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

Good morning, everyone, and welcome to our TFG 2022 year-end results presentation. In addition to Bongiwe and myself, we have a number of our senior leadership team members presenting with us this morning. We do this to add color and richer insights into the various parts of what is increasingly a large and diverse business, and also to give you some sense as to the depth of talent that we have running our various businesses. As our business continues to grow and evolve, a key differentiator will be the extent to which we have the best teams and the best players. The results that we'll be sharing with you today are very much the result of a team effort. One of the tangible benefits of the easing of the lockdown restrictions and the gradual waning of COVID is that we've recently been able to travel to visit our teams and businesses in both the U.K. and Australia for the first time in over 2 years. I'm thus very pleased to have Gary and Dean from Australia, and Justin from London, physically with us in Cape Town today. I'll start the presentation with an overview of our financial year and our key achievements, both from a financial and a strategic perspective. Bongiwe will take us through the detailed group results, balance sheets and cash flows. Jane, Gary, Dean and Justin will share their perspectives on this year's results for credit, TFG Australia and TFG London. I'll then wrap up the presentation with a summary of our strategic direction for the new financial year and an update on our most recent trade post year-end, and then we'll still have time for Q&A at the end. 2022 was one of the busiest years in TFG's history. But if I had to summarize the year in just 4 soundbites, it would be as follows. TFG bounced back from one of the most turbulent periods in decades to reach record levels of turnover, gross profit and profitability and has, at the same time, continued to make significant investments in the key capabilities that will define the future of retail. TFG has made significant market share gains, both as a group as well as in each of our 3 main operating territories by outcompeting the overall market as well as almost all of our key competitors. We've applied a relentless focus to the efficiency of our working capital, cash flows and the strength of our balance sheet. And we've done all of this with a simultaneous, deliberate and intensified investment in our ESG programs, especially in terms of what we've done for job preservation and job creation, which remain key components of our social contribution to South Africa. Unpacking this in slightly more detail, 2022 was significantly impacted by lockdowns, which forced us to close our stores, especially during the first half of the year, intensified load shedding across South Africa, which impacted both our customers' ability and their propensity to spend in our stores and on our e-commerce sites, civil unrest in KwaZulu-Natal and parts of Gauteng, which resulted in 198 of our stores being looted and severely damaged and which also forced us to close nearly 1,000 stores in high-risk areas for more than a week on average as well as global supply chain disruptions and distortions, which impacted the timing of shipments as well as our overall logistics costs. Despite all of these headwinds, we recorded significant market share gains across all of our major territories. The group and TFG Africa, in particular, saw a very strong like-for-like gross margin recovery. TFG London's new business model and structure has delivered record U.K. results for the group, with EBIT up 75% on pre-COVID levels. TFG Australia, which has now been part of TFG for 5 years, again, delivered strong top line and margin growth and outstanding operating leverage. 2022 was also a year of extremely disciplined capital and balance sheet management. The group made significant organic and inorganic investments to both drive near-term growth and profitability as well as to further our strategic ambitions. These included a major store build-out program with 274 new stores for TFG Africa on top of the 176 looted stores that we rebuilt, together with 41 new stores in Australia and 8 new stores in London. To put all of that into perspective, this meant that our property and stores teams opened, on average, 2.4 new stores a day, 5 days a week for the entire year. We also invested, both organically and through acquisitions, in new brands, new capabilities that we didn't previously have within the group, and in further vertical manufacturing capabilities and capacity as well as in our social performance. Despite the extent of these significant investments, our strong trading during the course of the year, combined with our working capital discipline, saw us end the year with a very strong cash position of ZAR 5.7 billion and us declaring a healthy dividend. So with this background in mind, let's look at how our strategy and execution translated into results and key metrics. From a P&L perspective, we achieved record group turnover of ZAR 43.4 billion, record gross profits of ZAR 21 billion and record headline earnings of ZAR 3.3 billion, with growth of 31%, 40% and 442%, respectively. We also continued our transition into a true omnichannel business with e-commerce growths of 18%, 14% and 27% for TFG Africa, London and Australia. These growths were all up against high COVID bases and despite our struggling e-commerce growth on purpose for TFG Africa, whilst we were replatforming. Focusing on TFG Africa for a moment, we significantly improved all of our key customer metrics with store visits up 56%, online visits up 34%, and our customer satisfaction score improving to an all-time high of 83%. In terms of our social performance, we created more than 7,000 new jobs and workplace opportunities in South Africa during the year. As a result of this clear focus on our social investment and performance, I'm very pleased to be able to share that we've just finalized our B-BBEE audit, and we've now moved to a Level 3 rating, which significantly raises the bar for listed South African retail. The theme of our 2022 financial year was very much one of growth, which was generated on the back of previous investments in our business. We know that retail requires continuous investment to consistently outtrade your competitors. And with this in mind, we also continue to invest to support our future growth. The group delivered like-for-like growth of 21.3% with underlying growth from TFG Africa and Australia of 17.8%, 74.5% and 15.8%. These like-for-like growth both highlight the extent to which last year's numbers were negatively impacted by COVID, and just how dramatically we bounced back. Our gross margin, which was also severely impacted by COVID, improved from 45.5% in the previous year to 48.5% in the year we just closed. And this is despite the impact of globally inflated logistics costs and the margin dilution, it comes with an expanded value segment. We also invested in new brands, new capabilities and in our strategic verticals. From a new brands perspective, having returned Jet to significant profitability in its first year at TFG, we relaunched Jet Home and opened our first 15 stand-alone Jet Home stores in addition to 356 Jet Home store in stores. While it's still very early days, we're very happy with the performances of both Jet and Jet Home, and see a significant runway ahead for both. Granny Goose, which we acquired in October last year, has also delivered very positive results with a 4x revenue run rate increase, and a 2.1 percentage points improvement in gross margin since acquisition. We will, subject to regulatory approval, conclude the acquisition of the suite of Tapestry Brands, Coricraft, Dial-a-bed, The Bed Store and Volpes Linen and anticipate this transaction being finalized over the coming weeks. From a new capabilities perspective, we acquired Flat Circle, the leading Flutter mobile app development team in South Africa. We acquired Quench to help us establish our own in-house last-mile delivery capabilities, and to improve our overall omni-fulfillment. We also invested significantly in establishing TFG Labs, which I will talk about in more detail later. From a strategic verticalization perspective, in the clothing area, we acquired the manufacturing assets and we'll start with House of Monatic, TCI, Radeen and Playtex. In the homeware space, we acquired Cotton Trader's, the manufacturing arm of Granny Goose. And again, subject to regulatory approval, we will acquire the various tapestry manufacturing units namely Sleepworld, the Volpes factory and the Coricraft factory. These will allow us to further improve the working capital efficiency and the margins in our homewares businesses. As a fashion and lifestyle retailer, we put our customers first, and we obsess them in everything that we do and everything we design. More people than ever before are following the TFG brands across the various social media platforms. This is a proxy for them, digitally voting for their favorite brands, and the gaps between TFG and our competitors continue to grow. More people are joining. We saw a 22% increase in our already significant TFG rewards base, and had 700,000 new customer accounts opened this year. Our customers are also more satisfied. Our CSAT, or customer satisfaction scores, have continued to improve with the influence of TFG Labs already making a marked impact on our online CSAT, which improved from 74% to 83% over the year. Further illustrating this point, we had a 20% reduction in call center contacts despite an 18% growth in online turnover. In putting our customers first, we are constantly investing in, and striving to have the best brands, the best people and the nexus of these 2, the best stores. A few examples to illustrate the ongoing strength of our brands would include Sportscene, just one of our many individual brands, which was the fifth strongest brand in South Africa this year amongst some pretty heavyweight competition. Other individual TFG brands such as Markham and Foschini also featured in the top 50 most valuable brands in South Africa, highlighting the extent of the equity in each of our specialty brands. In terms of people, we continue to win recognition as an employer of choice. And in this respect, I'm particularly proud of TFG winning the year's Top Empowerment Award, and being runner up in the SAGEA Employer of Choice Awards. And then I guess not surprisingly, given these numerous brand and people awards, our stores, which is where our brands and our people come together, continue to win recognition for offering the best retail experiences. Examples this year include TotalSports, Markham and Foschini. As a result of our brand and customer obsession and all of the efforts and investments that we put behind these, our customers are, in fact, putting us first. We continue to outcompete and to grow market share in all of our markets. These market share gains can be viewed at both macro and at a much more detailed macro level. But at either level, the message remains very similar. At a macro level, and looking at the blue bubbles on the right, TFG London grew by 57.3% versus Euromonitor number for the U.K. of 12.7%. TFG Australia grew by 24% versus the Euromonitor number for similar retail in Australia of 12.2%. At a more tangible macro level, the Retail Liaison Committee or RLC growth numbers, which measure the major South African retailers in detail, showed that the aggregate South African men's and ladies wear market grew by 5.9% for the year versus TFG's equivalent growth of 27%, which is illustrated on the left-hand graph with TFG's monthly growth trajectory shown by the purple line. I've made a few references to the impact that TFG Labs has already had on our South African online and customer satisfaction performances. But I think these trials are so fundamentally important for the future that they deserve to be unpacked in a bit more detail. Our TFG Africa online turnover grew by 18% to just short of ZAR 1 billion during the year of replatforming. Our cost per order decreased by 19%. Our average order turnaround time decreased by 10%. Our on-time last-mile deliveries improved by 50%, and perhaps as a result, we also had a 46% growth in first-time online buyers. These achievements are really significant, and would never have been possible in any traditional corporate e-commerce culture. It reflects the reason why we have hired 85 high-caliber software engineers and e-commerce specialists within TFG Labs. Having spoken a lot about our financial successes over the year, I'd like to conclude by reflecting on how we've gone about doing this in a manner which has been beneficial to all of our stakeholders. TFG Africa, as I mentioned, created more than 7,000 new jobs and workplace opportunities during the year, many of which were directly linked to our government's retail master plan and our participation in the YES program, during a period which has seen unemployment rise to record high levels in our country. Using whatever economic multiplier you choose to, the 7,000-plus jobs have a massive knock-on impact on the broader economy. And, in most cases, provide people who've had no work experience their first job, and foot onto the employment ladder. We had more than 2,000 equity promotions amongst our growing workforce. We also invested more than ZAR 100 million on social impact initiatives, including supporting various NGOs and communities during the year. We directed more than ZAR 2 billion in new business to black-owned suppliers. And as a result of this level of commitment, we achieved our Level 3 B-BBEE rating, which is significantly ahead of the rest of major listed SA retail. At a group level, we've also committed to meaningful BCI, or better cotton initiative, targets. Now whilst ambitious, these sort of social performance initiatives are not mutually exclusive to strong financial performance. We did generate a 24% total shareholder return for the period. I'll now hand over to Bongiwe, who will unpack a lot more of the detail underpinning these headline achievements.

Thanks, Anthony, for setting the scene for us so eloquently, as always. Good morning to everyone on the call today. Lovely being here once again this time around to deliver our 2022 March financial year-end results. Today is an even more special event as we have Justin, Gary and Dean with us in person, their first visit to South Africa in almost 3 years. I'm keeping fingers crossed that in the not-so-distant future, we will have most of you and our staff in person here in Cape Town. A bit about the image on this slide, both the jacket and the skirt were proudly locally manufactured through our very own facilities. I think the Maitland design and manufacturing facility. The beige fitted skirt became one of our pursued best sellers immediately. It's in the shop floor. And yes, please, guilty as charged, I have it in several colors, stunning quality. The design team started off with 1,200 unit -- test units. That sold incredibly well. The rate of sale at over 70% that very first week. And through our local response manufacturing unit, we were able to respond swiftly to the demand. Within 40 days, we successfully produced 60,000 units, and sold all of them within season. How incredible is that? Local is definitely [ luckier ]. Back to the business at hand. It has once again been an eventful year. However, once again, our model has proven robust, adaptable, and our teams have been able to grab at opportunities in the midst of all the headwinds, as you will have noted in the highlights presented by Anthony. To put our numbers into context and for ease of comparison to financial year end 2021, I have listed on the left, the significant noncomparables, or one-offs. For example, the government and landlord COVID concessions of some ZAR 1.5 billion that influenced our results in the prior year. And on the right-hand side, the further headwinds during financial year end '22, which primarily were the continued COVID restrictions, albeit at different levels of severity in all our operating [ triages ], which resulted in several hours of trade loss as previously reported and listed on this slide. Africa, and over and above the different levels of COVID restrictions was impacted by the July civil unrest and Eskom power supply challenges, which seems to have deteriorated in the past year. Consequently, we are once again conservative as we dealt up credit acceptance rate. And on average, we're 25% during the year. And quite honestly, we simply didn't need to turn up credit lever in any material way as cash growth continued to exceed expectations, as I will share later on. And for now, 20% to 25% seems to be the comfortable level for us. Jane will take us through credit in detail later. If the graph looks familiar, you might have seen it from the April results presentation, and I thought to borrow the [ Sankey ] diagram to give you a good feeling of the shape of our income statement and how we evolved down to a record profit after tax of ZAR 2.9 billion. In summary, from a record turnover performance of ZAR 43.4 billion achieved, which was up 1.6% on last year, we have expanded leverage and delivered gross profit growth of 40.3% by growing volumes sold and improving gross profit margins. We squeezed trading expenses further, which grew at only 20.9% as reported, which is ignoring the impact of the ZAR 1.5 billion in COVID relief support we received last year. And on a like-for-like basis, though, grew only at 5%, which I'll unpack in the next slides. This culminated to a reported EBIT of ZAR 4.8 billion, which grew over 700% on last year, and normalized grew 12.9%. Consequently, the group delivered a strong headline earnings of ZAR 3.3 billion, which translates to a HEPS of ZAR 0.1009 per share, up ZAR 0.1666 normalized. That is taking into account the increase in the number of shares today compared to 2020. This, in a nutshell, is our '22 performance. Well done to all TFG businesses, local and international. Now getting to a bit of detail. Starting with turnover. All our businesses delivered a robust growth. Africa achieved a record turnover at ZAR 30.3 billion, up 32.3% on last year, 21.3% like-for-like, and pleasing that it was 23% up on 2020 financial year. Well done Africa teams, to us and surely our retail directors, well done. London has truly come back stronger, and delivered GBP 309 million of turnover, which was 57% up on last year. And on a like-for-like basis, turnover in London grew 75%, outstanding recovery amidst a very tough trading environment. Justin will take us through the TFG London results later on, which honestly, all the financial metrics have exceeded our expectation. EBIT growth forecast is the TFG London story, a smaller turnover business, less dependent on department stores, but a far more profitable business, and will grow off from this space. We look forward to that, and well done once again, London team, Justin, as well. Australia. Australia honestly continues to please. Despite all the severe lockdowns of 2020 financial year, Australia reported a growth -- record turnover of AUD 224 million, 24% ahead of last year, like-for-like a 16% growth and 15% ahead of 2020, well done Gary and team. Online sales grew by 12% off a very strong base. Online sales now contribute ZAR 4.3 billion to group turnover, also satisfying is the cash sales growth of 34%, once again, growing significantly ahead of credit sales, which grew 24% on prior year. Group cash sales at ZAR 34 billion, approximately 80% of our turnover as in last year. This feels like it is firmly our new operating level. The impact of a high cash base, cash sales and other optimization successes will be substantiated further when I take you through some of our key balance sheet metrics. Pleasing to note our 10-year CAGR of 14.1%, which has come from a combination of year-on-year strong organic growth and profitable acquisitions. There's a lot of perception in the market that only deep value segment is growing, which, of course, it is, but the mid- to upper segments equally growing strong for us as depicted by the chart on the left. The strategy of operating niche businesses in all consumer segments albeit at differing levels cannot be overstated in times such as this. On the screen, left chart, we show growth of our key categories. Clothing, our latest category grew strongly at 82% with local and regional quick-response manufactured apparel now contributing 72% of Africa's apparel. I've also disclosed our athleisure segment growth, which at over 28% growth, continues to exceed expectation. Pleasing also was jewelry's performance, a discretionary purchase, growing at 21.3% on last year. Notably, homeware grew 29%, which is ahead of competition once again, and notably off a very high base. I know [ Shane ] is looking forward, subject to competition commission approvals, so having on board the Tapestry Group, which is largely a vertically integrated business, and will add to our market share in the SA homeware segment. And together with the newly launched Jet value homeware segment, we will begin to play a meaningful role in homeware. I'm often asked how our base business performs against our competitors, removing the impact of acquisitions. And for the last year, it's been a notable year of acquisitions for both TFG and our competitors. I've taken the liberty of taking up our performance against that of an often quoted competitor, removing the impact of our Jet acquisition for the first half as it was noncomparable. In the second half, I've inferred Jet, it was in our base in the prior year. Ultimately, stripped back of acquisitions, our underlying base business, our real growth is revealed. The figures speak for themselves. Gross profit. Money through the [ till ] continues to grow, and we achieved a record ZAR 21 billion, up 40% on last year. Last year, I explained that we took a decision to deal with all our old stock, and took a lot of markdown, hence the drop in our GP margins to 45.5%, including the Jet dilution of 1.4%. Also, at the same time, made a promise that while we head for the bank -- for the rents we bank, very important for us, especially as we are now firmly entrenched in the value segment or in the value segment layer with volumes almost doubling past 2, 3 years, we would not lose sight of GP margin recovery. I'm pleased to report that the GP margin for the group has come back firmly at 48.5%, and with Jet dilution included. We expect this to be our new base, and to grow this depending on economic recovery or obviously, promotional activity in the market. The internal businesses GPs have recovered firmly to pre-COVID levels and in some categories, pleasingly exceeding pre-COVID levels. You will see, when I go through the inventory slide, we have conservatively retained the same provisioning buffer as last year in light of the global economic conditions and supply chain disruptions. So in short, GPs were not boosted by any significant provision releases, and sales growth was not achieved at the expense of margins. Simply, the demand of our products, group strategic sourcing initiatives and margin reached quick local manufacturing is driving our margin expansion. Moving on to other income. Credit income over the past 2 years has reduced significantly as depicted in the bar graph as interest rates fell to historical high levels. The combination of the 225 basis point interest rate reduction plus us putting a cap on the interest we charge to customers in light of the pressure on the consumer and further, the impact of a smaller debtor's book, which is of a high quality today has meant that approximately placed ZAR 540 million hole in our accrued EBIT when compared to 2019. Hence, you see the percentage of turnover down to 6.1%. As you have probably calculated, any improvement in interest rates will reduce this gap, and drop to bottom line. And we've already seen improvements in this new financial year as treasury increased interest rates. Lots of other mitigating and exciting new initiatives on the go, on the credit side, which Dean will proficiently take you through later on. And for completeness sake, confirming we have conservatively accrued for ZAR 150 million of business interruption income following the obviously, given civil unrest, ZAR 100 million in the first half, as I reported at half year, and ZAR 50 million during the second half of the year. It might be better to click to the next slide to refresh everyone's memory as to how we impacted as previously reported. We estimate a loss of about ZAR 1.4 billion in total for the group for Africa, made up of a combination of assets, stock and lost sales from the looting of the 198 stores, and also the closeout of the surrounding stores, which we intentionally closed as precaution and for the safety of our employees. I have to applaud such a leadership. We have skillfully handled the claims process. And with a wonderful constructive, forward-looking spirit of same-business recover and keep as many jobs as is possible. I mean truly, one of the great examples of what government and business can achieve when we work together. Thanks, [ Sachia ], well done. To date, we have received ZAR 541 million from [ Sachia ], and expect the rest in the next few weeks. We are also finalizing our PI claim, and as mentioned, conservatively accrued ZAR 173 million, including debt to income and raised a debt of ZAR 223 million at year-end. Pleasing is that to date, about 180 stores have opened, and are trading strongly. We'll open the rest towards the end of the first half, and also by year-end, probably have opened all. As you know, trading expenses have been an area of focus for us for the past 4 years. And one of my KPIs when I joined the group was to optimize all back offices working with our optimization team led by James, who just also joined the group. We named the project Stone, improvements to the standard operating model, and my other KPI from Anthony was to optimize working capital, which we named Project Wind. I think I've shared with you the successes and savings that we have delivered past 3 years in Africa, working with all our teams to deliver savings conservatively at ZAR 500 million, and obviously, more during the COVID period. I did not waste the crisis, as I've often said. I'm pleased that as we traded, almost full steam in all our regions, our cost to turnover ratio continued to reduce. Now firmly at 41.4% from 45.3% in 2019, tremendous cost control discipline. We have certainly learned to do more with less. And this is driving our operating leverage expansion as you will see in the next slide. Our like-for-like growth, as mentioned earlier on in trading expenses was 5.1%, well below inflation and well below our turnover growth. Well done to all our Africa teams. Moving on to London. I know Justin and team have taken out the best part of GBP 7 million ahead of this cost and space cost for the past 2 years. And Dean in Australia is ruthless on cost. I have to share this with you. When I traveled to Australia, I have to bring my own teabags and a little Ziplock bag filled with Cremora from South Africa because you bring your own to the office, honestly, true story. Great culture that Gary and Dean have filled over the years. And you'll see in their slides the significant EBIT improvement year-on-year as they continue to sweat the assets and squeeze cost out of the business model. The metrics of that on the right-hand side are our key costs, and you can see the continued decline. The challenge now for all our teams on the call is to keep these ratios, and I know the teams will rise to the occasion as usual. As mentioned previously, the result of all the good initiatives is that our EBIT has come back strongly after last year's loss to an EBIT margin of 11.1%. And this was achieved with credit hold -- credit income hold that I mentioned earlier on, and also with new costs in the business, our investment costs in omni-platforms, led by Luke and [ Klaus ], and will establish TFGLearn as Anthony mentioned earlier on last year and further investment in building out our very successful margin reach, local quick-response manufacturing. In the block at the bottom, we try and estimate that without these discretionary investment costs of some ZAR 450 million. And if interest rates were at just 2020 levels, the group will be reporting conservatively an EBIT margin in excess of 13.5%. Moving on to the balance sheet. Gearing at ZAR 1 billion is at historical levels, and net debt-to-EBITDA at 0.2x show the strong trade and how we focus on paying down debt. Cash on hand at year-end, ZAR 5.7 billion, up ZAR 1 billion on last year. Debt has booked only up ZAR 400 million or 6%, while credit sales grew 24%, which shows, once again, the good quality of the debtor's book, and that we have built over time as we purposefully reduce acceptance rates. You will see the debt has stayed in the middle, down another 44 days from last year. Well done, credit teams. We are focused on improving shareholder returns. ROCE is up 14%, and beating pre-COVID levels, and we will continue to steadily increase ROCE without sacrificing the need to invest in the business. Our return on invested capital at 17.4% is up 320 basis points from pre-COVID levels, again, showing that we are pursuing organic and inorganic opportunities with solid returns. Inventory, great discipline, as mentioned earlier, through Project Wind, we work with the teams to reduce inventory days. And I will take you through inventory in detail later. But inventory at the end of the year, grew 12%, well below turnover growth, and also taking into account the store expansions, and also we are holding a little bit of stock in light of the supply -- global supply chain disruptions and obviously ahead of store openings. What's pleasing though is that the significant proportion of the stock is fresh. Touching on debt's fair value. You'll see from the slide, we are building a nice war chest, ZAR 13 billion in facilities in place, and over 70% on a long-term basis. And further, I am continually humbled by all the preapproved credit letter of commitment from our major local banks, which in total exceeds ZAR 20 billion to support TFG on any acquisitive opportunities in our pipeline. As you know, and mentioned earlier, Tapestry awaits [ com-com ] approval, but we have ring-fenced already, cash, from all the good collections to fund the transaction when we receive the go ahead ultimately. Inventory, been through some of the highlights but maybe on this slide is to note our improvement in stock trends over the years. Some brands like Jet, Markham, which stock turns -- running at about 4% and more, in some product lines, even 5 to 6x, and we have maintained our conservative provisioning, as mentioned earlier, at ZAR 1.2 billion, almost the same balance as last year. And inventory days pleasingly down at 153 days. CapEx. We doubled our CapEx spend in 2020 with us catching up, as previously mentioned, on all organic investments that we held back in 2021 financial year. The CapEx is driven from all brands fighting for capital, and growth in areas whether or not previously we've presented and pleasing is that they are returning above expectation returns. I estimate that by the end of this quarter, we would have opened another 80 stores in Africa at market's competitive rentals and store size is fit for purpose and obviously profitable. The stores opened last year added another ZAR 1.5 billion analyzed in turnover with a payback of 12 to 15 months at most, which continues to be impressive. Africa's total trading space is now at about 1.3 million square meters with more than 3,100 stores. We also invested a further that ZAR 250 million in local quick-response manufacturing, which we estimate to have yielded about ZAR 250 million in margin benefits as rates of sales are higher, and thereby limiting markdowns. In the table at the bottom, I have shown us, again, some of our competition. Bottom line is growth does not come for free in an economy where GP is muted. If you don't maintain stores and enhance customer experience and in parallel, invest in your store staff selling capabilities, digitally or other, I don't need to say further. For us, this is in line with our business value, it's simply showing respect to our customers and to our staff. Strong free cash flow generated from strong trade and stringent working capital management has resulted in the group generating positive net cash of ZAR 1 billion in 2022, as mentioned earlier, and that is after CapEx of ZAR 1.5 billion and paying out a dividend of ZAR 474 million. As mentioned in the first half, we have resumed paying dividends, and the Board declared a full dividend of ZAR 0.500 per share for the '22 financial year, which is a 2x cover level which was -- is now what we've previously guided. I will now take you through Africa performance, our biggest trading region. I've also adjusted a Sankey diagram, which I'll take you through the highlights quickly. A record turnover of ZAR 30.3 billion, which is 32.3% growth on last year, and incredible leverage delivered with gross profit growing by 87.9%. Reported trading expenses well below turnover growth at 27.4%. And actually, normalized trading expense grew only 21.7%. And Africa reported a record ZAR 2.2 billion headline earnings. Gross margin has also shown strong recovery from 41.4% last year to 43.2%, and that is including the 1.4 Jet dilution. As TFG Africa, we are focused on driving volume. And you'll see units sold grew 91% on last year, and thereby ran to the till at a record ZAR 13.1 billion. Trading-cost optimization remains a key focus area for us with trading expenses now at 87.7% of turnover. Working with our landlords is a strategic imperative for us, both locally and internationally. TFG property teams continue to work closely with all landlords, big or small, to ensure we match our growth with affordable and sustainable rental. We're constantly evaluating space and optimizing where possible across Africa's numerous brands, which are in different life cycle phases. Rental reversions are achieved where appropriate, creating a win-win situation with landlords. And often, the result is that overall space is improved and increased. We value our landlord relationships and negotiations, while always robust, are very fair. So that end, Lisa worked tirelessly during the year. And of the 662 store rent lease renewals -- store lease renewals, they secured an average negative 14% rental reversion. This translates to a cost savings of some ZAR 80 million. If we come back to 2019, our rate per square meter is down 17.4%, and trade entities are up 7%, which is excluding Jet. Again, well done, Craig team. And also in London, Justin, Emma and the team, a large proportion of our leases today are now turnover-based leases with an average length of 1.2 years. Equally, Australia, Nicole has been hard on rental reversions where they also, for the 2022 financial year, achieved a negative 14.2% rental reversion. Well done property teams. EBIT, as a consequence, continues to grow despite the investment cost and the credit EBIT gap as mentioned earlier. Operating margin expansion, as previously mentioned, remains a key focus area for us. I just inferred this slide on Jet because a few analysts have asked us to show Jet, especially as this is the full first year for -- in the TFG stable. Jet was set to meet turnover of close to ZAR 6 billion. But as we mentioned at half year, they were the brand most impacted by the July civil unrest, stores, and obviously some of their suppliers. Hence, we are very satisfied with the ZAR 5.1 billion turnover and double-digit trading profit margins achieved, up significantly from when we purchased the business. We added another 17 Jet stores, which 11 were new homeware stores. And also to improve trade entities in some big boxes and strategic locations, we added another 380-some Jet homeware restores within the big Jet stores. We look forward to Jet's continued success and well done Shane, TK and the Jet team. In closing, I am sure you've heard from -- this from a lot of retailers. It's going to be important to cut the cloth to suit and at the same time, focus on building a future-fit business. There is a better opportunity to optimize expenses, especially in the transport or logistics cost centers as we optimize our DCs and road transport network. I know Jacques is very passionate about it and is working with teams. ESG is our key focus, as Anthony mentioned. And as everyone knows, job preservation and job creation is unashamedly a top priority for TFG. And lastly, I'd like to thank my super finance and back-office teams in all our regions for their efforts, particularly at this time of the year, but also throughout the year as well as Deloitte, our auditors, and our operating Board, our Chairman and our Supervisory Board and Audit and Finance committee chairs in particular, for their continued support. Handing over to Jane now, who will take us through Africa credit. Thank you.

Thank you, Bongiwe, for the introduction. So what's the latest in the world of credit? Well, during the last financial year, we have seen unprecedented levels of applications for our store card credit. And if we thought the first half did well, well, the second half did even better. In total, reaching 2.8 million applications for the year, which just shows that our store card credit is still very much in demand. Now the reason for this increase is due to 3 main reasons: Firstly, we have resumed our new account drives in our stores with incentives for both customers and staff, which always prove very successful, and has naturally stimulated demand in the market. But of course, customers will only apply if they have a reasonable expectation to be successful. And you can see from the graph that we have cautiously increased our accept rates during this financial year. And during the second half, this was sitting at circa 25%, which is obviously higher than it was during the previous financial year. However, these accept rates are still conservative when compared to 2019 and 2020. And thirdly, customers will only apply for store card credit if you've got the merchandise that customers want to buy, which you can see is clearly true from the turnover growth that we are seeing in both cash and credit. Now an increase in applications combined with an increase in accept rates has resulted in the active account base growing, and we have now 2.6 million accounts, and the gross book has grown by nearly 4% to ZAR 8.7 billion at year-end. Now the second piece of good news is that the credit health of the overall book has also improved during this financial year. However, this is what you would expect if you restrict the credit lending criteria, like we did in the previous financial year during the start of COVID. There's always a lag between the opening of new accounts and the bad debt statistics. So to be honest, if I didn't see an improvement, I would have been worried. And thankfully, all of the statistics are better. If you look at the overdue amounts, which are the amounts due for more than 30 days as a percent of the book, this has improved, now down to 13% versus 16% this time last year. Less overdue values means a better book construct, which is reflected in our improved impairment provision ratio, down to 19% from 21% last year. This is with no changes to our provisioning policies, and we continue to be appropriately provided. A lower provision requirement as a result of lower bad debt write-offs, and improved bad debt recovery means our net bad debt, as a percent of the book, improved down to 11% from 15% last year. And I'm pleased to say that the overall EBIT for credit significantly improved this year to ZAR 175 million, with the main reason being improvements in bad debt. Now we've also shown a graph on customer payment behavior to illustrate the improvements in the quality of the book. The purple bars represent the percent of cash collected relative to the prior year. And you can see that we've collected more money on a smaller book, indicative of robust customer payment behavior as well as a great collections department. But given we have increased our accept rates during this financial year, and net new accounts do attract a higher provision ratio, and during the course of this next financial year, I would expect to see the bad debt and provision ratios to increase slightly, and then will increase ahead of the income line as you always feel the impacts of the bad debt first whilst income is earned much more slowly. Now I mentioned that our collection results are much better than expected, even with the restriction in credit lending. So how come? Well, one of the decisions we made was to keep our collection staff working from home. And as a result, we're seeing unprecedented levels of productivity with notable decreases in unplanned leave and improved adherence. An unintended consequence, but obviously, this is great for our results. And in the past, I've talked about how we are often the first line of credit that a customer takes out. And we have started a journey to talk to more of our customers about the benefits of maintaining a healthy credit record as well as the implications of not paying their account. To this end, we embarked on a simple and effective revamp of all electronic communications to our arrears customers, just making it easier for the customer to identify where they are in the collections process and what they need to do in order to prevent their account falling further into arrears and the consequences of late or nonpayment. Now we've all trialed the use of bots, and we too have done that within our collections department, and we launched a web chatbot, making it easier for our customers to use electronic communications to make payment arrangements or just to get more information about their options as not everybody wants to talk to an agent. These initiatives are yielding great results in our collections numbers, and we will continue to look for ways to improve our collections numbers. Jet, now with the onboarding of Jet into the TFG world, one of the first initiatives we did was to ensure that our existing TFG credit customers could shop at Jet, which was very successful with over ZAR 700 million in Jet credit turnover coming from existing TFG cards. This represents circa 45% of all the credit spend in Jet. And we also launched our second look book during the course of this financial year. And this now contributes to circa 20% of all the total Jet credit turnover. And TymeBank, at our half year, we announced our strategic partnership with TymeBank, which will allow us to accelerate our digital offerings and expand our financial service products. We are now in the middle of the implementation phase. You will have seen that the more timed "buy now, play later" product is currently being piloted in selected TFG stores. This product allows the customer to take the product immediately, pay half upfront and the remaining amount over the next 2 months, with no fees or interest. Now this is fully funded by TymeBank, and the debtors' balance does not sit on TFG balance sheet. The TFG money kiosk is due to be launched in 600 of our stores later this year, and we have literally just taken ownership of our first-ever TFG money kiosk, which is live in our head office, whilst we test all of the functionality. The kiosks are key to launch a greater suite of financial products. For example, our co-branded debit card, and staff and customers will be able to open up a bank account in-store or by our offices via one of our new TFG money kiosks. And to all the staff who are listening, did you know if you open up a TymeBank account, you can get paid a day earlier if your salary is paid into this account. So can you open one now, please, and tell me what you think of the product. So the all-important money slide. Income's still down because interest rates were at an all-time low during the last financial year. The primary way store card credit makes money is through interest. This picture, of course, is changing right now, and we expect our income to grow during the next financial year, but this will take time to come through to our P&L. Now as discussed, our bad debt is also down, and this was expected, but this will increase during the course of the next financial year as we have cautiously increased our accept rates, and there is always a lag to bad debt impacts. Costs were up during this financial year, primarily due to credit marketing activity, which stimulated demand for our store card and not due to employee costs. We expect a more inflationary level growth in our cost during the course of the next financial year. Now given that we expect to see an increase in bad debt due to an increase in accept rates and an increase in income, we believe we will keep the EBIT contribution at roughly the same rate as it will take longer for the interest impacts to be felt in the P&L. So overall, despite being in an incredibly low interest environment and due to careful management of bad debt, it's yet another [ take-it-to-do ] year from credit, and long may that continue.

Thanks, Jane. So turning to the results for TFG London. Overall, a really good result in a period of significant change with TFG London driving an EBIT margin well ahead of pre-pandemic levels. The backdrop here you can see is that we had a very difficult year the year before, with COVID having had a substantial impact on the demand for TFG London's core categories. So the key points for this year, what happened. We saw the early relaxation of COVID restrictions as high vaccination and booster rates in the U.K. substantially reduced the spread of the virus. The U.K. market and customer behavior then began to make positive steps towards normality. Other markets that we work in took longer to recover and restrictions on the whole were lifted more gradually. So trading improved steadily through the course of the year with a particularly marked post-Christmas performance driving positive gains in the final quarter of trading, January, February, March. This is also carried through to the 2 months of the new financial year, which is really positive. As a key indicator, footfall to stores recovered well, albeit still not quite to pre-pandemic levels. And this recovery was not felt evenly across the estate. And the key call out here really is that London, which is an important market, continued to be impacted by low levels of travel and tourism, and a slower return to normal working patterns, which resulted overall in slower footfall and trading. However, on the whole, it was great to see our store base business and our bricks-and-mortar business driving the year-on-year sales increase after a really tough FY '21. This recovery overall has enabled us to refocus our efforts on providing a high-quality solution-orientated service to our returning and our new customers. Just looking at margin and gross profit. During the period, we also repositioned TFG London to focus on margin outcomes as well as sales growth. And we reduced the overall days on sale and we were able to allocate stock on a contribution basis. Redesigning the business model away from the legacy department store channels and championing fewer, better stores, closing some loss-making stores and working on a segmented customer approach, we successfully drove gross profit percentage gains and we're able to maintain margin in stock and lower the overall mix of markdown generated sales. On efficiency then, the restructured cost base is increasingly focused around supporting our talented, high-performing brand teams collaborating across the group to deliver a personalized 5-star customer experience. So looking ahead and the outlook for the U.K., we have a more sustainable business model, which is less reliant on the legacy department store business. Turnover, overall, is lower, but margins and efficiency have improved the overall results and the new strategies playing out positively. Due to the work we've done with our landlords and the significant efforts of our property team, we've been able to increase the flexibility of our fixed cost base, and also reduce the length of our overall lease to just 1.2 years on average. We've moved the online proposition forward significantly and invested in both the technologies and the teams to support this, and we further invested in both the creative and the digital marketing efforts to support growth. More of our decision-making now importantly, is based on data, and we have greater clarity on our different customer segments. There's no doubt there are headwinds in the U.K. and that the overall market is facing, and that supply chain continues to be a significant challenge. We've also got consumer confidence being impacted by cost price increases, and the upward interest rate movements that we've seen. We as a team continue to work hard to ensure that we contain these pressures, and so maintain the price that the customer pays for our products. For the year ahead, therefore, we're remaining cautious but optimistic. And to close, overall, really pleased with the outcome for the year. We drove an improved EBIT margin of just under 8% and a cash increase of just under GBP 49 million in a year of recovery for TFG London. My sincere thanks go to the whole team. These results are a testament to their resilience and focus through what's been a period of dramatic change. And now handing over to Gary and Dean from Australia. Thank you.

Thanks, Justin. Hello, everyone. Firstly, I'd like to say on behalf of Gary and myself, it's an absolute pleasure to be back in Cape Town with the rest of the TFG team for the first time in over 3 years. As most of you already know, my name is Dean Zanapalis, I'm the CFO for Australia. Today, I'll be providing you with some key highlights for 2022, and then I'll hand over to Gary Novis, our CEO, to talk to the strategic and operational outlook. Okay. As you can see, there are 5 years of financial performance on this slide. Now whilst the Australian team doesn't take this for granted, we are extremely proud of these results. 5 years of consecutive growth, and this year's EBIT profitability is up 26%. So let's focus on '22. It's hard to believe that we lost almost 15% of our trade days due to restrictions, very similar levels to '21. So what happened? How did we achieve the results given the circumstance? Well, the lift in sales is actually relatively easy to explain. After 18 months of on and off COVID restrictions, Australia finally reached its vaccination targets, and each state started to reopen. Now we've certainly experienced reopening from lockdowns before. However, on this occasion, Australia reopened with over 80% vaccination rates. As a result, we opened with minimal restrictions, a lot of consumer confidence, strong demand for all types of events and a consumer that was employed, and still had record savings. This delivered sales growth of ZAR 122 million, up 24%, and a comp growth rate of 15.8%. Now from a cost perspective, we still had a challenge. In '21, we received support from both government and landlords. In comparison, '22 had no direct government support for wages, substantially reduced landlord abatements, and higher inflationary pressures. As a result, costs grew, but with good operational disciplines, the team managed to contain that growth. Now finally, from an economic perspective, there is no doubt that the Australian economy has performed well when not in lockdown. And current economic conditions are relatively good. Record low unemployment at 4%, economic growth with GDP back to 3.3% and reasonable levels of consumer confidence throughout the year. So the opportunity was there. However, full credit goes to the team, who've worked relentlessly throughout the last 2 years to ensure that culture remains strong, and the business is on track. So at the end of the year, we delivered a great result, 24% growth in sales, 22 net new stores, a 26% growth in EBIT to ZAR 82 million and an EBIT margin at 13.1%. Thank you very much. And I'd now like to hand over to Gary for the strategic outlook.

Thanks, Dean. As Dean has shown in the previous slide, our profit has increased every year since TFG acquired RAG, and we have very clear and consistent strategies to continue this growth. Firstly, our retail store network. We will continue to open new stores as well as relocate and expand existing stores and drive like-for-like performance. Secondly, we are focused on growing our Johnny Big brand into the United States by way of online only, and this is currently exceeding our expectation. And finally, investing for the future. We continue to invest in our center of excellence for all things digital, which we refer to as our digital hub, as well as investing to ensure we have world-class IT systems and website platforms. The outlook. Australia, like the rest of the world, has economic challenges around logistics and supply chain. And while there is inflation, and an increasing interest rates, on a local level, our Australian economy is in very good shape. RAG is benefiting from record low unemployment, households starting to spend again after record levels of savings during the pandemic, and our rare customer is spending on events, which were either postponed or not planned during the pandemic. I am feeling very positive about the year ahead. In the first 2 months of our financial year have exceeded expectation. Thank you.

Thanks, Gary and Dean. It's really gratifying to see these incredible Australian results continue into the fifth year that you've been part of TFG. I'll come back to that point later on. At last year's results presentation, you may recall that I made the point that TFG's strategy was clear, intact and wasn't in need of any major overhaul. We have a differentiated, resilient and diversified business model that delivers significantly superior growth, and that is not easily replicable. Considering the commodity, geographical, LSM, channel and brand diversification of our business as well as its historical track record and scale, we are already South Africa's fashion and lifestyle champion. The strength and the resilience of our strategy becomes obviously clear and real if we look back at what it is delivered. And this is well illustrated by these 2-, 5- and 10-year charts, which other than for the direct impact of COVID closures, show a very clear direction of travel. Thankfully then, our challenges and strategy that's pretty much down to prioritization of opportunities and execution. So if our strategy is intact, and prioritization and execution are key, how then do we manage to do this successfully across such a large diversified business with more than 38,000 staff operating across more than 30 brands through 4,351 outlets on 5 continents, and in 24 countries? The way that we approach execution with clarity and consistency is through our bolt execution framework. This starts with our purpose. We inspire our customers to live their best lives, and our vision to create the most remarkable omnichannel experiences for our customers. These have been rolled out at every level of our various businesses, and they unite everybody at TFG in terms of what we need to achieve. If we break out bolt execution framework down into its key components, we are focused on building out individual diversified high branded equity businesses, optimizing everything we do, especially our sourcing and supply chain efficiency as well as our cost base, leveraging our considerable assets customers, customer data, store footprint, talent pipeline, vertical quick-response manufacturing, and our leading in-house credit and e-commerce capabilities, transforming into a true omnichannel retailer and platform play, and deeply embedding ESG into everything that we do to ensure that we both sustain our own business and play a meaningful role in the broader ESG agenda. Now in terms of building out, we will continue to invest meaningfully in our businesses to ensure that they remain as relevant going forward as they have been in the past. And we anticipate spending approximately ZAR 2.1 billion in CapEx in FY '23. At least 75% of this will be focused on expansionary projects for both stores and omnichannel. We will continue to focus on our brands to mitigate against the increasing trend of direct-to-consumer. We will also continue to emphasize our growth in the value sector, particularly in South Africa and in Australia due to long-term trends, and equally because of the current economic pressures. This chart shows how we've already moved our value sector contribution to group sales from just 15% in 2018 to a much more meaningful 28% in 2022. We will also continue to look to acquire strong brands and businesses that meet our investment criteria whether these businesses are located in South Africa, the U.K., Australia or perhaps elsewhere in the world. Interestingly, we are increasingly being seen as the owner or home of choice for management teams or businesses that are going through any form of change in control. And at pretty much any point, we are being approached by parties that want to become part of TFG or who would like to partner or collaborate with TFG to leverage our various retail and platform assets, and we remain very open to these approaches and discussions. Share a bit more color on our organic store build-out runway. The majority of the new stores for FY '23 will come from South Africa, with Australia and the U.K. also opening a more limited number of stores. In terms of South Africa, we currently have 353 stores under development with committed CapEx in excess of ZAR 600 million. Based on past recent history, and a conservative store viability process, we expect that these new stores will generate slightly north of ZAR 3.9 billion in additional turnover on an annualized basis. In other words, for the 12 months after they've been opened. 350 stores may sound like a lot, but the makeup and the diversification of our brand portfolio as well as the resultant underrepresentation of a number of our brands across significant retail nodes in South Africa makes this sort of growth both possible and very profitable. For example, during the past year, we opened, in 55 new retail nodes, where we were previously not at all represented, and these stores contributed more than ZAR 422 million in additional sales. Now as much as we consistently grow on the back of our organic store and brand rollout program, we do continue to look for acquisitions that we can bolt on to our increasingly sophisticated TFG platform. Given the strength of our organic growth, we sometimes get asked why we bother with theoretically risky acquisitions, and whether they're actually worth the effort. The simple answer to this is we are ambitious, and we want to be able to add the returns that carefully selected and well-integrated acquisitions can deliver to our overall group results. Looking back at the acquisitions that we've -- that have really supercharged our growth and scale, over the past 7 years from 2015 onwards. I think the returns profile that we've been able to generate illustrates this point. Looking at the combined Phase Eight, Whistles, Hobbs, RAG and Jet acquisitions since 2015, our current year, still impacted -- still COVID-impacted EBIT return on these acquisitions was 30%. This is clearly additive. As I mentioned, we are often seen as the most favorable home for high-quality businesses, and their management teams. We know how to leverage our retail assets and back-office platforms and systems to make these acquisitions more accretive. And we have a track record of successful integration, and of keeping incoming management teams intact for a sustained period, which is incredibly important as we rely on these management teams to run the businesses that they know better than anyone else. Looking forward, we have both a strong investment pipeline and a strong balance sheet and cash position to support further carefully selected acquisitions when appropriate. I stress the "when appropriate" phrase because as a rule, we don't rush into transactions. In many cases, we've watched and engaged with businesses for between 2 and 5 years before a transaction is materialized at the right time and the right price. Given that we've just reached our 5-year anniversary of the RAG acquisition, I thought it might be useful to use this as an illustrative example of what we think a successful retail acquisition looks like. We bought RAG from a private equity fund 5 years ago through a personal introduction to the management team after nearly a year's due diligence, and getting to know and understand the team and the business. The original management team had a significant say in where the business would end up. And I think they chose us as much as we chose them. The original management team is still very much intact. And as you could probably sense from their presentation earlier on, they're just as excited about being part of TFG today as when they joined 5 years ago. Five years ago, RAG produced an EBITDA of ZAR 420 million. This year, it produced an EBITDA of ZAR 921 million. Five years ago, RAG had 400 stores, and was considered by some of our South African competitors who are also looking at it to be ex-growth. Today, it has 554 stores and a significant online business and runway. Five years ago, we purchased the business when it was worth ZAR 3.1 billion. A month ago, we asked an Australian corporate finance house to value the business for us. And accepting that there's always a margin of error inherent in any valuation, nonetheless, the valuation came in at just under ZAR 11 billion. At the time we announced the acquisition of RAG, Amazon had just entered the Australian market, and the prevailing common wisdom was that Australian retail was too expensive, too competitive, too difficult to run and could only ever end up going badly, particularly for South African investors. Now other than the illustrative value of this RAG example that also highlights the value of these offshore businesses and balance sheets as a catalyst for further growth and expansion opportunities, our continued build-out of manufacturing capacity and capability has also rarely served TFG well during a time of unprecedented global supply chain disruptions and significantly derisked our business. Our average quick response lead times are more than 50% lower than the best third-party suppliers in South Africa. We'll be growing our quick response units by approximately 30% over the next year, and doubling these by FY '26. Our proprietary QR manufacturing processes have materially assisted us in reducing our markdowns, improving our margins and significantly improving our stock days as is illustrated in the table below. We will be building out 10 further manufacturing units during the year ahead. And then tying, order this back to our commitment to social performance. We anticipate that we will grow our direct and strategic CMT jobs from their current 5,200 employees to approximately 11,200 employees by FY '26. Now to give you a sense of the scale of what's been accomplished in this area in the past year, I thought I'd show you a couple of before and after photographs of some of the manufacturing assets that we commissioned during the past 12 months. Prestige Caledon, Prestige Maitland, Prestige Durban and Christie Epping. I hope that these photographs help you appreciate the scale of our investment and the positive environment that we've created for our manufacturing staff. I have mentioned TFG Labs and the strategic importance of our omnichannel strategy on a number of occasions this morning. As I've shared before, TFG has by far the most advanced and valuable combination of omnichannel assets in South Africa, which include our already over-indexed online presence, our deep customer base as well as our 3,200-plus physical stores. TFG Labs has been working both hard and very smartly for the last 12 months re-platforming and simultaneously creating something very special that will harness these omnichannel assets and combine them with an unrivaled choice of brands, product ranges and SKUs, both our own as well as those of selected third-party vendors. We'll soon be announcing the launch of a new omnichannel brand and platform that will bring all of these omnichannel attributes together in a way that simply has not been done in South Africa to date. I'd really love to be able to share more about the name and the specifics today, but I had to promise the team that I would wait until they had completed the migration of our entire product catalog before we share the rest. All I can say is watch the space. This brings us to the point where I'll share some of my thoughts on the year ahead as well as provide you with an update on our current trade post year-end. We're acutely aware of the various external macro factors that are warring governments, financial institutions, policy setters and businesses around the world. Inflation, the impact of the war in Ukraine the ongoing COVID impact on China, global supply chain issues, rising energy prices as well as what is clearly a rising interest rate environment are all real, and will present challenges, I think, for all businesses. That said, we have built what has proven to be a very resilient and diversified business and operating model. And we've also taken far-reaching steps over the past 2 years to de-risk our balance sheet and to insulate ourselves from these anticipated disruptions. Having acknowledged these factors, which are largely beyond our control, I think we do have reasons to remain cautiously optimistic given both the levers that are at our disposal and our future strategic ambitions. Dealing briefly with each of our geographies. Australia. Australia is at full employment. They will continue to benefit from the commodity cycle, and the majority of our RAG customers are not heavily indebted, and have less exposure to rising interest rates than one might assume. The business remains strong and in many ways, is now poised for the next phase of growth. London. The positioning of our U.K. brands and their business model still has significant upside to be captured. Even if the macro environment stays tough or tightens further, I believe they will be less impacted than most. Bringing this back home to TFG Africa. We have a massively differentiated set of brands, serving all taste levels in LSMs. Our individual brands remain amongst the most desired and sought after. And we spent the past 5 years consciously ensuring that all of our brands offer the best value for money equation in their categories, which will be of increasing importance in a tough economic environment. In terms of current trade, our year-to-date growth to the end of May were plus 11.9% for TFG Africa, plus 45.5% for TFG London, and plus 11.6% for TFG Australia. Breaking down the TFG Africa numbers further, we had an incredibly strong April, but we did see a slowdown during May, like most retailers did, but this again picked up from the start of June. There were a number of factors that I believe led to the slowdown, including the fact that no real pay days fell into our May trading calendar whilst we effectively had 2 pay days in April. The [ access ] of grants, which normally paid monthly to nearly 10 million South Africans have not been paid for the last 2 months, following everybody having to reapply for these grants. These are due to be paid on a catch-up basis starting from the middle of June. There was also a significant shift in the Eid dates which further distorted the month's splits. As a result of these various shifts, I think we really have to look at April and May on a combined basis, much like we do look at November and December. And I think on this basis, we're actually very happy with a 2-month growth of 11.5% of what is an increasingly high base. This brings the formal part of our presentation to an end. I do hope that you find the presentation helpful in better understanding our results and our group strategy. We're going to have a short comfort break, and we'll be back in about 10 minutes for the Q&A. Thank you for joining us today. [Break]

I hope you enjoyed the original presentation, and you've now had time for a comfort break. In the meantime, we've had quite a few questions come in. I'll add on to them myself or pass them on to any of the presentation team who's best suited to answer them.

So to kick off, the first question is, please comment on the trading densities for TFG Africa. They seem to be lower than some peers. Are you considering some store size reductions? And is this perhaps in response to growing online sales. It's a great question. We've obviously got lots of different brands. The density is very hugely between the different ones. Jet is -- we were very open about the time we completed the transaction would be dilutive from a density perspective. They had a lot of oversized boxes. We spent a lot of time this year reducing the oversized boxes or cutting other TFG brands. And Jet itself, just to give some sense of the metrics, their trading densities have actually increased by 45% during the first year that they've been part of TFG. In terms of the online piece, that might be a kind of common wisdom theory that as online grows, densities go down. And I think if it was pure e-commerce, there'd be some validity to that. We actually believe we're going to see exactly the opposite as we get omnichannel selling really up and running and perfected. I alluded to that when I spoke about labs in the presentation. We'll actually be driving more customers, fulfilling from stores. Densities over time will actually, I think, go up. So hopefully that answers the first question. The second question is what drove the very strong second half Africa like-for-like revenue growth? Can you talk us through the various segments? Good question. We did an analysis of the last 6 months, and actually the last 2 quarters independently, and then together, we significantly are traded pretty much any listed or publicly available information, retailer in South Africa over that period. I think there were a variety of different reasons for that. First and foremost, we were very much in stock right from Black Friday all the way through. That was largely as a result of our own onshore quick response, local manufacturing. I think a lot of our competitors were stuck with supply chain issues, particularly out of the Far East. We had some impact of that, but it was relatively negligible compared to others who are more reliant. I think we've also been through a cycle that really kicked off during COVID period as stores reopened after those initial 2 months. In South Africa, there was a lot of panic buying, and a lot of the consumer spend really shifted to absolutely rock-bottom value, almost emergency-type buying. If you remember, it was kind of going into winter, people haven't been able to shop for 2 months. They literally went out and bought the cheapest they could get. As they realized over the next couple of months, and all the way pretty much through to December, January, February for us, there's definitely been less panic in the market. People have got more confident. I think they've realized the world hasn't come to an end, and there's definitely been a market shift back into aspirational type brands and shopping. And again, if you look at the -- I made the point in the presentation, if you look at the brand equity of the TFG brands, I think that's where customers have really, really gravitated towards. Next question on TFG Africa, could you give us a sense of what the EBIT margin would be if you excluded Jet? I think I've spoken enough. Bongiwe, maybe you can take that one.

Okay. Thanks, Anthony. I think it's approximately 12.8%, excluding Jet. So remember, Jet has got a dilution effect of about 1.4% to TFG's trading margin in Africa. And remember also this 12.8% on coating is with the whole -- that I mentioned on credit, ZAR 540 million that I mentioned in my presentation. So on a like-for-like basis, again, excluding Jet, the base business EBIT margins run at approximately 16% to 17%. Thank you.

Perfect, Bongiwe. Thank you. can you comment on post-period trading? Peers have reported a slowdown in sales in May. I did comment on that in my closing and outlook. But again, just to reiterate it in case anybody missed it, we've really looked at April and May as a combined 2 months period. We kind of grew 11 -- to just over 11% for TFG Africa over the 2 months. And I think we're very happy with the 11%. The reason why May was a lot softer than April. I think there are a couple of components which I spelt out. Probably the most significant is social grants in South Africa. Those are paid to between 10 million and 11 million South Africans every month. Haven't been paid for the last 3 months, and that's obviously had a cumulative effect. There has been a commitment from government to pay those on a catch-up basis. So in theory, 2 or 3 months will be paid simultaneously, pretty much from middle of June. So if that follows through, there should be a lot more money circulating in the South African economy. So I think that was probably the biggest single issue. There were also shifts around when Eid fell. And equally, if you look at our trading calendar, April versus May, effectively, we had 2 proper pay days, which is obviously when most of the money gets spent on our stores fell into April. We had 0 in May. And certainly, we started to see a bit of a pickup again into June, and we would hope that, that picks up back to the kind of levels we've had January, February, March, once money starts circulating on the grants again. Okay. The next question. Given the second look book participation of 20%, what is the total credit participation in Jet? Is it now closer to 50%? Or has there been some transference to TFG's book? Jane, I think that one is definitely yours.

Absolutely. Okay. So yes, right now, the credit contribution for Jet is circa 30%. And that, of course, is made up of both the RCS component as well as the TFG component. And quite rightly, the 20% is of the new accounts that we have opened up in the Jet store. But an awful lot of the credit turnover spend for Jet right now is coming from our existing TFG store cards. And that is about ZAR 700 million, which is about 45% of all the credit turnover in Jet is coming from our existing TFG account holders.

Great. Jane, thanks very much. It looks like you're getting 2 in a row, Jane. Could you give -- this one's actually addressed to you. "jane, please could you give more clarity on TFG's money kiosk? And what did you mean on having cards given to customers and staff?"

I love it when a question allows me to give a plug for, like, my TFG money kiosk, so whoever wrote this question, thank you very much. So the TFG money kiosk that we have right now, which is live in our head office, means you can go there now. You can literally apply for a debit card, a bank account online, and you will get your card printed in under 5 minutes in store, in our head office. Now it's only available to staff right now whilst we iron out all of these efficiencies. And then during the course of this year, we will roll out to approximately 600 of our stores, where customers will be able to apply for a TFG TymeBank account in-store, get your card there and then.

Super. Jane, thank you. Another Jet question. Now that you've integrated Jet, do you still believe you can get to an EBIT margin of around 14%? Yes, I think the guidance we gave was between 13% and 14%. If you -- Bongiwe mentioned it in her slides, if you took out the impact specifically around the looted stores in Jet, they had about twice the proportion of Jet stores looted just because of where they're geographically situated compared to the rest of the group. If you kind of added that back, they would have been pretty close to that, I think. There is a lot of work being done around the margin piece. The margins recovered massively. It was kind of in the mid-30s at best when we bought Jet. It's already sitting very close to the 40% level. And as soon as we get that to 41%, 42%, all of that money drops straight to the bottom line. I think putting all of that aside, it's still a business that has generated over ZAR 500 million worth of profit in its first year. Given that we paid quite a lot less than ZAR 500 million for the business, I think we're pretty happy with it. But there's absolutely no question it's got legs. That doesn't even really take into account Jet Home. I touched on that in my presentation. Jet Home's another growth lever on top of that as well. The next question was, what was the group selling price inflation for Africa? And how did it compare to the previous period? Also a great question. It probably needs to be answered in 2 parts. We've had a massive product mix shift in FY '22 versus the previous year. FY '21 was a huge shift to casual as people work from home, and then a shift back into a lot of smarter where both the men's and women's as people went back to events, went back to the office. So we've been selling a lot more high-priced items this year than the previous year. But having said that, on a like-for-like basis, the actual inflation on similar product would have been close to 0. And if you go back over the last 5 years, our selling price inflation relative to the South African market has kind of been circa half. We've done that very consciously. We're value engineered to make sure that's pretty much all of our brands from top LSM to bottom, offer the best possible price value equation. TFG's quick-response manufacturing, how does this compare to Chinese imports? I get the impression it's very favorable. Again, a great question, and a good observation. When we started quick-response manufacturing, actual landed cost of the individual garment item wasn't a priority. We were much more focused on the speed of response, minimizing markdowns, taking out fashion risk and maximizing working capital efficiency. As we've started to get into bigger and bigger volumes and drive efficiencies, we've actually got to a point where on lot of items and commodities, we're now cost competitive, in some cases, actually lower landed costs and particularly with inflated shipping costs at the moment than if it did come out of China. But again, just to emphasize the key -- and Bongiwe gave a great example at the start of her presentation. The key benefit of quick response is exactly that. It's quick. It stops you taking 150- to 180-day view on a fashion trend. That's reduced down to 30 to 40 days. Is rising inflation an external concern perhaps not mentioned in the presentation? Again, I think we touched on that in the outlook, I think inflation is a concern to all businesses around the world. Having said that, I think in retail, a bit of inflation certainly isn't a problem. As a matter of fact, a bit of inflation can be your friend when it comes to driving turnover. What is the next question? Very exciting to hear about the amazing growth in TFG International, how does a creative working in -- sorry, that's someone looking for a job. we'll skip that one. And then what is the next one? This is another interesting one. How do we invest in TFG? Please explain in detail. I guess if you are a serious investor, you're welcome to give us a call, and we'll tell you a bit more about the business. Otherwise, we're listed on the Johannesburg Stock Exchange. But yes, that was quite a nice question. And what is -- are there any left after that? Guys, can we just scroll up the list of questions to answer that. Please comment on further acquisition opportunities you're finding in South Africa, the U.K. or Australia or elsewhere. Again, a good question. I think we made a couple of points. We -- the group has been acquisitive for a long period of time. This is not something we've taken to recently. It's very much part of our DNA. As a matter of fact, more than 50% of TFG over time has come through acquisitions. We typically like to find businesses with great management. Cultural fit is absolutely critical. I mentioned that earlier on. Businesses that can leverage off TFG's platform. Jet was a great example in terms of systems. Other brands -- we spoke about Tapestry. They're going to leverage off -- again, subject to competition commission approval, leverage off our online platform, our credit, et cetera. We like to find opportunities ourselves. We typically don't get involved in sales processes. That's normally done just to kind of drive prices up to unrealistic levels. I think the key piece, which I did mention is we've got a long pipeline already of potential investment opportunities. There's honestly seldom -- a week or 2 weeks that goes by where we aren't approached by somebody. We felt them very, very carefully and perhaps 1 in 20 or 30 and even gets to an NDA stage. So hopefully, that gives -- yes, gives you kind of some idea. Okay. What else have we not answered? Can we -- guys, I think we've done all of those. Can we just scroll further down, further down. Jane, I think that is one for you. It's not a complete question, but it's regarding the grant nonpayment. Sorry, that's actually for me. I thought it was a nonpayment -- creditors' nonpayments. Regarding the grant nonpayments, is this specifically for COVID ZAR 350 per month for all grants not paid? My understanding is it's the ZAR 350 per month, but as I -- it might not sound like a lot. But as I said, that's paid to between 10 million and 11 million people. It looks as though literally in the last week, the government departments have only really come to grips with the fact that it hasn't been paid for 3 months now. If you think what that means over a 3-month period, it has created a massive hole in consumer spending. I think the upside is when that money starts to flow. And as I mentioned, it's likely that, that will be the middle of June, I think that injects a lot of liquidity and a lot of money back into consumers' pockets. Justin, you actually get a question. How much of your U.K. online sales is through third-party platforms versus your own websites? What is the profit profile from online versus bricks? Do you want to have a go at that?

So on the U.K. business, we've got a really good split between our own web and partner webs, and they're both very profitable. They're both good -- really good contribution margins. So that's really the split and that hasn't changed through the cycle in terms of participation of online sales. So that's the answer to that. And then the next one I think is across the regions.

Yes. That's fine. Then Jane, one for you. Are you comfortable with credit as a percentage of group sales? I don't think it's just a yes or no. I think you probably have to give a little bit of detail, sort of why.

Really? I thought a yes would suffice. I'm, like, comfortable. Yes, everything is great. Where are you comfortable with credit? So we typically aim around that 30% mark for Africa, of course. That's not at a group level. And one of the things, of course, that I really monitor is how is the cash growth doing compared to how is the credit growth doing. But I think the sweet spot for Africa is around about that 30% level.

Great. Jane, thank you very much. And then there's also -- sorry, just to not let you off the hook, you might just want to touch on TymeBank and buy now, pay later.

Yes. So of course, one of the things that we are doing in financial services is launching a greater suite of financial service products, and the first product that we have got live right now, of course, is the buy now, pay later product, the more timed product. That's not on our balance sheet. So that does not go into our credit turnover statistics, fully funded by TymeBank. The debit card, of course, is also under the TymeBank. And if we do personal loans, which we are hoping to do. We're currently in negotiations. Again, that will be funded by TymeBank, but we'll be leveraging the TFG Money brand. So we're really going to take that TFG Money brand to market in a much bigger way, offering a holistic suite of financial service products, but looking at what do we want to fund versus what do we want other credit providers to fund. And TymeBank is our partner of choice.

And Jane, just while you were talking, that's obviously triggered some more questions on TymeBank. Do you want to just talk about the take-up? And who is most likely, in your opinion, to actually use that as a payment channel?

Yes. So buy now, pay later is only live in selected TFG stores, okay. So it's live in Jet, Exact and FIX right now. We have literally only just launched this, okay? So it's in roughly, I think, 30% of our stores, if I think about the mix. Brad, I know you gave me the statistics and I've promptly forgotten it, and I apologize, but I'm sure it's around about 30% of all of our stores. It's only available in our bricks and mortar right now. We do think there'll be a bigger take-up once we go online. And that is part of our implementation plan. And really and truthfully, I mean, if you look at any worldwide about buy now, pay later, it's growing. It's growing in a big way. It appeals to a certain segment of the market, either of those that are kind of like not sure about credit or I don't want to use credit, but I want to buy now, pay later. And we will be monitoring exactly what kind of customers want this? Who does it appeal to? And how does it fit into our overall journey? But we see it as a complementary product to our store card. It's not replacing our store card.

Okay. Thanks, Jane. Getting to the end of the questions, this is one quite a long one, which I'm going to have to summarize. Effectively, it's asking whether TFG uses rewards and data to the extent that some of the food retailers talk about doing this. The answer is absolutely. We've got one of the biggest rewards programs in South Africa. We've had close to 28 million people enrolled in TFG rewards. We're increasingly using that in a very scientific and targeted manner, particularly as it applies to e-commerce and omnichannel selling. We're able to make much more personalized offers that are much more relevant to individuals. I think we're all used to being bombarded with e-mails and offers from any number of retailers. 90% of them honestly are totally the kind of things you're not going to want to shop or you've got no interest in or just not relevant to you. The upside and all of this is making them targeted and focused. We've -- interestingly, over the last couple of months, we've run a couple of trials on some very specifically targeted offers and the uptake, and the return on investment has been dramatic. Guys, that's pretty much the end of the questions. The problem is we didn't get one for Australia. And for you guys having traveled all the way here. It's -- Dean did such a great presentation, but I don't think that's fair. So because you're up here, I'm going to ask a question. You did mention Johnnie Big online into the U.S., but you kind of just mentioned it as a sentence. Could you maybe just give us a little bit of a sense of what's happening and where it could go?

Look, it's a brand for big and tall men, and performing phenomenally, we're in Australia. And we've launched online only in the U.S. with a great response. And so we feel that with further investment, we can continue to grow, and grow at a quick pace.

Fantastic. So Australia going into the U.S. online, no rentals. Sounds good. Guys, thank you. I think just to the rest of the team, thanks for answering all the questions. To everybody who attended the presentation. Again, thank you very much for your 2 hours. Hopefully, it was helpful. Have a fantastic day, and we look forward to catching up in due course. Thank you.