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

Good morning, everyone, and a very warm welcome to our TFG 2021 Year-end Results Presentation. Unfortunately, once again, we're unable to be together in person. However, we've tried our best to create a different, more personal atmosphere today, and I hope that you enjoy the new format. We've got a lot of ground to cover in today's presentation. We have made a conscious effort to try to streamline the formal slides as much as possible whilst moving the more granular detailed information to the appendices. We've also set aside more time for the Q&A at the end of the presentation. Given all the complexities of what has transpired over the last year, we've distilled the presentation down to 4 key topics. Firstly, understanding the impact that COVID had on our business in 2021, to provide context for our reported results and some guidance as to how we believe the business will perform in a post-lockdown world. Secondly, we'll take you through our group performance for the year from both an income statement, balance sheet and cash flow perspective. Thirdly, we'll be unpacking the performance of each of our key segments. This includes our 3 key geographies as well as credit. This is really important given how different the COVID impact has been in our 3 different geographical segments. Fourthly and finally, we'll be spending more time than usual on our outlook section as I think this is really where the majority of our focus should be today. If I had to summarize what 2021 meant for TFG, it was clearly an unprecedented year for TFG due to the COVID-19 pandemic, but that was the case for most other companies as well. However, 2021 has also been a pivotal year in TFG's strategic journey. Our strategy was very clear and very successful going into COVID, but COVID has allowed us to move more rapidly and more boldly than we've ever done before in more normal times. As I just mentioned, our retail trading was significantly impacted by a number of COVID-related issues, the greatest of which was obviously the loss of trading hours due to various government-enforced lockdowns in our different territories. In terms of timing, the start of our 2021 financial year coincided almost perfectly with the global emergence of COVID-19, and we were thus impacted throughout the full 12-month period. As you can see, we lost 15% of our trading hours in South Africa, 13% of our trading hours in Australia. Where we were the hardest hit, however, was clearly in the U.K., where we lost nearly 50% of our available trading hours. The extent of the lockdowns in the U.K. caused several of our routes to market to permanently close. And this, combined with an unprecedented elevated WACC rate, almost inevitably resulted in a noncash impairment of the valuation of our intangible assets in the U.K., which we'll explain in some detail later in the presentation. However, what is very clear and encouraging is how strongly turnover has recovered for TFG Africa, TFG Australia and for the whole group as the lockdowns have eased from Q1 through to Q4, which you can see very clearly on those bar charts across the top of the slide, moving from steeply negative in Q4 back to steeply positive by the time we got to -- from Q1 to Q4 and as I'll talk later on, even more strongly post year-end. Despite the very negative impact that these various lockdowns had on our turnover and trading performance, 2021 was nonetheless a year of very strong operational performance for the group. Right from the start of the year, we did everything we could to preserve and generate cash, and this resulted us in generating ZAR 9.4 billion from operations. This, combined with a successfully executed and well-supported rights offer, allowed us to reduce our net debt to ZAR 1.3 billion. The rights issue also gave us the balance sheet and the confidence to swiftly acquire the Jet business at a time when almost everybody in the market thought it would fail and leave a gap in the market to be filled by the existing value competitors. We're extremely happy with the performance of Jet thus far. It has exceeded all of our projections, and it has already turned a profit, albeit a fairly modest one during its first 6 months. I'll provide a lot more color on Jet later on and where we see that business going. So 2021 really was a tale of 2 halves for TFG. In H1, we had the most significant proportion of our trading hours lost due to lockdowns. We were hurt by the lack of demand for the smartwear and more formal parts of our business. And at that point, we had very limited exposure to the value segment of the market, which was all -- which was where all the action was happening in the first half of the year. In H2, we were significantly less impacted by the lockdowns other than in the U.K., and we were able to benefit very quickly by switching out of a lot of our more formal offerings into more casual wear. And further, we started to benefit from the exposure to the value segment as we closed the Jet deal. The net results of all of this is that there was a 63% growth in turnover in H2 versus H1. Now while ESG has always been something at the forefront of our thinking and our actions, COVID brought an even greater focus to the real essence of ESG. And as a management team, we find ourselves continually asking the very simple question what is the right thing to do whenever we were dealing with the business problem. I'll cover some more of the progress that we've made in terms of ESG later in the presentation. We've spoken at length in past presentations about the growing importance of e-commerce and omnichannel retailing, and TFG is ahead of the curve investments in this area. To be honest, I'm not sure everyone fully believed us at the time that we spoke about how strategic this was going to become even in South Africa. Looking back, I think we were right to have made our e-commerce investments early, and we've certainly received the payback on these investments over the past year. Our group e-commerce sales grew by 33% off a reasonably high base. And in South Africa, we grew our e-commerce sales in excess of 130%. Most importantly, we are already e-commerce profitable in all 3 of our regions. There will be a lot more on omnichannel later in the presentation. I think most importantly, COVID also gave us pause to reflect on our group strategy. As we start to come out of COVID, we are very confident in our strategy and, fortunately, do not need to make any significant changes to it. If anything has changed, it is that we are more determined than ever to execute our strategy more ambitiously, more boldly, more quickly and more efficiently than ever before. Our strategy is actually quite simple and clear, and it remains underpinned really by 3 pillars: firstly, creating a market-leading, fully integrated omnichannel experience for all of our customers; secondly, operating across diverse sectors, LSMs and commodities through creating or acquiring highly desirable, high-brand equity specialty brands; and thirdly, all of this is supported by our proprietary quick-response manufacturing capabilities to ensure that we can give our customers what they want and desire before anybody else can. Now the rest of the team will provide detailed insights into the performance and strategy for their key areas of the business. But in summary, despite all of the trading hours lost due to COVID, group turnover for the year only dropped by 6.7%. This was achieved largely as a result of a very strong H2 recovery for TFG Africa; the acquisition of Jet, which impacted H2; and the continued outperformance of TFG Australia. Most pleasingly and perhaps most importantly, our group cash turnover grew well ahead of our purposely restricted credit turnover and accounted for nearly 80% of our total group turnover for the year, which I think finally demonstrates our transition from being historically viewed as a credit retailer to being very much a cash retailer with a credit lever that we can dial up or down as we feel prudent. Our gross margins dropped by 7%, which closely mirrors the extent of our drop in turnover. Bongiwe will take us through the detail of the gross margin impacts in her presentation. But I think the key message here is that we took a very conservative view on any inventory that was seasonally impacted by COVID closures, and we made sure that we took our medicine. The upside of all of this is that we entered the new financial year with fresh and clean inventory, which sets us up for a strong recovery. Despite all of these negative impacts, we nonetheless still managed to produce a headline earnings profit of ZAR 600 million, which Bongiwe will unpack in some detail and show was closer to ZAR 1.5 billion, if it were not for the one-off COVID provisions that we took during the course of the year. We also continue to improve our free cash flow conversion and produced a free cash flow of ZAR 3.8 billion, which was 70% up on the previous year. As a result of this, we reduced our net debt by 84% to the ZAR 1.3 billion I referenced previously. Looking forward, we've secured a meaningful share of the value segment, which will add approximately ZAR 6 billion to our turnover and significant profit to our results in the year ahead. We have reset our cost and our working capital basis going forward, and we will hold those tightly. Debtor on the balance sheet is no longer a distraction at all. Our U.K. business has been rightsized both in terms of carrying value and cost base. All in all, we are well positioned for a strong recovery, and we are committed to improving shareholder returns. Now over and above dealing with the complexities of trading in a COVID environment, we managed to find the time to make significant progress in executing our group strategy, and I'd like to share just some highlights of this progress with you. The core strength of our group strategy is that we are a specialty retailer with a large, diversified portfolio of high-brand equity brands. We continuously invest in building these brands through social media, influencers, innovative and immersive store design, and increasingly, through our online presence. Our competitors tend to be more monolithic. And over the past year, many of our individual brands have won key awards and been recognized as market-leading despite being just individual brands within TFG. To touch on just a few of these awards. In the Sunday Times Next-Generation Cooler Store Awards, 3 of TFG's brands placed in the top 5 coolest brands with Sportscene, not surprisingly, placing as the #1 coolest brand in South Africa. Totalsports is the third, and Markham is the fifth. Redbat, our own homegrown brand within Sportscene, was recognized as the third coolest clothing brand, just behind Nike and Adidas in the Next-Generation Awards. Absolutely amazing. Sportscene then went on to win the SA Hip Hop Awards, Best International Brand Award. Not bad for a proudly South African brand with a 35% Redbat contribution. From a stores point of view, our flagship Sportscene store that many of you will have visited in Sandton, won the award for the best new store in South Africa. And our next-generation Foschini store in Fourways was also a finalist in the same awards. At home, won the Ask Africa Best Homewares Brand Award. Brand Finance, as an annual valuation of the top brands in South Africa across all categories, not just retail, both Markham and TFG placed in their top 50 rankings across all brand categories this year, with Markham being the fastest-growing brand value in their top 50 and TFG being the fifth fastest growing brand value. Now the reason for spending time taking you through these awards is not at all to brag. It's simply to demonstrate what continues to drive our growth and our outperformance in the market. If we look back at these charts, which cover South African retail for 2015 through to 2019, what you can see very clearly is that TFG sales growth has been significantly ahead of most of the market and that most importantly, our cash sales growth, which is the true barometer of where people choose to spend their hard-earned money, has been well ahead of all of our peers. On the bottom chart, you can see that we've been growing our sales densities the fastest. And equally, if you look at those blue bars across the bottom chart, our cost base or cost per square meter has also increased faster than our competitors, but that is really a reflection on our continued investment in our business and our brands. The good news, and Bongiwe will touch on this in some detail, is we've reset that cost base and taken a lot of unnecessary costs out during the past 12 months. In terms of absolute market share stats in South Africa, we have to rely on the RLC numbers, which are better than nothing, but are certainly not perfect. What this extract shows us is that we continued to take market share in our core men's and ladies apparel categories and that the rate of these market share gains accelerated throughout the course of the year, as you can see from the widening gap between the lines. Importantly to note, this data set purposely excludes Jet and our entire sports business to ensure that it's fairly comparable to the rest of the RLC numbers. I'll leave it to you to impute where you think those lines go with their inclusion. Speaking about our sports business, whilst we have tried to avoid providing too much information on our individual categories and brands, after all, we don't want to make it too easy for our competitors, we thought that it would be a good idea to share some high-level information on this important part of our business, especially how COVID has globally raised awareness and interest in health, wellness, sports in both casual and athleisure wear. So without giving away too much information, our sports business comprises of Totalsports, Sportscene, Archive, Sneaker Factory and Redbat, the sub-brand in Sportscene that has become so successful. It's almost a brand in its own right. These combined sports businesses have a social media following in excess of 4 million people. Sportscene itself has more than 1 million Instagram followers, making it the highest Instagram following of any retail brand in South Africa. Sportscene Radio, which was launched as part of our new Sportscene shopping and lifestyle app already has in excess of 400,000 monthly listeners. Combined, our sports division contributes a significant part of TFG Africa's revenue. And as mentioned, our own brands already contribute roughly 50% of our sports turnover, and thus continues to grow and add margin to the business. The key to our brand strategy is that we continue to innovate and invest in new brands and refreshing existing brands we needed. During this COVID year, we launched and continue to roll out a number of new brands and formats, including Relay Jeans, Young and Gorgeous within Foschini, Sneaker Factory, RFO and our new premium Denim Union that was launched just over the year-end. Our brands continue to have a lot of organic runway. COVID massively accelerated online shopping. I think we're all aware of that. At a group level, our online turnover grew by 33% and on a like-for-like basis now contributes 12.8% to the group. We saw very strong growth across all of our regions in terms of online. We're continuing to invest in our e-comm and our omni capabilities, and we see a medium-term target contribution for the group of between 20% and 30%, in my mind, probably closer to 25% to 30%. Online is already profitable in our environment, which is not the case for almost any of the pure plays and was also not the case for many of our competitors. So what's driving our online success? In e-commerce, there's a very strong correlation to sales between the extent of choice of product offering as well as the strength of the brand equity and the social media following that these brands have built. You can see the left-hand bar chart on the slide shows TFG's social media market share or following versus the rest of South African retail. The gap is wide and growing. Moving on to the right-hand side of the chart. This year produced some incredible e-comm stats for the group. Our total social media followers grew by 11%, up to 13.9 million people, and that's off a high base already. We had 152 million unique site visits to our various brand sites. This resulted in 2.6 million orders and us delivering nearly 6 million items to customers. There's little sign that this is slowing down even as lockdown restrictions have lifted. We've had a real focus lately on improving some of our e-comm basics. Frankly, we still got a long way to go. However, what was pleasing was the extent to which we were able to improve our customer conversion rates, one of the most fundamentally important e-comm pieces. For TFG Africa, we increased our conversion rates by 67%, in the U.K. by 11% and in Australia by 47%. So where does all of this places from an e-commerce perspective? We've consistently said that we are more and more benchmarking and measuring ourselves against the pure plays and less and less against the traditional retailers. As flattering as the pie chart is on the right, that is not where this game is going to be played out. The real battle for online is going to be against the pure players. And as you can see on the pie chart on the left, we've done quite well, but we do have a lot of ground to catch up. And this is where a lot of our focus will be over the next couple of years. An update from Jet and their performance to date. You'll recall that we acquired 425 profitable Jet stores. We're in the progress of starting to roll out new stores and see a clear potential for 100-plus new stores over the next couple of years. From a performance point of view, Jet has delivered ZAR 2.2 billion in turnover since the acquisition through to our year-end, bearing in mind that they had almost no stock at all to sell initially. We see Jet comfortably producing in the region of ZAR 6 billion worth of turnover over the next 12 months with an operating margin of 14%. What's really helped drive this profitability and operating margin is the improvements in gross margin, where we've already increased the gross margin from the acquisition levels of 36% to currently 40%. And we anticipate this getting to the sweet spot of around 42% over the next 12 to 18 months. From a CapEx point of view, Jet is not going to be CapEx-heavy. To date, we've spent ZAR 118 million on Jet CapEx. Almost all of that was once off around putting them on to up-to-date IT systems, which I'll touch on in a second. And for run rate going forward, we anticipate spending between ZAR 120 million and ZAR 150 million per annum, and almost all of this will be expansionary CapEx. The existing business is getting back into shape very quickly. And once we've had a suitable period to fully settle things down, we will look to grow that footprint with the 100-plus stores that I referenced earlier. Another really exciting opportunity that Jet unlocks for us is in the value homeware segment. Back in 2016, Jet Home was doing turnover of close to ZAR 2 billion. This was then neglected and dwindled to almost nothing over the next couple of years. We are now very excited to be relaunching Jet Home in 345 selected and suitably sized Jet stores. The market opportunity are significant, and it's around ZAR 12 billion. And we want to see Jet have an appropriate share of this, and we are going to grow it over the next couple of years. Later on during this year, we're also going to start rolling out our first stand-alone Jet Home stores as we see them existing both within their existing Jet stores and on their own. Touching briefly, and hopefully for the last time, on the integration of Jet, and I say that because it's now done. Our platform type of business and our shared services centers were huge enablers in enabling us to integrate Jet. I'm not going to touch on all of these points. You can read through them at your leisure. But just to pick up a few of it, I think, the ones that really stand out for me. We had to install nearly 7,000 new IT devices. Yes, I'm talking point-of-sales, mobile point-of-sales, printers, et cetera, across the Jet fleet. We trained 5,200 store staff on how to use these devices. We implemented a new warehouse management system at the Durban DC and trained 280 of the DC staff on how to use these new systems. We moved 250 head office staff into Isando offices and converted Jet on to 70 of TFG's core IT systems, including planning, merchandise, logistics, finance, HR, et cetera. All of this required a team of more than 300 people to pull this off. The transition was delivered ahead of schedule, under budget and has already had the impact of reducing the ongoing IT costs by more than 60%. This has been the biggest full integration in the group's history. And despite how much went into it, we now have both the confidence and the blueprint for how to do this seamlessly in the future. We've also continued to make strides in our quick-response manufacturing. We've increased our locally manufactured units by 60% on 2020. And that's allowed us to reduce our reliance on imports, particularly those from China, which now contributes less than 30% of our units. We acquired a number of new manufacturing assets mainly over the year-end period, the most public of which was probably the House of Monatic assets. In the past, we've shared some metrics and hard numbers around why quick response makes sense to us and what it adds to our business. Those are shown in the colored bubbles, and the most important of which is the 2% margin advantage. We take less fashion risk and less markdown. All of these numbers that we've shared on both the screen and in past presentations are interesting, but maybe they sound a little bit academic. What I now want to share with you is the impact the quick-response manufacturing actually has on a real business within the TFG stable. I'm not going to share the name of the business, but you'll see from the chart, a bit of a giveaway. This was a business we started in 2017. So those of you who've been following us for several years will probably be able to work out which one it was. In 2017, using an old retail model, 96% of the product had a lead time of greater than 5 months. This resulted, not surprisingly, in very high markdowns approaching 16% and a very low stock turn of about 3.5x. If we play this forward to 2021 and have a look at the impact of QR on this business, 90% of the units are now locally manufactured. And just under 70% of the entire units are manufactured on a quick-response time with a lead time of less than 42 days. The markdown has been reduced to less than 7%, and the stock turn has climbed to 5.5x. That's quick response in action. I said that I was going to touch on some of our ESG activities earlier on in the presentation. We've done a lot this year. In total, we've saved more than 6,000 jobs in terms of both Jet and the manufacturing assets that we took over. We've also supported our suppliers, particularly vulnerable local suppliers and helped them get through COVID. We've adopted a real focus on waste recycling. And we continue to focus on reducing electricity usage, where we've reduced this by 15% over the past 12 months, mainly through the installation of smarter lighting and air conditioner control units. We spent ZAR 70 million on skills development, and we've signed up to the YES campaign, which means we'll be giving close to 1,000 previously unemployed job seekers their first jobs. Our ESG efforts are now much more closely aligned across our 3 territories. And as you will see from these various blocks here, every one of our businesses is doing something meaningful. The one that I just wanted to highlight and the one that's, I think, the most exciting for me is we just formalized a relationship between Foschini and YAGA. For those of you who may not know YAGA, YAGA is the biggest online used clothing retailer in South Africa. And this initiative is going to encourage our customers to resell their loved Foschini items and avoid further landfall. In closing this section, I would like to thank everyone for their unwavering support during a very challenging year, including our customers, our shareholders, our advisers and our leadership teams across Africa, Australia and the U.K. I would like to especially acknowledge and thank all of our 35,000 employees who turned up every day to serve our customers and kept our operations alive, especially our store staff, our DC staff and our factory staff. Many of them had to catch public transport every day to and from work at a time when none of us really understood the virus and how easily it may spread. In recognition of these extraordinary efforts, we will be awarding every one of our frontline staff a special COVID Thank You Bonus that will be paid together with their July salary. That brings my section to an end. I'm going to be handing over to Bongiwe, who will take us through the highlights of our financial performance. Thank you.

Good morning all. Thank you, Anthony, for that great presentation and update on our strategic context. Really sitting behind there, the scenes I listened to you, and I realized how much we've achieved and the strategic progress we made in the past financial year, which truly is wonderful and amazing in a challenging year. Going into '22, I'm sure there'll be other challenges. But if anything, everything confirms or points to the fact that our strategy and execution capability is very much future-fit. Thank you. I then would like to get on to the finance section. You'll notice during my presentation, I'll focus a lot more on the second half rather than the full year because I would like to start giving you a sense on how we, as TFG, are reemerging out of the COVID year. Obviously, still not fully out of it. However, you'll star seeing and where I can, I'll quote a Q4 performance to give further context and highlights. At a turnover basis, I think you're all aware, we're down 7% for the year. But again, looking at the second half, 11.2% up, and that's still with the U.K. closures almost for half of the second half and driven by a very strong performance and comeback in Africa, as Anthony has mentioned, and also Australia. I think their sales grew well in excess of over 20%. Looking at GPs, down 20%, 19% for the year. But if you -- again, looking at the second half, our GPs were only down 3%, and that is with the inclusion of Jet and a lot of provisioning we took conservatively. Again, I will touch on that in my next slide to unpack it further. Interest income, down 22% for the year. It's because of some of the rate reductions in the year. Other income, there's small reduction on last year. However, I'm not worried about that. There's massive effort that Jane, Scott and team are driving to get advance to beyond 2019 levels. On the expense side, our expenses for the year down 6.1%. Yes, lots of government support we've received in all our regions. But if you look at the second half -- forecasting on second half, 9.8% up on last year and where there was actually no government support, and that includes Jet. Again, I'll unpack it further in the next slide, but great cost control there. I can assure you, as a CFO, I did not waste the crisis. I'm working with our executive team. We made sure that where there were areas of offset, we cleaned up and also was able to fast track some of the cost savings that were in my 3x targets with Anthony and pushed them into this year with the support of the team. So yes, we definitely are resetting the base there. We took an impairment of ZAR 3 billion in the U.K., as we've spoken to. Again, if you look at the first half of the year, we took no impairment, and that was due to the fact that the business model was robust and the WACC rate in the U.K. than from second half onwards they closed and European shops closed. We decided to be conservative, and with the risk premium attached to the U.K., obviously take the impairment in these of ZAR 3 billion. Going down to then, what I want to highlight is the finance cost, which is the impact of the debt reduction. Anthony spoke to the massive debt reduction. A lot of work done in the years within the second half following the successful rights issue, where we applied the ZAR 4 billion -- ZAR 3.8 billion received into debt, but further with strong trade utilized cash to further pay down debt. Again, I'll take you through that in the next coming slides. Before maybe we get into the detail of the numbers, let me just talk to the adjusted headline earnings number we spoke to of ZAR 1.5 billion, which is only really down 44% on 2020. Again, I just want to qualify that this is just indicative and also excludes any turnover that we lost in the current financial year. Obviously, if we had to overlay the loss turnover, the number is significantly beyond ZAR 2 billion. So we report headline earnings or headline profit of ZAR 600 million. And then if you take out some of the one-offs, as I've mentioned, that we incurred in the year with the Jet transitioning costs, Anthony mentioned the IT cost that going forward, we are quite confident at 60% lower than what Jet was paying before. And it's been absorbed in our IT systems. Some of the stuff and restructure costs we took this year, I've talked a lot of times in the past about our business optimization drive and some provisioning we took there, ZAR 200 million. And then obviously, it massively is a stock increase where we purposefully, obviously, to get into 2022, fresh clean dealt with all stocks, but also still put a buffer as we go forward into 2022 of about ZAR 550 million. Yes, there was a lot of government support, which have taken out that other includes -- taking out some of that government support, but further also putting all the provisions that we took this year in the area of concessions and other gets us to that ZAR 1.5 billion -- conservative ZAR 1.5 billion. Again, I think this is not a profit warning or other, but it just begins to show our path as we go forward into 2022, where we -- how -- and how closely we are likely to recover to 2019 levels. Turnover, we've spoken at length, very strong second half performance. Africa, up 23%, obviously, with Jet. Without Jet, still up, the base businesses up 4%. Turnover for Australia, strong. The guys started very strong. Gary and Dean will take you through that later on, up 12%. Obviously, the U.K. remain under pressure. But again, even the losses on the previous year were much better in the second half. Overall, the group closed the year at 11%. Merchandise categories, I won't spend a lot of time on this slide. Again, just shows you the strong growth in our merch categories in the second half. Cellular, up 48% in the second half. Homeware, down in the first half because of the 2 months -- almost 2 months closures of the homeware -- or nonessential homeware and furniture in the second half. And then the second half showed a strong recovery of 21%. Clothing, first half down 30%, largely because of store closures, but second half is being with the London closures 10% up on the prior year. So great performance. Cosmetics, I think, we've spoken at length. There's a lot of COVID restrictions of as on how we sell cosmetics. But again, in the second half, only down 4% when compared to the first half where they were down 34%. The jewelry level as well, they were closed for 2 months of the year. And we all know that jewelry already started discretionary purchase. So for them to be only down 6% for the year is a remarkable performance there by Shane and her team. Sales, I'm not going to focus on some of the pie charts here, but just to highlight again further that cash really is king. And we've just managed to turn the model over time to more cash sales business than credit. I think 5, 6 years ago, this would have been the other way around, where a large proportion of our sales came from credit sales. This year, with all the well that we've been doing and Jane's team to really constrain credits, and I think our acceptance rates were at their lowest, was -- and we reduced our credit sales by 23%. Cash sales, obviously, muted. But yes, close to 80% in cash sales for the year, which is quite pleasing. Gross margins, I'm going to spend a little bit on this slide because a lot of things impacted the number this year. So margins, as Anthony mentioned, were down 7 bps compared to last year. But again, when stores reopened in the first half, there was a lot of promotional activity in the market. And for some brands, obviously, we had to respond. But again, I think I quoted the number there of ZAR 1.4 -- ZAR 1 billion in provisions that at year-end, we're carrying with regards to our stock, which obviously has direct impacts on margins. You'll see the waterfalls on -- at the bottom there that talks to how those provisions impact margins in each region. Africa, 1% impact; in the U.K., an 8% impact in the decline in GPs was due to the margins. And then obviously, the sales mix and promotional activity, they also drove some of the GP decline. But already in the second half, most of our brands in Africa, some actually even exceeding 2019 levels as GPs showed great recovery. Going into the current financial year already, we see a lot of margin improvement, more full selling price -- mostly of the FSP, full selling price, and that is quite encouraging, so area of focus for us. I'll touch on that later on. So moving on to cost. I spoke to this earlier on. Our cost base has been reset really, really focused on driving our cost base down, especially on the 3. I always our P&L is driven by 3 expense elements, which is obviously our people cost, especially at head office levels; our occupancy costs; and depreciation, which is driven largely by the IT projects. All of that is pointing to the right direction. Our employee cost, 8% down for the year. Yes, the number includes some of the government one-off help. I think, about ZAR 750 million in government support. However, even without that and on top of that, the provision that we are carrying, going into the following year, our cost -- base costs were down 5%. Obviously, that excludes Jet, and the number might move a little bit with Jet going forward. But it's a remarkable performance. This expense line used to grow 8%, 9% in the prior financial years. A lot of focus has been done by the business automation team there. Occupancy costs, again down for the year at 2.3%. Even with Jet included is about $400 million in government provisions -- or rental relief, sorry, that we received from our partners there. But even without that, the base cost, because of the massive work that the team has done on achieving negative rental reversions, year-on-year, those costs are down significantly in the base business. And going forward, we still have a lot of runway. Every year, we're renewing about 25% of our leases. And each time, it presents an opportunity for us to further renegotiate and working with our landlords to make sure that our rentals reflects the current market conditions and at acceptable levels. I won't touch on the other. But I think in closing, the non-comp, you can see 7.9% with Jet including and other, our costs still down 6%. We will continue on this track. And in my closing comments, I'll touch on this again in terms of what the run rate we still have as a business. Moving on then to the balance sheet. I think our balance sheet has never looked so cleaner and as strong. Facilities at the end of the year, I spoke to you at the end of the last financial year. Probably my smile wasn't as wide as it is today. We had limited facilities, and most of them due to be repaid in the next few months. We've managed to restructure working with the teams, restructure debt -- pay down the debt fast, but then also the repayment profile, that's what the slide that just shows how we've smoothed out the repayment profile over the next few years. Operational -- strong cash flow generation by our operations, ZAR 9.4 billion, up 14% on the prior year. I think Australia's EBITDA levels as well in cash, I think, was up significantly on last year. I'm sure Gary will touch on that and Dean. Debtors' book, massive forecast by gain, lots of derisking initiatives over the past few years. We sit today with a much, much better quality data. And also the balance much lower, 14% down on last year, again, releasing working capital there. Inventory days down significantly without Jet. I think, again, we still have a long way to go here. There's a lot of work we are doing together with Graham's team on quick response, on local supply. I think Anthony has spoken a lot on that. We've seen the benefits of that come through. And I've got no doubt especially on apparel that those days will continue to improve over the next few years, again, leasing working capital. Free cash flow, ZAR 3.8 billion, up from ZAR 2.3 billion last year. And also the net debt-to-EBITDA metric, it's comfortably at 0.5%. That -- sorry, 0.5x. That will go up in the next -- obviously, as we start trading and stuff. But comfortably, we're quite comfortable to achieve our short- to medium-, long-term target of 1x to 1.5x, lots of effort there. Australia, I just wanted to highlight, still remains ungeared. The U.K. has got a little bit of debt there and is starting paying a lot of debt in the current financial year as they begin to trade. I won't to spend a lot of time on this slide, just to highlight that repayment profile on the left side -- on the right-hand side there at the bottom. And obviously, there was no dividend payment this year. There's every plan that we resume dividend repayment, maybe at a little bit slightly higher cover than in the past, but definitely sometime this year working with our Board. Obviously, it's our Board decision. Inventory, we've spoken at length about the provisions we carry. But just talking at net stock balance level, our stock levels, all of them in each region are down significantly on last year. If you look at Africa, which obviously is our largest and the biggest division or strongest region, full year net stock was ZAR 5.6 billion last year. This year, we're closing the year at ZAR 4.7 billion, with Jet still same balances last year, 16% down, as I've said. Provisions raised in Africa and new provisions of about ZAR 530 million, new provision about ZAR 300 million, ZAR 200 million of the starting balance at the year, but closing the year with ZAR 530 million in provisions for Africa. And that obviously is 8% of our total gross stock levels. Again, the highest I think we've ever carried. And stock days significantly improved. What also is pleasing is the freshness of that ZAR 4.7 billion of net stock that sits there. Over 78% of that stock is less than 26 weeks old. So it's current season and it's selling at I'll speak about trade a little later on post AA and selling mostly at full selling price. London, you can see the provisioning impact there. Stock down 20%. The level was down on last year. Again, it dealt with a lot of stock. I've spoken about it already. And they raised provisions this year and closing the year with GBP 26 million in provisions. Again, 30% of that stock that they're carrying at year-end is provided for. And here, you can see a lot of their stock as well sitting fresh -- comfortably fresh. Australia. Stock, AUD 116 million, up a little bit on last year, but it's because of the planned store openings and planned store rollout. Great trade. I mean the economy is buoyant. Gary and Dean will take us through that. But again, even in Australia, we're carrying provisions at 5% of our gross stock. And their stock, 84% of it is less than 26 weeks old. Again, stocks of freshness, going into the year fresh. So yes, I think we've never sat so comfortable at stock levels. This work will continue. There's a lot of work we can still do in this area of forecast, a lot of deliberate action. Some of the actions included some of the centralization of the purchases and the stewards will control most of the purchases or the OTPs, and that drive will continue. We'll not relax at -- post-COVID. On the cash side -- on the cash flow side, strong cash generation, as we've spoken to. Started the year with ZAR 3 billion, closing the year 60% up on cash and cash generated ZAR 9.4 billion by operations. As I've mentioned, a lot of also release of working capital through controlled purchases, and obviously, the reduction in the debtors' book. Investing activities, a lot of debt went into Jet, obviously expansionary staff, which is Jet acquisition and the whole lot JV that came with it. And then Jet stores, Anthony spoke about it, close to 7,000 point-of-sale systems we had to install in Jet stores. We also bought some manufacturing software. Software as an IT CapEx there. We relocated the Jet staff into our assigned offices, and there are a lot of maintenance CapEx as well there, but a high proportion of debt is really expansionary. I think my next slide shows that. You can see the debt brought down this year by ZAR 5.1 billion under financing activities and as we say, from the process of the right issue and the strong cash -- using the cash upright from the businesses. CapEx, I won't spend a lot of time here. You'll see 81% of our current stock sort of spend. This year, CapEx was on expansionary activities and Jets largely. We opened more stores this year. I think in total for Relay alone, we opened close to 30 stores in a COVID year. And going forward, there's still planned openings in the next financial year. I think the team plans to open at least for TFG Africa, close to 200 stores in the new financial year, again, working with the landlords. If the rental structures are right, in line with our digital expansion, we will open new stores. Future investment will continue. We'll continue to invest ahead of time. But obviously, a lot of our CapEx, that is base CapEx on digital platforms, has been spent. And going forward, all of it is going to be driving more turnover and more growth in that area. Maybe as I start closing, just highlighting Africa, which obviously is our biggest region. Turnover, I think we've mentioned, up 1.6% for the year with Jet. Costs, very much controlled. You can see Africa on a cost line basis, expenses up in total, I think, only 3.2%. And that's driven by some of the Jet, obviously, people that have brought in. And the margin, it remains our forecast. We've already seen margin improvements for Africa. And we still achieved product deflation that's again working with local suppliers on the QR processes. Into financial year '22, if you start with the income statement, from what we know today and for every plan, certainly, the plan is to revert back and maybe even exceed 2019 levels for some brands; jet comfortably to deliver close to ZAR 6 billion or more, hopefully, in revenue; and the profit line, what is obviously a big focus, definitely going towards by the end of the year. Our Jet profits have improved or GPs have improved from 32% to close to 40%. That continues in this year, getting closer to 42%, and the trading margins as well. I mean the plan is to get to about 14%, 15% over the next few years. But comfortably in 2022, we will achieve some of those. Gross margin, as was mentioned already, very big area of focus for us. Obviously, there's the value brands, as they grow. They start to weaken a little bit our margin levels. But again, for every brand, where brands are growing, there's great focus on selling at full selling price and achieving margins to the levels of 2019. No use comparing us to 2021 financial year. TFG London, again, misfocus by us there. Expected to breakeven in the current financial. If you look at the trading -- not putting them under pressure, if you look at the trade though today since they reopened, they're trading well ahead of plan, well ahead of budget. So hopefully, if everything remains the same, they'll even return to profitability in the current financial year. The cost base for every -- all of our region has definitely been reset. With the full inclusion of Jet, there's more work to do on the optimization side, and we'll continue -- I've always said, all the cost savings that you took in the past were never really flash cut in brand, but which was a methodical and probably the lowest-risk quartiles in those areas. There's definitely a runway as we go forward to focus more, again, ahead of this level and obviously in our trading portfolio. So quite comfortably there that we would set that base. Going into the balance sheet, focus on improving shareholder return. We're moving more and more into being a metric-driven organization, where we measure almost every initiative and the return on every investment that we do upfront and continually monitor that to ensure that we deliver returns as we invest continually in our digital drives and other stuff. Inventory, I mentioned the focused disciplines. Very much focused on keeping these tightly controlled by each of the brands, and we'll continue to monitor those as we go along. And obviously, the benefit of QR, as I've said, we're seeing it come through. It is helping us to respond in-season and keeping our stocks fresh, really for the high-fashion brands. Net debt target, we spoke to, all is our target debt. I'm quite comfortable to achieve this in the shorter term than in long term. And we've set there 1x to 1.5x. Obviously, responsible growth in the debtors' book over time. I think Anthony mentioned that we've got a lever -- credit lever. We have not had to use it or -- as the market improves, obviously, we'll look into probably loosening up a little bit there in a responsible manner. Jane will take us through that. I think in closing, I want to thank also all the finance teams locally, Ian's team, Jane's team, Darwin; and also the U.K., Nick and Catherine's teams there; and obviously, Australia, Dean and his team there. Excellent work and support from you guys. Obviously, our IT team supported us greatly to ensure that we could work remotely from home. And also, I would like to thank our Audit Committee and our FinComm for all the support that they continually give us. Thank you. And then with that, obviously, I'd like to hand over to Jane, who will take us through the credit segment. Thank you.

Thank you, Bongiwe. Life in financial services is never boring, and this year has been absolutely no exception. So let me take you through some of the credit numbers. You can see here at the start of our lockdown in H1 financial year 2021 that demand credit was significantly down. And of course, because of the uncertain economic climate, we also reduced our credit lending criteria. And our accept rates were taken down to circa 10%. Then, of course, in the second half of the year, as we saw our customers able to make their payments and not struggling as much as maybe we feared, demand for credit came back. And you can see here that the accept rates actually increased again. Now our accept rates were keeping at roundabout 25% for the financial year going ahead. And that's still lower than where we have been historically. Historically, we've been roundabout 50%. Now of course, if you've got a constrained credit lending environment and your accept rates are lower, then your active account base is going to be impacted as well. And you can see here it's down by 17%. If you've got less new accounts and, of course, you've got a lower active account base, then your credit sales is also going to be impacted, and that is down by 24%. But the good news is if you look at the new account growth graph in the bottom right-hand corner and you look at the little blue line, and the blue line says for all the new accounts that were opened in each financial year, how many with two 0 moments delinquent after 5 months of opening. And you can see here that the delinquency rate for our new accounts is at the lowest-ever level that we've ever had it in the last 5 years. So that's great news for going forward. The next slide actually says, well, how well did our customers perform? And you can see here that the cash collected for the year overall was only down by about 12% overall. In April, of course, when we were in the middle of the hard lockdown and every single store was closed, we had to think of ways of how are customers able to pay us because, of course, pre-COVID, about 90% of all of our customers paid in store. And now, of course, with all the stores closed, we had to find a way of how are they going to be able to pay their accounts. So what we did is we launched a number of different electronic payment channels, such as EasyPay. We also run an incentive program to key essential items, such as food vouchers to incentivize customers to pay their accounts, but also stand a chance to win a food voucher. And this had a great result. You can see here as well on this graph that the payment as a percentage of the book, which is effectively our payment rates. In 2021, they are actually in the second half of this year better than our previous financial year, which is showing the resilience of our customers. Our buying position, so how many customers are able to actually shop, is improved back to 77%. At half year, you can't see here, but if you use decimal points, you can actually see that it was slightly better in March '21. Overdue values has improved as well. And of course, if you've got a better buying position, your overdue values have improved, your new account growth is looking better, then your impairment ratio is also going to improve. And that has now improved from 25% to 21%. And so it's circa back to our March '20 results. And our net bad debt as a percentage of gross debtors' book is at 15%. So an improvement compared to our first half of the year. So overall, credit is in a good position, and we're very happy with the results that we have. And that's credit in a nutshell, guys, and everything is tickety-boo.

So hello from London. It's been a challenging year for TFG London with the significant impact of the pandemic on the U.K. and with the economy suffering from successive lockdowns, which has led to stop/start trading. Across the TFG London brands, 2 of our key categories in events and occasion wear and then workwear have felt the biggest impact as our customers switched their spend into softer home dressing and leisure wear. In addition, planning for future seasons has become more difficult based on the significant levels of uncertainty. The U.K. high street overall has been significantly impacted, and the change on both the high street itself and on department stores has been extensive. The financial performance for the year for TFG London reflects the impact of COVID on the high street and the reduced appetite for our key categories and the categories traded by the brands. The loss of trade from store closures, where we've lost about 50% of the overall trading hours, has been offset partially by positive online trading, where we've seen growth from our own websites of 11% during the financial year and in total across our web businesses of just over 1%. At a gross margin level, both the promotionally-driven environment and our own trading stance with the additional stock provisioning that we've taken has reduced our overall margin delivery for the year. At a cost level, we took early action in all areas to tightly control the variable elements that we could. This action augmented essentially what's been a longer-term strategy to reduce the fixed cost ratio, particularly in property. We took advantage of the government furlough schemes as well as reducing our own head count overall. Our central teams have undergone 2 restructures during the period as the extent of the pandemic became fully clear, and those restructures have delivered annualized cost savings of GBP 6.5 million. The positive outcome is a more streamlined organization, which is enabling quicker feedback loops and greater scope for test and learn across the brands. Positive discussions have been held with our property partners and rent-free periods and further flexibility agreed in support, which has improved our liquidity and also we've taken the benefit of the retail rates relief scheme. These measures collectively have delivered a further GBP 6 million of cost savings in the period. And also, as a positive result, we've established more effective dialogue with our wider stakeholders. We've also continued to create greater flexibility in our store estate, where our average lease term now stands at just under 18 months. And in addition to which, where we have renewed leases, we've seen a positive shift in the market sentiment where our average reduction in rent is just under 45%. Variable cost structures in the business, for example, department store partners and turnover rents, where we now have over 70 stores on these more flexible terms, have enabled us to flex our cost base with sales, which has further mitigated trading losses. This slide shows the EBIT waterfall, bridging what is essentially a GBP 13 million loss from trading through the noncash impacts on stock, on property and other restructuring. You can see that we've taken a conservative approach to stock provisioning, which, given the continued uncertainty, is the right approach and in addition to which the broader trading and sourcing environments. The higher WACC rate this year has impacted -- significantly impacted the level of impairments that we've taken against intangibles, which is driving the overall financial outcome. Moving into this financial year then. We have started to see the impact of the easing of the COVID restrictions, and we remain extremely positive about the future as normality starts to return. The shift to casual dressing is continuing. And core categories such as knitwear, as you can see on the chart, have benefited showing positive growth. In each week of this new financial year, we have exceeded our own expectations in our budget on both the sales and a percentage margin, which is extremely encouraging. We're seeing green shoots in the property portfolio, in the retail portfolio, where, for example, the Phase Eight solar stores in the month of May showed positive growth on the year minus 1 during the whole month of May. And then into June, key category of dresses, we're seeing the top line mix improving. And last week, across the brands, we saw this category come in at level on the year minus 1, which is really positive. Occasion wear and workwear, the more formal categories, do continue to lag in pound sales terms and in mix, and we expect this to continue as long as the restrictions are in place and until there's more certainty about the future. Looking ahead, TFG London remains well placed for growth. We have world-class brands. We have an experienced and highly resilient team to deliver the strategy to put our customer at the forefront of everything that we do. We are focused as a team on building a better direct relationship with our customer through online and through our dedicated store teams and basing that relationship on data. And alongside this, continuing to support our growth partners such as Marks & Spencer's, Next and John Lewis in delivering their plans. Across the business, we remain focused on our test and loan strategy in terms of how we trade and in reducing those product lead times so that we can react more quickly to our customer needs and have been able to, particularly to, deliver more versatile and relaxed styling. We continue to work effectively and collaboratively across our central, our field and our brand teams to share knowledge and learnings and promote faster and better decision-making. And then finally, renewing our determination to minimize our environmental footprint using sustainable materials and processes and focusing on our people as an inclusive, transparent organization. Thank you.

Hi, everyone. Dean Zanapalis, CFO, here with Gary Novis, CEO, with our results presentation for Australia. Let's start with a brief overview of the Australian economy. There's no doubt the economy has proven to be resilient. First, let's have a look at GDP. As you may recall, it's during this financial year that after more than 20 straight years of economic growth, Australia moved into recession, recording a 7.7% contraction in the June quarter. Since then, however, the economy has bounced back, recording 2 consecutive quarters of over 3% growth and 1.8% for the final quarter to March, an impressive result, particularly considering the lockdowns and restrictions that we have now become accustomed to. The unemployment rate has also managed an impressive recovery. From a peak of 7.4% in June '20, the current unemployment rate in April '21 is now 5.5%, which is comparable with pre-COVID levels. And in fact, there are slightly more people employed now in Australia than the month prior to COVID. So it's a great result. Now in regards to government stimulus, there is no doubt that the economy growth and employment has been supported by record levels of spending. In 2020, the Australian government made the largest cash injection into the economy in recent history, a cash deficit of $161 billion for the year and this is just the beginning, with a further budget deficit of $101 billion planned for this financial year and further deficits to follow it. So how is this impacting the consumer? Well, all of the indicators that we generally track are quite positive. There is growth in the economy, housing prices are up or stable, unemployment has improved, and the savings rate is starting to decline from its all-time high, all leading to reasonably normal levels of consumer confidence. So as a result, as long as there are no lockdowns, the Australian consumer has been spending, which gives us confidence in the economy and the outlook for 2021. Over to you, Gary.

Thanks, Dean. RAG had an exceptional year in spite of various lockdowns, which included a national lockdown towards the end of March, followed by rolling state and city lockdowns. We lost over 13% of trading hours. And while our sales were down 7%, our profit was up. And Dean will talk in more detail to the results shortly. Our 5 RAG brands performed very differently over the past year. Rockwear, which is our ladies active wear brand, traded phenomenally. One of the very few reasons, one could leave home in lockdown was to exercise. This, combined with working from home in comfortable clothing, led to a massive increase over prior year driven in part by our online store. Johnny Bigg, our brand, which caters to bigger and taller men, traded very well. Our online business picked up dramatically, and total brand sales exceeded prior year. Our product range caters to many end users. And our customer was buying the casual component of a range during the lockdown, work-from-home periods. Connor, our value menswear brand, traded very well both online and in store with casual product. So given we've seen a lot of aggressive product too, including suiting, sales were down for the year versus last year, but Connor's performance way exceeded all expectations. Tarocash and yd., both brands are fashionable menswear businesses selling crazy product. Both these brands are events-based, yet no events were on in Australia for many months. No races, no weddings, no formals, no clubs, pubs, restaurants were open. I'm sure you're getting the pattern. And these brands have struggled during COVID. As soon as the country started to open up and events returned, both yd. and Tarocash started to fly. And we are blown away by the turnaround. On the 27th of March last year, just a few days before the start of our financial year on the 1st of April, we closed all our stores except online. So the graph in front of you shows the effect that rolling lockdowns had on our sales. We started opening a few stores towards end of April. So our first quarter sales were massively down 42% versus prior year. As more stores opened, trade started to pick up. And we had a reasonable second quarter with most stores trading and a very strong online business. In Q3, which includes Black Friday and Christmas, events started to happen. While there was still short sharp circuit breaker lockdowns, our sales were pretty much in line with the third quarter in the prior year. The fourth quarter was phenomenal. Events were in full swing, and the country was playing catch-up with weddings and formals, and yd., Tarocash and Connor started to fly. And Q4 sales were up 30% on the prior year. Dean?

Thanks, Gary. Now to the results. At a high level, Australian sales were down 7.1% with EBIT up 20.9%, an exceptional result, which I'll walk you through half-on-half. In the first half, as Gary explained, we experienced the worst of the lockdowns, losing approximately 2 months of trade. This cost the business $54 million in gross profit shortfall compared to the prior year. Despite this, the first half profit result was quite reasonable. A far and decisive response ensured that the potential downside was substantially mitigated. This was, of course, achieved through management cost-reduction initiatives and supported by government initiatives. We certainly have the Australian government to thank for the JobKeeper initiative, helping to keep Australians employed; and the National Leasing Code of Conduct, which paved the way for substantial lease negotiations. However, credit also goes to the entire team, who together reduced the first half cost of doing business by over $25 million, some of which was their own wages. Now whilst the cost savings achieved in the first half were not sustainable, the disciplines we applied resulted in a leaner cost base, which continued naturally into the second half of the year. As a result, when sales momentum returned in the second half, growing by 11.8%, thanks to the easing of restrictions, we were able to deliver exponential profit results, almost double the prior year, recovering the first half shortfall and delivering an annualized EBIT of $65.1 million, up 20.9%.

Our strategy remained consistent during COVID, and we're not panic. We did not swing. We stuck to what we know. We know our customers. We know what he or she wants, and we did not labor. We knew that eventually events would return, trade will normalize and we will continue to have the consistent growth we have enjoyed over the past years. So our strategy is very clear, and as I've said, very consistent. We will continue to open stores in both Australia and New Zealand. We will optimize the store portfolio for each brand by rightsizing all stores and closing the underperforming stores in our portfolio. We will accelerate investment in digital channels. We will trial Johnny Bigg in America with an online-only approach. And we will always look at potential acquisitions. I feel really good about our business. We are trading well and above expectation. And our current rolling 12-month EBITDA is the highest it has ever been. Our balance sheet is strong. We have a great team to execute our strategy, and our culture remains intact, probably stronger than pre-COVID. There is one external risk, however. Unfortunately, our states will lock down when COVID escapes hotel quarantine. And this, unfortunately, results in store closures, which we are currently seeing in Melbourne. I really do hope that in May or June next year, we will see each other in person in Cape Town. Thank you.

Thanks, Gary and Dean. Really standout performance in Australia, a strong base to continue to grow on and some very nice positive momentum going into the new year. TFG has a very strong foundation and is well positioned to continue the growth trajectory that we enjoyed right up until the time that COVID hit. We're a specialty retailer with an inviable portfolio of diversified, high-brand equity brands, serving customers right across the LSM spectrum. We've got an increasing proportion of vertical integration and quick response in the business. We have very strong and growing cash sales. We know how to execute. We have the leading e-commerce and technology platforms that are already profitable. All of these foundations provide us with a very clear path to further growth, growth in turnover and growth in earnings, especially in respect of clear organic growth opportunities; credit that is now a lever and not a crutch; the ambition, ability and track record to execute accretive and transformational acquisitions; and opportunity to further grow and evolve our omnichannel offering and our profitability. In line with our e-comm and omnichannel ambitions, I'm very proud to be able to share the launch of TFG Labs with you today. As I said earlier, the omni and e-comm battles will largely be fought with the best of the pure players. To win in this area, you need to have the best pure-play talent available. On the 6th of April, the Co-Founders and the joint MDs of Superbalist, Claude Hanan and Luke Jedeikin joined TFG as our new joint omni officers. They represent the top talent in South African e-commerce, and they are already bringing all of that experience to help us build our omnichannel -- on our omnichannel foundation that we've been working on for the last couple of years. I'd like to think that we've done a better job than most in the space up until now, but we will have to be better, faster and more agile for the next phase of our digital evolution. TFG Labs is already attracting and recruiting the top tech talent to form South Africa's best tech team with the sole purpose of building the most customer-centric retail capabilities on the African continent. TFG Labs has been set up to operate like a software business with a highly entrepreneurial, high-performance culture. I look forward to introducing Claude and Luke to you in due course and watching how TFG Labs evolves. Moving on to the outlook for 2022. The global economy is recovering faster than many people would have expected, and vaccines have now started to be rolled out, albeit at different paces in different countries. There is much to be hopeful about. However, we know that COVID is unpredictable, and we haven't won this battle quite yet. We are, however, encouraged by the strong trade across all 3 of our territories. We have reset our cost and working capital basis, and we will hold these tightly. We look forward to improving both our operational leverage and our return on capital. We are planning on resuming dividends during the course of 2022 at a reset cover of 2x headline earnings, which we consider to be an appropriate cover given both the lingering uncertainty regarding COVID as well as the scope and the scale of both organic and inorganic growth opportunities that we see in the year ahead. In terms of our trade post year-end, we've got off to a strong start, and all of these growths are based on our 2019 numbers given that we were largely closed for this period last year. For TFG Africa, for the 10 weeks to the 5th of June, our turnover is up 32.2%. Credit turnover, still restricted, negative 11%; but cash turnover, up 67.4%. TFG London is still trading in negative territory at minus 34%, but we have to remember the stores only reopened on the 12th of April. And as you heard from Justin, there's been very strong trade since they did reopen. I think most importantly, in terms of TFG London, our original budgeted sales got us to a breakeven profit for the year, and we are tracking well ahead at this point of our budget to turnover levels. So we do think that there's upside there. And then TFG Australia have continued their very strong trade despite the spot lockdowns that Gary and Dean referenced, and their turnover has grown 36.5% over this period. Thank you very much to everyone for your time and interest today. We're going to be flighting a short video now that will give you a sense of the omnichannel world that we are busy creating. I do hope that you stay on to watch it. It's about 4 minutes' long. Thereafter, we will take a 5-minute comfort break, and then we'll all be back to take any questions that you have. Enjoy the video and see you in about 10 minutes. Thank you. [Presentation]

Welcome back, everybody. I really hope that you enjoyed our presentation on how we see the omni world developing within TFG and that you got a couple of minutes for a comfort break. We've got quite a few questions coming in. I'm going to direct them to whoever I think is best placed to answer them. I'll see some will be international as well. We've got Gary and Dean and Justin all on hand. So they'll come in for those. And we'll work our way through as many as we can in the time that we've got.

The first question is with the growth of online internationally, why is TFG still pursuing an aggressive bricks-and-mortar growth path? It's a very good question, but the answer is not particularly difficult to answer. Within South Africa, there are a couple of dynamics. The first is what we are building is not an online business. We're building an omnichannel business. Omnichannel means you can order online, collect in the store, have it delivered to you from a store, delivered from a DC. It really doesn't matter how it gets fulfilled. And as long as you have a fully integrated, well-working omnichannel universe, everything that the last video was demonstrating, stores form an incredible big part of that business and an incredible asset. As a matter of fact, our store base that we've currently got in South Africa gives us a huge advantage over both the pure plays and other retailers who've got a smaller footprint. The other key piece is our opening stores, and Bongiwe referenced this. It's all about making sure that we get the right ratios, the rentals are reasonable. There's no ways we'd be opening 200 stores if we were paying the rentals of 2 or 3 years ago. Rentals have largely been reset in all territories across the world. South Africa is not immune from that, and the proviso is that we can do these at the right rentals. I think the last point to make is, and it goes back to the point I stressed quite a bit in the presentation around our organic growth runway, having the number of brands that we've got and the number of new brands and sub-brands that we keep innovating and launching means that our business is not mature. It means that we still have organic growth opportunities unlike a lot of other businesses. To give you a practical example, the Markham brand is well over 50 years old. By all accounts, you'd think that Markham must be mature by now in the South African context. Firstly, it's not even as Markham. But secondly, one of the things that we've done is we've spun Relay and Denim out of Markham into separate stand-alone stores. And we see a real-life potential of probably 200 to 250 more Relay stores. So -- and we do that across all of our different brands. So the 2 are not in conflict with each other. We see them really interacting very well in the future. Okay. The next question, and I think Bongiwe, I'm going to pass this one on to you. Should we expect any further optimization initiatives?

Sure. Thank you for that, Anthony. I think I touched on the fact that we still have a bit of runway on our cost-savings drive. We focused on head office. And obviously, we took the low-road, low-risk scenario. And I think as we incorporate Jet and integrate Jet, there's plenty of opportunity as we're working with our teams, obviously, to save even further cost. I'm quite confident that we listed the cost base going forward. And obviously, there's more coming as we work together with the teams.

That just means I need to reset your targets. Okay. Next question. I think it's a very good one as well. Is there an opportunity in the future for TFG to look at value home store as well as possibly exploring FMCG? The value home store, I've already spoken about. We're launching with inject to start with, but we're going to be rolling out stand-alone Jet Home stores this year, probably somewhere between 5 and 10. And once we've got that formula right, we can roll out quite comfortably a couple of hundred of those stores on a stand-alone basis. And that can give us growth for the next 5 years. Funny enough, FMCG a couple of years ago would have been something well out of our expertise and our experience and perhaps our comfort levels. In the world of omni and online, all of that changes very quickly. Once you set up the infrastructure, quite frankly, whether you're selling and delivering washing powder or a pair of denim jeans, it doesn't really matter as much anymore. So yes, certainly nothing off the limits. I see there are a couple of questions for Australia for Gary and Dean. The first -- they're kind of linked, but let's deal with them separately. Where do you see -- or where that disappeared to you guys? Where do you see the Australian operating margin normalizing in the current financial year given improving revenue growth but the loss of government support?

Thanks, Anthony. I might take this one initially. We see it continuing at similar levels. There's no doubt the trend has continued into this financial year. And certainly, in the second -- sorry, in the second half when we had no government incentives and we had higher sales, our margin has improved. So that operating margin is tracking really well, if not slightly higher. And then in terms of second question -- yes. In terms of the second question, we still would have grown our EBIT, definitely. Without that government support, we absolutely would have had growth in the business and been comfortably up on the prior year.

You must remember, I think that in the second half, we had no government support. We had one of our best second halves ever. So...

Thanks, guys. And the reality is the run rates accelerated even since then as well, so as you mentioned in your presentations. I think that answers those questions very well. Jane, I think a question for yourself on credit. Where do you see provisions and bad debts moving as a percentage of the book and also bad debts for the current financial year?

So provisions we see for bad debts for the next financial year probably to stay flat where they are right now. So our provision rates at the 20% mark. We are opening up new accounts, but we are doing it very slowly and conservatively. So we don't see that provision percentage having to increase, and we do see that staying flat for the next financial year. With regards to net bad debt, sir, for the next financial year, of course, net bad debt is your write-off, your recoveries and your provision movement. And we do see write-offs decreasing significantly for the next financial year, but that's purely because this financial year, we've had constrained credit lendings, you've had less new accounts. So you will automatically get less write-offs in the following financial year. So net bad debts will decrease overall for the next financial year, probably around about the 5% mark, and that's keeping our provision level flat.

Thank you, Jane. There's a question on our acquisition of the House of Monatic and what that means in terms of us increasing local content and units and specifically around the type of skill set that came with House of Monatic. And that's really because House of Monatic was known for its more formal tailoring skills. I think it's quite a broad question. It goes to everything I said earlier on in the presentation around advantages that we see in quick-response manufacturing. Quick-response manufacturing really doesn't work nearly as well if you don't actually own and control the assets. You can't really outsource quick response very efficiently. Things get dropped. So House of Monatic, together with several other smaller acquisitions in the manufacturing space that kind of spanned or straddled our year-end, are really helping us grow both our capacity in terms of units as well as our capability and the skill sets. Going back to my earlier point for House of Monatic, is quite a rare skill set in South Africa, its ability to do tailored jackets, more formal wear, et cetera. It's not that, that is necessarily where the market's going to be massive in the next 6 to 12 months. We're using those staff to produce a lot more casual wear at the moment, but it means we've got the skill sets and assets to turn that on over the next 6 to 12 months as we need to. I think we'll probably be talking and sharing a lot more around how those manufacturing assets fit together and what it means in terms of units and metrics probably in our interim presentation. As I said, some of this happened after the year-end. Then the next question is you had a strong -- you had very strong cash generation and you've got a very strong balance sheet, so why not pay a dividend? I think for a couple of reasons. One is we were very clear at the time we executed the capital raise that in doing so, we were setting ourselves up for really having a stronger balance sheet through the year-end and making sure that we have dry powder for both organic opportunities as well as M&A opportunities. The reality, and I referenced it very briefly in my slide, is that we are inundated with acquisition opportunities. There's rarely a week that goes by that we're not approached by somebody with a business either in South Africa, the U.K. or Australia. We've got very clear criteria around what we're interested in. 99% of them don't progress to an -- even to an NDA level. But the -- I think COVID really has shaken up the world, and particularly the retail world. Those opportunities are going to continue to come at us. Equally, just in terms of our own organic opportunities, one of the previous questions referenced our store rollout, that requires CapEx as well. And then I think finally, the reality is as much as we're coming out of COVID, COVID hasn't been beaten yet. There is uncertainty. And one thing I think we've all learned through the COVID period is that maintaining a strong balance sheet and strong cash balances comes with a premium. It's something that you'd rather have or not have. And at the moment, even if we had paid a dividend, it wasn't really going to be very meaningful. I think the most important point is we're signaling our intention to return to paying dividends with the caveat that it depends -- it's really if we're looking at funding a significant transformative piece of M&A at the same time, in which case we'd have to reevaluate. But the intention is there. Next question is on Jet. When do you aim to achieve a 14% operating margin? Yes, the 14% is pretty much dialed into the year's budget of the year ahead. It is a very swift return from single digits to well into double digits, and 14% isn't far off what some of the pure value players achieve. Again, the reason we're able to do that is we're plugging it in the front end of a business to a very well-oiled and optimized back-end shared services. We gave the example on the IT costs coming down by over 60%. That applies to most of the other head office costs as well. So yes, we will -- we think we'll get to 14% or very close to it in the current year. Let's see what the next question is. Okay. On TFG Labs, how many people are you hiring apart from the omni -- Chief Omni Officers? And what are your -- what is your short-term target for new hires? The reality is we've launched TFG Labs about 6 weeks ago. We've been hiring 1 to 2 people a week. And if you look at the rest of the year, we'll probably continue around about that pace. We need to build up that tech team to at least 100 people-plus. But they are rare skills in the South African market. You want to make sure that you get the right people. And actually, what's -- I think the most gratifying is the minute the TFG Labs was launched, it's not so much us going out and looking for talent, it's talent coming across to us because people are really excited about working in this omnichannel world, which really hasn't been done in South Africa to date. And an IT and the tech world wanting to be part of something that's critically important in terms of being able to attract the best talent. What is the next question? Are the store expansions for other TFG SA brands? I think we've covered that one. I think Bongiwe referenced 200 stores. To be honest, it might be more than that if we get the rentals right. And then there's another question. Why are you opening stand-alone value homeware stores? Is it on the back of the home improvement trends? Will you be adding any new home products, possibly furniture? Very good question. I mean we've seen massive growth in our @home business over the last year, both in terms of furniture and in softs. Initially, Jet Home is going to concentrate on softs. Furniture is big. It's got slower stock turn, and we need to fit them into relatively small spaces. So the stand-alone stores make total sense, but on a limited footprint. I don't think we'll be looking at hards in the next year or 2, but once Jet Home is up and running, absolutely no reason not to look at it. That looks like all the questions, guys. If there aren't any more, again, thank you very much to everybody for spending time with us today. I hope you found it helpful. Stay safe, and we look forward to hopefully seeing you in person in the not-too-distant future. Thanks once again.