. And again, to make the point, that's not only fashion and clothing retailers. But increasingly, we're not actually comparing ourselves to traditional bricks-and-mortar retailers. We're really comparing ourselves to the pure plays. And if you look at that piechart on the left, we second there, 24% all online traffic in South Africa. Takealot clearly the market leader by some margin. But again, that's a pure marketplace. And I think we're very happy with our position there. I mentioned, we've launched 2 new apps. We launched the myTFGworld online app. It was launched in July. It already accounts for 36% of our online sales. And as I said earlier on, that should grow a lot further. We would expect that to get to between 55% and 75% over the next couple of years. We also launched our Sportscene online app on 1st of September. We've had 50,000 downloads since the launch. Within the first week, it was actually in the top-5 trending apps on the South African App store. It's got a whole lot of really cool features on it. In radio station, a number of our customers come into our recording studio in Sandton and actually record their own music, and you can listen to that and play that through the app together with all the shopping and accounts functionality you'd expect. As I said, that's the first brand-specific app we've rolled out. Our plan is now to do that in a staggered fashion for the rest of our South African brands. As I mentioned, we'd also launched American Swiss and Sterns online. We've had nearly 1 million visits since the launch. That was a soft launch on the end of -- halfway through August. We really only launched at the end of August. Again, a staggering number of visits for a jewelry online player. We've sold nearly ZAR 6 million worth of product over that 2-month period, which again is, if you just think about it, jewelry is such a trust sale. People normally want to touch, feel, look at jewelry, try it on, understand the provenance of the diamonds, et cetera. Last week, we actually had a sale of a ZAR 50,000 diamond ring online sight unseen, not tried on. I think it does point to quite an exciting market for jewelry online. Then something that I'm really proud of is the launch of our first pure-play brand online, Galaxy. Galaxy & Co is a iconic jewelry brand in South Africa. It was founded in 1930. It went into liquidation a couple of years ago. We bought the trademarks and the IP. And we've literally launched this, as I said, a day ago. The official launch is on the 11th of November, which is Singles Day. This is everyday fine fashion jewelry for our younger customers, very much in the value space. It's going to be a fascinating experiment to see how well a pure-play brand works for us. And again, I think just shows how far our thinking has come over the last couple of years. In terms of local sourcing. Just to give you a sense of how we're doing that across our different commodities. We now have 33% local sourcing for apparel, footwear and accessories. That's up 3% on last year. Homeware is 45% upwards and trending. That's 15% up on last year. And then jewelry, again, a category, we've never really spoken about in the past, 57% local sourcing, up 14% on last year. And overall, 34% for TFG Africa, locally sourced 4% up on last year and more of that to follow. Then to touch briefly on Jet. I don't want to steal Shane's thunder on this, but just to give a sense of what we bought, we've ended up with 382 stores in South Africa. That should grow to approximately 425 once our BLNE transactions are finalized. That should be early in the new year. Each country has to follow its own competition commission-type approvals. We expect this business to generate between ZAR 5 billion and ZAR 6 billion worth of annualized turnover to start with. Something that I think is really noteworthy is we saved 5,000 jobs in this process. And I'm firmly of the view that, if we hadn't bought Jets, it ultimately would have closed either as part of the business rescue process or within the next 12 months. And I think to be able to save 5,000 jobs at this point in South Africa's unemployment crisis is something that means a lot. We've inherited total gross assets of ZAR 2.7 billion. Bongiwe will unpack some of that in her presentation. That includes stock of ZAR 473 million. That stock is clean. I'll give some detail on the makeup of that in the next slide. The total transaction value for South Africa has come out to ZAR 333 million. And that has generated a bargain purchase profit of ZAR 694 million, which is included in our H1 results. We've retained a very solid management team led by Shane, who you'll meet in the moment. We've retained the entire head-office team in Johannesburg. We're not moving anybody to Cape Town. They've moved out of [ Edgarvale ] into our TFG Isando offices. And there are many reasons for that. We want to keep that team together. We don't want them distracted, and we want them to keep that absolute value culture that is very much in their DNA. The effective date of that transaction was the 25th of September. And as I said, the rest of the Africa stores, we expect to conclude that early in the new year. And then from a systems integration perspective, it's mainly IT. We're well on track with that and expect to complete that by the 31st of March. We've now had the business since the 25th of September. It's given me a little bit of time to reflect on what we've actually got versus what we might have hoped to get. And this is the slide really just tries to summarize, I think, our key learnings to-date. In terms of any surprises, absolutely none, perhaps with the one exception that the strength of the brand is actually even stronger than I think we understood before we bought the business. And they've -- Jet have traded with very, very limited stock over the last couple of months. We're only starting to get back into stock now, and any new stock flowing through the stores is selling almost as it comes out of the boxes. For the brand equity to be that strong, having been starved and -- stopped and starved of CapEx for many years as part of the Edcon stable is both amazing but also very gratifying. And I think the other reason why we haven't had any surprises is, I think we had a fair idea of what we were getting into. As I've shared previously, we did do a very detailed due diligence of the Jet business about 5 years ago. We understood the systems, the dependencies, the structures. It just wasn't right for us at the time. And we were able really to use a lot of that knowledge to work out how the integration would take place. As I said, from an integration perspective, it's well underway. Cultural fit is at -- Jet has got us into approximately 200 locations where we had 0 TFG presence or were totally underrepresented with maybe one other store. So it's really opened up a whole new market for us, and we believe that there's a potential rollout for approximately another 150 Jet stores over time. And there's no rush to do that. We want to land the business that we've got, but the potential is certainly there in the future. This is the picture of the Rosebank Jet store before the refurb. You can see it looks dark. It's got old railing. The windows don't have any product in it. The VM's particularly poor. You have nothing to get excited about. Less than ZAR 500,000 later, this is what the new Jet store looks like. That honestly looks as good as any value retailer anywhere in the world. The shopfront is incredible. The product's the hero. You can't miss it. There's a huge decompression area as you walk through the door there that's inviting. People want to shop there. That's why we've seen double-digit growth. Very clear focal areas and key essential items really being called out, making a strong statement, and then a very much more open flow in the store with new railings and fixtures. To achieve all of that in a reasonable-sized store for ZAR 500,000, incredible. The build costs are low. So this is exactly what we're going to be doing with stores going forward. Then even though sustainability, I think, deserves an entire presentation on itself. I think, if anything, COVID, has really just reemphasized how sustainability is at the heart of everything we do. I'm not going to try and rush through this and unpack all of it because, as I said, this really is a whole separate discussion. But I think it would be remiss of me not to at least touch on some of our activities in relation to sustainability over the last 6 months. We've managed to achieve our level -- to retain our Level 6 in South Africa, and that's despite the codes becoming a lot more stringent, and incredibly, I'm proud as an organization that we find ourselves in that space. We've spent more than ZAR 1 billion supporting procurement and CSI in South Africa, not for the purposes of the scorecard. That was for all good economic reasons, but it's obviously benefited our scoring on the scorecard. In terms of our local manufacturing, we produced ZAR 1.6 billion locally or procured ZAR 1.6 billion worth of stock locally. We intend to increase that significantly. We're a founding member of the South African Plastics Pact, and we are SEDEX compliant. In terms of our suppliers, you're critical to our business going forward. We spent ZAR 1.5 billion on black-owned and black women-owned suppliers. And ZAR 1.7 billion spent on local SMMEs. And we've clearly got a very strategic plan to work with local suppliers and SMMEs and empower suppliers to increase that going forward. I think the thing that I'm the most proud of though is what we managed to do from an employment point of view. As I mentioned earlier, unemployment has never been more important in South Africa. We've recently signed up for the Y.E.S. program. That in itself will create approximately 450 youth work experiences every year. And we employ roughly 4,000 learners through learnerships and the TFG retail Academy as part of our Educate to Employ strategy. We spent more than ZAR 20 million directly into community projects. And our real focus has been to make sure that we look after our staff and the most vulnerable throughout this COVID period. I'm now going to hand over to Bongiwe, who will take us through some of our financial and balance sheet metrics.

Thanks for that great introduction, Anthony, and a good strategic scorecard update. Good morning, everyone. It seems like just yesterday, we stood in front of you presenting our March 2020 results in June. And at the same time, we're [ workhorse-ing ] our shareholders in anticipation of the right issue we are about to embark on. In South African language, I would say, [Foreign Language] a lot has happened since. April saw us reinforcing our balance sheet with additional facilities, successfully secured ZAR 3.3 billion in top-up facilities, working with our funding partners. At the same time, we waived covenant testing in September and reset for the ensuing period and converted a lot of our short-term debt into longer-term debt or RFC-type facilities. At the same time, we then -- we work with shareholders, obtained overwhelming approval to embark on a rights offer and successfully, as Anthony has mentioned, raised net proceeds of ZAR 3.8 billion working with a group of our banks, including being led by RMB, Stan Bank and Absa. We worked then soon thereafter. We then went through the Edcon BRPs to acquire the very opportune Jet profitable stores, as Anthony has taken us through, and which almost culminated in an accounting profit of ZAR 694 million, largely because of the stock levels falling significantly below the ZAR 800 million that was stipulated in our [ temp ] sheet on acquisition. So a lot has happened. We appreciate all the amazing support as Anthony has said from all our stakeholders. The pleasant and satisfying news in that we have never been in a stronger position as a group. I then wanted to just give you an overview of our financial performance, and I'll unpack key number of these items in the following slides. Looking at the last 6 months' financial performance, trade has been extremely challenged. As I'm sure all you know, as everyone has experienced, and we lost, I think, circa ZAR 5 billion in turnover. But once again, Africa, Australia, even the heavily impacted U.K. and Europe have proved resilient and reaffirmed our belief of the great demand of our brand and product. Cash preservation, margin protection. And at the same time, emergence with a clean, strong balance sheet has been our priority. And I suspect it's going to be -- remain the same for the next years to come, working on that businesses. Turnover declined 26%, and as Anthony mentioned, we lost almost 8 weeks of trade. What is pleasing, though, is that our EBITDA only declined -- EBITDA margin only declined 1.1%. And let's talk to the good cost control and the overwhelming support we see from either government through subsidies and working with our landlords, some rent reliefs to support us, which we appreciate. Our reported EBITDA number, ZAR 3 billion, declined 29%. I know that includes a lot of provisioning, which I'll take you through. Without those provisioning and without those once-off costs, only declined 19% or ZAR 800 million, which is quite pleasing. EBITDA, obviously, is flatted by the once-off provisional accounting intangibles, which I spoke to. Gross margins. Gross margins declined 8%, but before the additional stock provisions, declined 5.2%, again, a fair achievement in the context of the current environment. Gross margin decline was influenced by heavily promotional activity, especially the formalwear side of things, cosmetics and general formal occasion ramp. An increase in stock provisions to the tune of about ZAR 350 million for the group, which equates to about 5% and end up additional provisionings. But then GPs actually have held in some instances, that Anthony mentioned, athleisure and even in furniture and homeware and cellular when they were able to trade, their margins have actually done exceptionally well exceeding our expectation. Cost control has been the order of the day. Our trading cost down 23%. We're quick to review, as Anthony mentioned, and stop any unnecessary spend or expansion-related spend. And together with the optimization that we had already embarked on, I spoke to that a few months back to you to give you an update, we cut a whole lot of expenditure in a responsible manner. Additionally, the trading division's merchandise work that they've could already done through our GMP office and our local manufacturing through [ Graham ] and his team and landlord negotiations support -- there a lot of government support then led to the 23% decline in trading expenses. I'll show later how without some of the government support we have had. Reported earnings declined 66% as we have reported, and the HEPs down 117% as our trading guidance. [indiscernible] because I'll go through the slide quite quickly. You can see how each of the categories fell, improving and massive growth in, obviously, cellular. And jewelry and accessories, if you can all remember, closed 2 months -- actually full 2 months in South Africa. And when we're able to trade, we have, I think, I might have mentioned as well earlier on tremendous support, and they continue to do quite well against last year. Clothing, which all mitigated the impact of the decline in clothing. Again, if you also unpack that, you'll find some sectors of clothing, casual, leisure, has actually increased on last year, but the more formal sector for formalwear, occasion-wear has declined. By geography, Africa, as you all know, remains our traditionally largest area of operation. What I wanted to highlight in this slide was actual our less reliance on credit. Credit fell 35% on last year. While cash sales only dropped 23%, which brings the cash contribution of sales at group level at 76% or 77%. And if you unpack that for Africa, actually, 65% of our sales is cash and 35% or slightly less than that is credit, which is very pleasing in this environment. We've not had to use credit to buy sales. Quarterly performance. I mean, we started -- we gave a trading update of our Q1 performance, which obviously was miserable for all of us. But we've been very encouraged by the significant improvement in Q2. And I'm showing this slide how each of the regions have performed in between the quarters. As you can see, even the heavily impacted U.K. was 60% up between Q1 and Q2 in trade, even with the lockdowns that continue in that, and I'm sure Ben will talk a little bit more on that in his section. And then Australia, highly encouraging. 64% growth in turnover quarter-on-quarter, which again, very pleasing, considering that, in Q2, Victoria, which just to give context, is actually over 23% of our rate turnover, about 23% of it comes from that state, was closed from late August all the way into September. We firmly believe that actually had Victoria remained open, we would have definitely, in Q2, recovered and even grew on last year. Gary will eloquently talk you through that as well. Africa, great pleasing. What we're not showing here is month-on-month growth. I was quite pleased with our achievement in September, where our turnover actually was flat on last year. And last year September was a great month for us in excess of ZAR 1.7 billion in turnover, and to actually have the same this year in this environment, very encouraging. That trend has continued into October. Anthony, in his outlook slide, will talk to that. Gross margin, I've spoken to each, but I'm just unpacking this slide how each of the countries or regions gross margins have declined. And all of them, obviously, as I've mentioned, carry massive provisions to ensure that we come out of this clean, fresh in stock. 6.3% decline in margins for Africa. Again, we're carrying -- we increased our -- for Africa, our stock provision by ZAR 200 million, which brings our total stock provision in Africa to about ZAR 530 million. That's 2.4% impact on that 6.3%. Then product mix as well we spoke about the increase in cellular phones, those in home generally attract -- and branded goods generally attract lower margins, and we've seen a growth in that. So there's a bit of product mix there as well. London, 17.6% decline, which again is a reflection of the environment there. And Ben, as I said, will talk to that. But 6.1% of that decline is the provisions that we chose to carry in light of the current conditions and the slow-moving stock. In total, at the end of September, London was carrying provisions just on stock to the tune of about GBP 15 million. Australia, extremely well done, 4.1% decline. Margins have really held for most brands, but we do have the YD and the total cash brands, which are evening or occasion-wear, which because of the social distancing and governing for social distancing rules, we decided to be prudent and take provision there in total to the tune of about $6.4 million. So I hope that gives some light on our gross margin performance. Key expenses, as I've already mentioned, down 23% through a lot of direct deliberate intervention. We received in support in total from either government in the form of a JobKeeper or TERS in South Africa, ZAR 700 million -- close to ZAR 700 million in savings -- in relief in subsidies. We also implemented 0 salary increases across all our employee base. And then if you take all of that out, still, our trading expenses and our employee costs decreased 2.2% on last year. And that's because of some of the work we've been doing on optimization, especially at the head office, is bearing fruit. I think, Anthony mentioned some of the initiative that we've succeeded on which have yielded in excess of 100 million in savings. That we expect to continue on a steady-state basis, and any increase in our 2021 financial year, employee cost is likely to be inflation related or other. The web continues to drive cost down. Occupancy costs. With the rental relief in all our countries, our landlords have been highly supportive, and we'll continue to work with them to find win-win solutions, down 8.6%. But if you take out all the relief we received, which in total equaled to about ZAR 301 million, increased only 5.7%, and that's because of new stores that we opened [ as plain ] Australia last year and some of the expansions with impact on generally also CPI increase as well were employed. Other operating costs, biggest savings area is travel. No one has been able to get on the plane outside Africa in a while. And that -- and some of the marketing savings have yielded ZAR 100 million reduction in costs. We expect this, obviously, as borders unlock and maybe the impact of COVID has long passed us next year to probably increase a bit, but I'm sure it's all taught us a new way of doing things. And we'll watch this that it doesn't climb back to the levels as before. Depreciation, what I wanted to just highlight is the impact of IFRS 16 on our numbers, as we've always said, because of the nature of our leases and tenure, and some is between the U.K. turnover related, mitigate any impact on IFRS 16 on us. As mentioned, and you would have expect the sort of non-comp items in these numbers. We've spoken to a lot of these already, maybe highlighting the acquisition costs related to Jet of ZAR 14.3 million. I've spoken to the government relief that we've received, and the finance cost reduction actually just because of the raise, when we had money in our accounts August 19, applied it immediately to debt and yielded a saving of ZAR 32 million for the period to September. Obviously, those will be further reduced for the full 6 months of the coming second half. Also the numbers contained a lot of COVID-related expenses. I think a conservative ZAR 30 million, if you look at the sanitization, all that we've done is whether a location of staff from head office and setting them up at home, chains, call centers, et cetera. All around ZAR 30 million or if I daresay even more. Balance sheet, as mentioned, never been stronger, and debt-to-equity ratio 11.2% down from 52.4%. I'll unpack that a little bit further. Pleasing is the highly generative -- continued, highly generative business, free cash flow debt of 600%. Quite pleasing, up from the 92.2% at half year -- at full year last year. Current ratio has improved. We've spoken about group inventory data, and I'll unpack it further in the next few slides. And net debt to EBITDA, obviously 0.6x compared to 1.6x at year-end. That's obviously influenced probably by things like not paying the dividend, reduced tax and all of that. And -- but we do expect to maintain going forward a ratio of 1:1.5x going forward. Debt to equity. I'll go quickly through this. You can see our -- what I wanted to highlight was the available facilities as of the end of September. We have cash in the bank of about ZAR 4.8 billion. We've got facilities of ZAR 9.2 billion, bringing cash and anything available to, in facilities, available to ZAR 14 billion for the group. And you can see how our payment profile has smoothed out over the next 5 years, a complete different picture to what I gave you in the end of the year for last year, in what I presented in June. So excellent efforts there by our treasury teams and finance. Net debt-to-EBITDA was spoken, to 0.6x, and then of the net debt post-IFRS, which is a different number and we don't -- hardly ever speak to is the one -- to truly understand it, ZAR 7.3 billion, but pre-IFRS 16, ZAR 2.3 billion. And that's largely actually Africa, that the U.K. sits in a net debt position, but quite small. And Australia pleasingly sits in a net cash position. They have generated, in the past 6 months, cash, and sits with actually excess cash of about $600 million in the business, facilities of about $65 million, and those facilities untapped. They have not dipped into their facilities throughout the COVID period. So Gary will speak to that as well. And then the U.K., everyone always asked about the cross-guarantees between South Africa and the U.K., all our businesses support themselves. There's no parent support yet. If you have to fund anything, we fund a little bit to the -- as required. But we haven't had any material need for that thus far. Group stock value. We've spoken about that, down 10.7%, and this number includes Jet. If you take our Jet stock that we obviously included in our numbers at the end of September, group stock fell 17%. Quite pleasing when we spoke to that and our days as well, up only 2 days. And you can see what has driven that. Africa day is very pleasing at 167 compared to 186. And that I always say to everyone, we will never potentially have days in double digits because of just the nature of our operations. We carry large growth stocks. We are the leader in jewelry and current large sporting goods. So we are quite pleased at TFG, on the one that the trading divisions have achieved working with us in our projects to drive that down and I'm sure locally as much as possible where we can. Australia, up to 11, and it doesn't frighten us. That's just the model we work on. And then the U.K. remains under pressure. You can see why we've had to raise provisions and take provisions to GBP 15 million in the U.K. because of the slow-moving stock as they've been probably the worst affected by the lockdowns. Cash. Cash is king, as we all know. In the past 6 months, we generated, operation-wise, ZAR 2.6 billion in cash, and to add that with the working capital management, just our gross datas book because of tight, tight controls and stringent acceptance criteria, which Jane will take you through, reduced our debt gross book from about ZAR 9.7 billion that we reported at the year-end for the 31 March 2020 financial year, to about ZAR 9.1 billion. That's a good 7% reduction in our book. So a lot of work has done -- have happened to achieve that and which took our net cash from operations to about ZAR 4.3 billion. You will also see CapEx reduction, which we spoke to. A Jet first tranche of payment of about ZAR 161 million, you'll see that in the next while as we repay -- as we pay the shareholder, Edcon shareholder, [ or VIP ], the Jet acquisition price, reduction in our lease costs and also the profits from the right offer. You will see our debt actually has reduced much more than the proceeds because we've actively, as some of the institutional funding matured and because we are so cash-generative, paid them down, so which is in a very good position, as we've already mentioned, net debt-wise. CapEx is probably my last slide. CapEx, expected a significant cut in CapEx. Store CapEx, by this time last year, we had spent [ ZAR 320 million ] in store CapEx. This time around only ZAR 70 million CapEx. That number, if you will ask of run rate, we do expect it to increase partially. I think Anthony mentions more of the CapEx required to make, and Jane will speak to it as well, to make a -- to look pretty and give it the support obviously that it requires. But that's not any major CapEx according to our standards. And a lot of our CapEx continues to be on IT, digital transformation and expansionary-type CapEx. And we spent ZAR 117 million in the past 6 months compared to the ZAR 177 million last year at this time. We do expect in the second half, these numbers, obviously to slightly increase or if the economy recovers. In closing then, looking ahead, working capital management will continue to be a focus for me in finance. Inventory levels, I've already spoken to, will partially increase as we stock up Jet and to bring them to the levels that they want to be at ultimately in sales and turnover levels. Debt book management by Jane will continue to be her focus. And I'm sure, CapEx run rate, I have mentioned, we expect it to increase. Cash preservation, we'll continue to work on that. We've reset the base for some of -- a lot of costs through a lot of innovation that we have done. And I will conclude some of the business information work streams that I spoke to earlier on. In closing then, I also want to thank my finance teams locally, [ Ian Dowen ], who have worked tirelessly with us, Mark, to achieve the Africa result or report Africa results on time and with all the other processes that we've done, corporate actually, we've done in the past 6 months; to thank also the international teams, [ Katherine ], the U.K. and her team; Jean in Australia, who is the CFO there and his teams; and also thank all the support that I've received from my Audit Chairperson, [ Eddie ] and my Fincom Chair, [ Graham ]. And least -- and last but not the least, I mean, IT have been phenomenal. [ Prenta CIO ] and [ Nikki ] have worked so hard to ensure that our reporting and our work is seamless. We hardly have had any glitches in the past 6 months, which obviously allowed us to meet all the deadlines imposed on us. And with that, I thank you, and I'd like to hand over to my colleague, Jane. She's actually in a stunning, stunning red Foschini dress and will give -- take us through credit. Thank you.

Thanks, Bongiwe. Hi, everybody. This does seem to be the new norm, where we're presenting to our computer screen. And you now, it will be great when we can all see you in person once again. I do miss seeing all of your faces. So how has credit looked? Let's go straight into the numbers. Under normal circumstances, we would normally get about 1 million applications every 6 months. But obviously, we've had the COVID pandemic to deal with during this half of the year. And our credit demand is down by about 55%. And this is really down to 2 reasons. First of all, when our stores were closed during the lockdown Level 5 and then only partially opened during Level 4, of course, there was no credit applications during that period or very, very few. And the second reason is we cut our credit marketing. So we didn't do our new account drives. We didn't do any credit marketing, any mailing drives and et cetera. So of course, the whole credit demand was significantly down during that period. Now in response to the pandemic, we also cut our accept rates. We're not sure how customers are going to cope with a pandemic, the economic stress, how the scorecards will be impacted as well. And we cut our accept rates down to less than 10% for that period. And this is compared to 37% this time last year. In the recent months, that accept rate's been running around about 13%, though. But we've also shown you here a graph on the quality of new business. And the graph shows the growth in new accounts for each financial year as well as the delinquency performance. So you can see in 2019 that there was significant new account growth. And that was immediately following our proof of income court case, where we had all that pent-up demand for new accounts come through the door. But it was also at the same time that we actually tightened up our credit strategy as well. There was some stress in the economy. We could see some early indicators. And I've spoken to you previously in some of our results presentations about the need to tighten up our criteria. And you can see the delinquency significantly improve in financial year 2020, and this has been maintained during this financial year as well for this half of this year. So given that demand is significantly down, given that we've cut our accept rates, of course, credit sales has been impacted as well. And our credit sales are now down by nearly 35% for this half of the year. So our credit contribution is roughly 35% versus 42% for this time last year. And we are expecting to keep its ties to credit strategy in place for this half of the year. Now the million-dollar question is, well, how has our book performed during COVID during this half of the year. Pre-COVID, about 90% of our customers paid in-store for their accounts. And obviously, when our stores were cut, this just wasn't possible. So what we did was we launched a number of different payment options, primarily electronic, PayU, PayNow, EasyPay, et cetera. But as well as the ability to pay at Checkers or Shoprite, and we actually gave customers ZAR 3 million worth of food vouchers to say thank you during that period for those that converted to a different payment option. And in April, you can see that we collected about 40% of the cash that we collected this time last year. Then in May, when some of our stores reopened, we saw -- we actually collected more money as people came back in, they needed those winter essentials, and they bought, and they actually paid their accounts. But if you look June, July, August, September, you can see this has normalized at roundabout 90%. So we're actually only down 10% year-on-year of cash collected against our debtors book, which is a fantastic result. We're getting 90% of the cash that we got this time last year. But obviously, not everybody could switch to electronic payments or they couldn't make their payment due to the pandemic. And so what we did do is we gave payment holidays, and we gave payment holidays in April or May. You could take 1 or 2 of them for those customers that just couldn't pay. Now about 50% of our account base did take up the option to have a payment holiday. And you can see on the graph there that, of those customers that didn't take a payment holiday, 90% of them were up-to-date as at September. So 50% of the base didn't need a payment holiday, and the majority of them are still up-to-date as of September. For those that took 1 payment holiday, circa 65% of them are up-to-date as at the end of September. And those that needed 2, which clearly are the most distressed portfolio, about 1/4 of them are up-to-date now, but that's still a quarter of the people that managed to actually get themselves back up-to-date. So we feel the payment holidays have been a big success. And then the cash collected through the door is still very, very good. Now obviously, this meant that we didn't write off any accounts in April and May. So our writeoff statistics are artificially low for this period. Now given that the cash collected is slightly down year-on-year, and given there is some stress in our portfolio, our provision levels have increased to 25% -- 25.1%. And this is up from 20.4% as of the end of March or 19.7% at this time last year. This includes our overlays for COVID, debt intervention and macroeconomic. And we've made no changes to any of our provisioning methodology. And we believe our provision levels to be conservative. And actually, our expectations are that our provision levels will drop by the year-end, provided there are no further lockdowns and provided customers keep collecting as we're currently seeing. So the answer to the question about how has our book performed, very well under the circumstances. Customers continue to pay their retail accounts and long may this continue. So how does that look in our EBIT? Well, of course, our income has been impacted by the significant interest rate cuts that we've had, 270 basis points since the 20th of March. And that's why it's about ZAR 150 million of my bottom line. And we also didn't charge collections fees during April and May. Whilst we were trying to inform and educate our customers about how to pay their accounts, we didn't feel it was right to levy collections fees as well. You put that together with the interest rate drops, and you can see our income is down by 24%. My net bad debt, conversely, has increased by 26% and that's primarily because of that provision level increasing to 25%. Now we have been able to cut some of our costs. We did run a voluntary retrenchment program. We didn't have the demand for new accounts. We didn't need the workforce as it was. And so we have managed to cut some of our costs. And this has meant that we've limited our EBIT losses to ZAR 90 million. I don't think any of us are expecting the interest rates to increase over the next period. And so when it comes to year-end, I'm not expecting that EBIT number to change much at all. So what's the outlook going forwards? Well, payment behavior of the customer base remains robust and exceeds expectations. I think any of us expected to be collecting 90% of the cash that we got this time last year. And long may that continue, but we will keep that strict credit lending criteria in place until the end of this calendar year as a minimum and then we'll review in the new year, about what does this mean, how are customers performing, and what should we do with our credit lending criteria. The DTI have recommenced discussions regarding the debt intervention bill, and we have been asked to give our views about how we think it should be implemented from a private perspective. Now what we have suggested is as a Phase I, implemented the debt counseling rules as is and make it compulsory for all credit providers. We believe that will solve a large part of the issue that consumers have about trying to access the debt counseling. TFG already implements those rules, so there'll be no further impact to TFG beyond that. And we believe that would be a great thing for the industry overall. Of course, we now own Jet. Now RCS already own the back book for the Jet customers. They already bought that book from Edcon. And it makes sense that RCS also managed the new account strategy for the Jet customers. So that is a one-customer journey, and it's seamless. But we will allow the Jet customers to be able to shop at the TFG stores and vice versa. The TFG card will also be able to shop at the Jet stores. And that should give us incremental credit sales for both basis. So that really is the outlook for credit going forward. And I'd now like to hand across to Shane to take you through Jet. Thank you.

Thanks, Jane, and good morning to everybody out there. As you know, I head up the Jet part of the business, and I'd like to take you through some of the strategy and where we're going with Jet. As you know, this business has been around for a long time. It was born in 1965. So it's 55 year old -- 55 years old. And a lot has happened since then. And I'm sure a lot of you have been through that journey. Obviously, some of the things we need to understand here is the purchase by Bain in -- I think, 2007. And I think that's where things really started going wrong. And then we sold the book to Absa in 2012 and that went wrong again. And we had to then start exiting certain of the divisions within the Jet portfolio. Just an interesting thing to understand is that, as you know, Jet today, there was a combination of Jet Mart, which was more of a general dealer in Jet. And that, I think, created a lot of confusion in the minds of the customer and it really ended up being in a discount world, which is not really where we wanted to be. I joined the business just 16 months ago. And when sitting with my team, soon realized that we had to get this business into the value space. So that's where we started 6 months ago -- 16 months ago, and I'm happy to say that we're well on the way to achieving that target. And then came along lockdown and very, very happy to be part of the TFG team now here in Capetown. So thanks to everybody at TFG for bringing us in and making us feel welcome. And I think the fit is really, really fantastic. Let's move on. If you have a look at our business on an annualized basis, we look at net sales of about ZAR 6 billion. We have just over 5,300 employees. We've reduced our number of stores from about 550, down to 425, and these stores are all profitable. From a social media perspective, we have 1.1 million followers on Facebook. Our Jet Club Facebook followers are at 600,000, and we'll talk a little bit more about Jet Club later on. And Instagram is starting to grow and an area of focus for us. We want to be the most loved value retail in Southern Africa. And I suppose, everybody who's in value retailing will say the same thing. We are a loved value retailer, or a loved retailer, not value yet, but we have to get there. And that's a major focus of what we want to do in the business going forward. Our mission is to address the lifestyle needs of value-conscious customers in Clothing and Home, and remember that one, without compromising the aspirations. We'll make sure that those people who are following fashion, who want to dress comfortably in a value lifestyle, we'll be there for them. And our purpose is to empower South Africans with the tools they need to write their own futures. These are individual people, and they do really want to make a difference in their own lives. If we look at our customers, we've got 5 segments of customers. We call them Savvy and Single. These are our single customers that make up 9% of our customer base. It's an area of growth for us. And especially when we start looking at the fashionable side of our business, and we've been testing product in that area, which is really flying. One of the areas that we have here just in the month of October had an 18% growth on last year. If we look at the other customer segments, we've got what we call Two 2 Tango. These are couples. It's a small base as well, an opportunity for us to also grow. They have limited disposable income, and it's an area we can focus on. Me and Mine, single parents make up quite a large percentage, 25% of our customers and 20% of our spend. Again, these people are strapped for cash, and we need to make sure that we're able to present the product to them at great prices, and they are very, very core to our customer base. Kids Zone, an area, I think, which is a tough area to operate, especially in the value area. This is a growth opportunity for us. We had quite a big share of customer in the past, has been eroded over time. We've sat down and looked at a few areas in the business, started with infants about a year ago, worked to a planogram, make sure we're able to be in stock, not going too crazy on the fashion side of things. And that is really, really working well for us and has given us the confidence to move into little kids, all the kids across boys and golf. So there's a huge growth opportunity for us and somewhere -- something that we'll be focusing on. And then All in the Family, and I think that's an important one, All in the Family, is that the -- a Jet customer. I nearly made a big mistake and called it Edgars. That's crazy. Anyway, so the TFG Jet customer, let's get it right, is really who we're all about. We're not trying to segment in time just to be fashionable. We look after the entire family. We just have to be very careful that we are producing the product and putting in front of the customer for the particular areas that they would fall into in terms of our customer profile. These people are not fashion followers. They see what's out there and they want to get it quickly, and they want it at a great price. They, therefore, very value conscious. They like to feel good and be able to mingle with everybody on a budget, and they sit in the predominant SEM of 3 to 7. What we did as a team in the business once we had settled down is that we created a 16-point plan for our business. The focus of this plan for me was to start off with making the product, the hero once again. Over the last couple of years, this has been eroded. It has been nearly a discount top operation, gets stock and sell it as quickly as possible for the best price, and we'll mark it down at the end of the season. Sort of never-ending area of not actually achieving what you want to get to. So we've looked at a 16-point plan, making the product the focus. We're looking at our assortment strategies. We're making sure that we are available across color and size. In the past what would happen, they would put in a white T-shirt this month, a black T-shirt next month and a red T-shirt the month following. We've changed that. We're making sure we have all the colors right in, racked, packed and stacked, work on a replenishment process to be able to make sure that we are supporting the customers' needs. Denim was a big area in our business in the past. We sold huge amounts of Denim, we lost our way, back into that. That then allows us to look at our range extensions. And so forth, we've looked at everything inside our business to say, what don't we need? What do we get out of? How do we then get back into the right stock and make sure that our customers are being serviced at the levels they want to. Other areas that we've looked at in great detail is, of course, our rewards and club and communication. We're about to launch our rewards program in May. And then as you all know, we got told to stay at home. So that didn't happen. And what we'll do with our rewards is lock into the TFG rewards. And that will be something that we will hook onto and come up with a rewards program which is appropriate to our customer. Other areas of credit, insurance and financial services under the guidance of Jane and her team, and the team that I have, we'll take that to new levels. Store segmentation, making sure we've got the right stores in the right size in the right place with the right assortment. And obviously, a lot of people will say to me, why are you talking about this one last, but this will all end up in an enhanced shopping experience for our customer. So I'm excited about the future and really excited about being in a position where I have a business that sits behind us as a Jet operation to give us the support from an infrastructure, help us reduce our costs and make this a highly profitable business. Thank you.

Good morning on what is regrettably the first day of our second nationwide lockdown in England. I'm going to take you through the difficult first half figures for our London-based brands as well as how we are repositioning our business here with a post-COVID recovery. Our first slide shows, on the back of the first global lockdown, we started to see a gradual reopening of our international store and concession estate during May, followed by the recommencement of trade in certain of our U.K. stores from the 15th of June. As you can see in the chart on the left-hand side of the page, by the end of July, we had reopened materially all of our physical estate, with only certain city-center locations, particularly those in Central London, being held back into October on the back of what was a precipitous decline in footfall driven by city-based office workers continuing to work from home and tourist numbers significantly down. As you can see on the chart on the right-hand side of the page, the pace of recovery in our turnover has certainly not matched that of our store reopening program, with our lightest year-on-year decline reported at minus 37.8% in August, where the U.K. government supported trade through a targeted Eat Out to Help Out campaign. This level of turnover decline is frankly markedly below that of the wider clothing market as customer demand for TFG London's key categories of occasion wear and formal workwear have remained significantly depressed. U.K. office workers have continued to largely work from home during the first wave of recovery, boosting demand for casual clothing over formal, whilst viral containment policies have led to waves of event cancellations, almost eliminating demand for occasion wear even ahead of the announcement of the second period of strict English lockdown, which I said this has started this morning. Indeed, I'm joining you today from my home. Turning over the page, as you will understand, with demand for our key categories in sharp decline, turnover for TFG London fell 56.2% in the first half, despite the slight positive growth in our own work channels, which have remained open for trade throughout this period. Recognizing the demand-led challenge, we increased the depth and breadth of our promotional activity throughout the period. That, alongside higher COVID-related levels of stock provisioning, contributed to a sharply reduced gross margin of 44.1%, down from 61.7% in the prior year period. Whilst our performance was clearly bleak at a sales and gross margin level as set out above and on the slide overlay, strong cost control, government employment support schemes, business rates relief, firm negotiation with our landlords and a significantly positive impact of our preexisting turnover-based store and concession rent agreements, all contributed to a GBP 52.8 million reduction, 47.4%, in our total trading expenses from GBP 111.4 million in the prior year to just GBP 58.6 million in the current year. On this next slide, we provide greater visual clarity of that movement, not just on the unprecedented GBP 86 million decline in our cash gross margin, but also the equally unprecedented reductions in our key controllable cost lines. Occupancy costs reduced by GBP 7.9 million, 37%, through a combination of rates relief, turnover-based store rents and robust negotiations on all fixed rent locations for the first-wave COVID closure period. Crucially, the decisions we've taken over the last 3 years to significantly increase the flexibility of our store estate really bore fruit in the period. As on the 49 leases where we've had a lease expiry or break clause, we've delivered an average 47% reduction in our ongoing expected rental costs, where we've chosen to remain in occupation. Employment costs in stores and concessions in head office reduced by GBP 19.8 million, 52%, through a combination of a head office and store restructuring across our brands, the government job retention scheme and a 20% reduction in pay that was accepted by our head office staff through April and May. Finally, other operating costs reduced by GBP 23.5 million, driven by lower turnover based commission and tight control of concessionary spend. Stepping over leaf to look at the balance sheet and cash flow. And the decisions we've taken have maintained a robust position that continues to support the provision of external credit insurance to our supply base. Stock balances increased from September '19 to March '20, as store closures sharply reduced our sales in that final month of the last financial year. But while sales have continued to be weak through the first half, our test and repeat trading model which operates with high levels of open to buy, has enabled us to reduce stock balances by GBP 1.7 million through the first half. Trade credit balances increased sharply through March '20 as we renegotiated payment terms with our merchandise suppliers. But over the first half of this year, these payment terms have been maintained with outstanding balances falling by GBP 4.4 million, purely on the back of reduced new season purchase orders. And finally, despite a loss of P&L level, TFG London's cash balance has actually rose by GBP 22.5 million versus the prior year, supported by the renegotiated terms with our stock suppliers, government agreed deferrals of direct and indirect taxes, landlord rent deferrals and drawdown on our external and intercompany loan facilities. So in terms of outlook, where does this leave us as we look towards 2021 and beyond? Well, firstly, it's crucial to note that our challenges should not be considered to be driven by a weak underlying U.K. market. Whilst our second 4-week lockdown starting today, will clearly impact turnover across the country once again. The U.K. retail market had rebounded strongly post the first COVID lockdown with total sales at retailing growth by 3.4% in September. Rather our challenge, our very specific challenge, is that the clear heritage and focus of our London portfolio of brands is and always has been an occasion wear and formal wear craft. And the elimination of all large group gatherings, weddings, celebrations, sporting events, eliminates the need if not the desire, to purchase these clothing categories. And we firmly believe that the strength of our brands is undiminished and the customer demand, particularly for occasion wear will return with a vengeance once the ability to mix socially is renabled. And our focus is, therefore, ensuring that we are optimally positioned for a strong resumption of activity, which we see taking place in spring/summer '22. In this, we continue to do a number of things. We continue to drive hard on our negotiations with landlords, where our strong brand portfolio and balance sheet strength continue to make us an attractive tenant. We continue to support our supplier relationships, trading with respect for these partners in order to retain their brand expertise alongside that of our in-house teams. We also continue to invest in maintaining our customer relationships, communicating increasingly over social media to support the engagement in social contacts that our customers would previously have received from our teams in stores. Finally, we're reshaping our business as we anticipate the impact of the acceleration of channel shift away from department store locations globally. By the time of our full year results, we expect to be able to announce significant new online, wholesale and brand licensing partnerships alongside a further reduction in the tail of our physical store and concession state. These are clearly unprecedented times for our London brand portfolio. We firmly believe that our market will reemerge, reshaped in spring/summer '22. And we are responding to this, reshaping our business and the teams that will lead it. The next 18 months will be exceptionally challenging. But these brands were built on the strength of our partnerships. And with these intact, we look forward to the long-term future with confidence. Thank you very much.

Good morning from Australia. What a 6 months it has been. But on reflection, I can honestly say, we did the best we could, both in the performance of our RAG team and our federal government. I'd like to introduce Dean, our CFO, who you will hear from very soon. Dean and his team did a phenomenal job managing cash and reducing our cost of doing business, resulting in a very strong balance sheet. It is also worth mentioning that our federal government's response to COVID has been excellent, both looking after lives and livelihood. And from what I've read and heard, Australia's response is world leading. So if we look at the first slide, since last we spoke on the 18th of June, just over 4 months ago, a lot has happened. July was fantastic for RAG. And just as we felt business was back to pre COVID levels, New Zealand went into lockdown and all stores closed. Soon after, Victoria, our second largest state, went back into the lockdown and 84 stores closed. The above, combined with consumer nervousness in New South Wales, hurt us in August and September. There are, however, many positive highlights, and our business is in very good shape. Thankfully, all stores are now open and trading and our ladies athleisurewear business, Rockwear is absolutely flying. And all our online sales in all brands are way up on last year. So if we look at the next slide, at the start of the financial year, all our stores were closed. Towards the end of April, we started reopening stores. And by the end of May, all stores were open and trading. But turnover for the 6 months was down 26.9% on last year. But on a positive note, we were absolutely brutal on expenses, including restructuring certain areas of our business. We received government wage subsidies for all full-time team members, irrespective of their roles at RAG. We also received rent relief from the landlords, although we are now back to paying full rent. All this resulted in our cost of doing business being way down on the previous corresponding period. Our EBITDA for the half was down AUD 7.2 million or 10.5% on last year, which, given the circumstances, I believe is a credible result. Our EBITDA margin was up from last year to 31.4% of sales versus 25.7% in the prior year. I'll now hand over to Dean to do the next 2 slides.

Thanks, Gary. This next slide contains the EBIT bridge, which provides a little bit more insight into the H1 result. As you can see, we achieved AUD 18 million, down from AUD 27.2 million. The main issue was, of course, the sudden loss of sales, which resulted in a AUD 54 million GP shortfall, an extremely difficult situation to recover from. However, there were 5 line items that drove the business back to profitability. Firstly, a AUD 19.4 million job keeper subsidy. This was a proactive government wage subsidy that certainly saved jobs and supported the economy. Secondly, AUD 16.6 million of wage savings. Declining center traffic gave us the opportunity to adjust our resources, and we reduced hours in stores and headcount across the business. Third, we negotiated a AUD 6 million in rent forgiveness from landlords. Also, we managed AUD 4.4 million in travel and marketing savings. And then finally, in all other consumables and across variable spend, we achieved a further AUD 4 million in savings, which goes back to the AUD 18 million. On to the next slide, balance sheet and facilities. Despite the fact that this is our second last slide, during April, when we were in full lockdown, cash and cash conservation was our first thought every day. In fact, during the first 6 weeks of lockdown, we reduced our weekly cash cost of doing business from the vicinity of AUD 6 million to AUD 7 million down to about AUD 550,000. We achieved savings across almost every line item. And as a result, we are comfortable with our cash balance and facilities and certainly feel that the state of our balance sheet is healthy. So at the half, in summary, we have AUD 47 million in cash, we have an undrawn facility of AUD 65 million, and our total inventory is under control. I'll hand it back to Gary.

Thanks, Dean. So looking forward to the next 6 months and beyond, COVID has reassured me that our RAG culture is strong and that we have a fantastic team. It has reassured me of the strength of our supplier relationship and our ability to embrace change with absolute urgency. It has reassured me that our strategy which has been very clear and very consistent for quite some time is right. It has highlighted the opportunity to accelerate our online sales and given me the confidence we are investing in the right areas to keep our business growing. I really do hope to see you all in person soon, may be even at our full year results presentation.

Gary and Dean, thanks very much for the Australia presentation. And really just looking at Australia and New Zealand, as you said, absolutely exemplary response to COVID and really touchwoods can hopefully keep COVID out of both economies going forward. It really, really an amazing national response. Moving to current trade and our outlook. Starting with our retail sales for October. TFG Africa, we've actually had a very encouraging performance, turnover up 8% for the month. And I think what's really important is to understand again the credit and cash split. Cash sales up 25% in October for TFG Africa. Really, we've always said that's the major strength of our brands. There's no captive audience there. Those shoppers can shop absolutely anywhere. So albeit one month, very promising. Credit sales continue to be restricted by our own very strict criteria, down 11%. The U.K. for October, down 38%. Clearly, the U.K. remains a concern with the further lockdowns that have just been introduced in the U.K., together with the Central City, particularly Central London locations, really suffering from a lack of footfall. And then TFG Australia, minus 15% for the month of October, bearing in mind a lot of that was in relation to the Victoria lockdowns. Victoria reopened on the 28th of October and the first day of trade, post the closure or the first day of reopening, were actually up 8% on last year and up 28% on the prior week, really just showing what an impact it has, in this case, positive impact when we're actually able to trade. Then looking ahead for the rest of this financial year. Clearly, trading conditions, consumer confidence are going to remain under significant pressure. And unfortunately, I think further job losses are going to be a reality in all of our markets, but particularly in South Africa. The threat of further COVID related lockdowns remains a threat. As I said, hopefully, Australia is through the worst of it now and New Zealand. The U.K. is really going to be -- U.K. and Europe really going to be critical in terms of how that's handled. Clearly, November and December are key trading times for us as retailers. Black Friday is going to be very difficult to call this year. What I can tell you is that we are well-stocked and we've got very, very good Black Friday campaigns. They've been stretched out over a much longer period, not just concentrated as we traditionally do over Black Friday itself or over the couple of days either side. And we've already done that to help play our parts in avoiding a mad rush to the shopping malls over a short period of time. I think by stretching it out, it gives people the ability to do what they need in an orderly fashion. And equally, we would also see online over November and December getting stronger and stronger, which also helps keep the social distancing in place. Clearly, as I said, the U.K. remains a key concern. These additional lockdowns aren't helping. Depending on how far those go into the future, it is possible that we may need to support them further from a parent perspective. However, really, at a group level based on any kind of reasonable cash flow projections, that's not likely to be in any way material from a group perspective. As Ben pointed out, when he spoke to us just now, we've got 3 incredibly strong brands in the U.K. There's brand equity and heritage that's been built up over many years. We've invested in those brands. We do expect that they will come back very strongly post COVID. And unfortunately, as we've seen already over the last couple of years as retailers come under pressure. We do expect some of our competitors in that space to continue to fold. And this is going to be about last man standing, winning and taking the market share once we're post COVID. The value in use related to TFG London is about GBP 240 million. We will test that at the end of the year. We really can't do that at the moment. We can only do it once the landscape is a bit better defined, but bearing in mind that's taking a 5-year view. And as much as COVID is impacting in the short term, we're still very optimistic on the 5-year view at present. TFG Australia, clearly very well positioned for further growth, especially in terms of Rockwear and Johnny Bigg. And now that COVID restrictions have been lifted, we would expect more social interaction, more social functions to come back in Australia and the demand for that smarter and more formal wear, no doubt will bounce back. And then Jet, as we've seen already as soon as there's fresh stock in the business, and is trading incredibly well. We'll be investing in quite a lot of fresh stock over the second half of the year, and we'd expect that to turn into some nice revenue growth for them through to the end of the financial year. And then just taking a broader step back and looking at how we are strategically placed at the moment. Despite the current COVID restrictions, TFG remains a highly successful retailer. We've got incredibly strong brand positioning. We now have over 4,500 outlets when we include our new 425 Jet locations. And we've got further opportunities to expand those as we see fit, particularly around high-growth opportunity brands. We currently have over 16 million rewards customers in South Africa, and that excludes the Jet customers. So that will grow to close to 20 million customers. That provides us with an unbelievable asset as a retailer. We've got world-class in-house credit, which works very closely together with those -- with the rewards program. And to date, although we've got a very strong value-added services business, to be honest, I think it's only partially tapped. We have a lot of opportunity to expand that further. We'll continue to innovate in terms of brands and categories and more so than ever before. In every single decision we make, everything we do, we are putting customer and digital first. It's really become -- it's been part of our DNA, but it's another question we ask before we undertake any major decision. The diversification of the group in every sense has again stood us in good stead during the COVID crisis. TFG is now well spread across all the different LSM categories, something that we've been seeking to position ourselves around for some time. And Jet really provides a solid anchor for us in the true value segment. We'll continue with our strategic investments in digital transformation in e-commerce. We've already seen the dividends that our past investments have paid. A lot of that groundwork clearly lifting and investment is still -- has already been done. But with all of these things, you have to continue to invest. And then again, on our vertical supply chain, we're going to continue to build both capacity and capability and we partner very closely with our key suppliers. As Bongiwe pointed out in her presentation, our balance sheet has never been stronger, and there couldn't be a better time to have a strong balance sheet. And from a cost control point of view, we will continue with our head office optimization programs, making sure that we're as lean as possible. Before we take a break and then go into the Q&A session, I just want to play a 3.5 minute video. We've spoken both in the previous results presentation, as well as this results presentation, around a number of the digital transformation initiatives we've invested in things like Yoobic, TFG On The Go, et cetera. I think it's quite hard to actually conceptualize what those investments look like in real terms if you haven't actually seen them and played with them. The purpose of this video is really to try and give you a better sense of how digital transformation is really revolutionizing our entire retail business. So if you'd please bear with us and watch this for the next couple of minutes and we'll then take a 5-minute comfort break after that and then come back for Q&A. Thank you. [Presentation]

Welcome back, everyone. I really do hope that short video on digital transformation and what that means within TFG help get across some of the practical benefits of the investments we've been talking about for some time. We do have quite a few questions. I think some of them have already been answered during the course of the presentation. And so I'm going to try and pick up, particularly on the ones that haven't.

The first question is what cross guarantees between the U.K. business and the rest of the group exist. Bongiwe, I think I'll ask you to address that.

Thanks, Anthony. I think I've addressed it in my presentation, there is none. All countries stand on their own, and they've got their process with their banks. There's no parent guarantees from TFG South Africa. Each region stands on its own. Thanks.

Thank you. The next question, Shane, relates to Jet. Can you give an outlook for Jet's profitability in terms of operating margin targets over the next couple of years?

Thanks, Anthony, I think just bear in mind that all the stores that have been taken on are profitable. There's been a huge reduction in overheads, obviously, by joining TFG in terms of their support and systems. We went through a whole process of rightsizing stores to get them to the right size, obviously, which has an impact on cost. There's been a huge focus on product assortment, coupled with IT planning platforms, which we'll take advantage of and we'll be -- and currently taking advantage of. And our operating margins will definitely get into double digits.

Perfect. Thanks, Shane. Then what was the benefit from rent reductions and government support in the first half of the year? And can we give some guidance for operating expenses growth for the full year? I think you did partially address that Bongiwe, but maybe just to repeat it?

All right. Sure. Thanks, Anthony. The support we received in terms of government subsidies for staff, whether it's U.K. or South Africa, was in total about ZAR 270 million. And then the rent reductions and rent reprieves from our landlords for both South Africa, Australia and the U.K. in total, came to about ZAR 300 million. Obviously, we're back to paying rentals in full now, and you won't see that in the second half. And the next part of the question was on...

So that was, I think, in total support received, so that would come out to ZAR 1 billion, right?

Yes, ZAR 900 million.

Yes, close to ZAR 1 billion.