The Foschini Group Limited ($TFG)

[Audio Gap] Performance and balance sheet metrics across our 3 geographies and at a group level in detail. I will conclude with our outlook and the decisive strategic actions that we are taking to reset the group for improved profitability and returns. To keep our presentation crisp and focused between us, we will also cover credit as well as the TFG London and Australia operating environments and their results. Dean and Justin will join us with the Q&A session to provide you with more granular detail and flavor in respect of these businesses. FY '26 was disappointing from the results perspective and [Audio Gap] Margins throughout the group. [indiscernible] It decreased by 22% and to ZAR 4.9 billion. Our operating profit [Audio Gap] In respect to TFG Africa, revenue grew by 5.3%, and for 10 of the 12 months, we outperformed the broader market as measured by the RLC However, as well illustrated on the chart, the bottom really dropped out of the market in June, September and December, resulting in 3 months where there was almost 0 growth, something we've really experienced before. . We dealt with the result in excess in the season, and this impacted gross margins, which contracted by hundreds disappointing after achieving an expansion of 150 bps in the prior year. With that backdrop, despite a tight focus on costs, operating profit declined by 14.8%. The majority of our retail stacks in TFG Africa hold very significant market share ranging from 25% in menswear to 26% in homewares and furniture, 39% in branded sports all the way through to more than 60% in jewelry. We've built these leading positions over many years, and they are the foundations of our retail business. However, a 10-year, almost 10% turnover growth CAGR has costs, costs and capital and complexity and operating structures and in the near 0 growth market that has persisted for most of a decade. That cost has weighed on our returns. This retail growth together with the more recent strategic investments we've made position us to increasingly realize their benefits on capital returns. We felt particular pressure in 2 of our biggest stacks, menswear and sports. The global sports retail sector faced particularly tough trading conditions during the year and competition in menswear continues to intensify. For FY '27, we bought more conservatively for these 2 businesses in particular, and are already seeing a meaningful gross margin recovery in sports. Menswear will likely take longer with [indiscernible] source commodities coming under some late shipping pressure. On the positive side, our womenswear grew strongly by nearly 9%, solid margin and is a clear growth lever for the future. Specialty comprising our home and jewelry brands grew by 7.1% and achieved pleasing gross add growth of 8.2%. Beauty grew by 21.6% and the contribution of owned brand Beauty continues to improve the overall gross margins for the category. Jet and our value brands had a solid start to the year but came under pressure over the festive season. Jet has ever seen a good rebound post year-end. Internationally, trading conditions were brutal. In the U.K. and Australia, consumer confidence remained at historically weak levels, almost as bad as those experienced during the worst of the COVID lockdowns. which you can see with reference to the dotted gray line on the chart. Customers shifted decisively towards centrals putting pressure on discretionary categories. White stuff traded well. It flatted the consolidated TFG London results and the legacy businesses, Phase 8 in particular, am under significant pressure with gross margins heavily impacted by necessary clearance activity and profit subjected to strongly negative operating leverage. Australia was somewhat less impacted and despite their sales being under pressure, managed to preserve their gross margin. However, despite every effort of cost control, this lack of top line growth also resulted in negative operating leverage. This year, our international results were materially weaker than our Africa result but were not necessarily out of line with the appear groups in their respective markets. Looking at the list of apparel retailers in Australia, for example, the average share prices are down circa 50% over the last 12 months, while the overall ASX was up 3.5% over the same period, illustrating just how tough it's been. Whilst this year has been a particularly tough time for both of our international businesses, the operating profit has outperformed our Africa operated profit for far out of the last 10 years, just to put it into perspective. Faced with the conditions I've just described, our management teams acted swiftly and decisively. During the year, particularly in the second half, we implemented significant short-term cost savings and avoidance, including ZAR 300 million alongside aggressive head office and store reductions in Australia and London. Excess inventory has substantially cleared with group inventory up just 1.7% at year-end. Capital expenditure was pulled back by more than ZAR 600 million, lending tightened and cash flow prioritized. These were defensive actions and the balance sheet was well protected. Focusing on capital, I would like to reflect on our capital allocation priorities over the past few years, organic as well as M&A. The Bolt strategy and platform built through several years of organic investment is now complete and operational. We have 28 leading brands, clearly defined growth levers, an advanced demand-led supply chain and modern distribution network. DASH with its leading digital capabilities together 1 of the largest customer data betas in South Africa, which we are in the process of flexing into a more integrated fintech business. The benefits of these investments may not have been visible this year due to the impact of macro factors, but they will help us to fundamentally improve the efficiency of the business and allow us to move to a less capital-intense model going forward. Over the past 7 years, our inorganic M&A activity has been highly selective and heavily weighted towards South Africa. In 2020, we acquired Jet, [indiscernible] cheaply as a key entry into the increasingly important value sector. In 2022, we are quite [indiscernible] to complement our home business and to use their vertical manufacturing capabilities to improve the capital efficiency of that home. And in 2024, we acquired White Stuff, a casual [indiscernible] brand as a bolt-on in the U.K. to help lessen our existing concentration in smart and occasionwear. We bought each of these businesses for a clear strategic reason we did not overpay for them, and each of them has performed well and being accretive. Our investment in building Bash and creating a true omnichannel environment represents our most transformative and important capital allocation decision. Some doubted us when we embarked on this journey, perhaps understandably so when online was just 3% of sales in FY '23. And Four years later, online and in-store omni selling now contribute more than 10% of TFG Africa sales and continue to grow in strong double digits as online adoption further accelerates in South Africa. This 10% contribution and strong growth profile indicate an inflection point in our business. Stores will remain important, but we clearly need to serve our customers through the channels that they choose, and they are increasingly choosing digital. This will directly impact our store footprint and future CapEx. Importantly, this growth is becoming increasingly profitable and has demonstrable capital light. A larger investment required to generate an additional online sale is a mere fraction of what is required in terms of a traditional store environment. To put this into perspective, the additional ZAR 1.1 billion of sales generated by Bachelet year would have needed the equivalent of opening more than 100 new stores achieving the same outcome through physical expansion alone would have required approximately ZAR 500 million in store CapEx and inventory investment. The deployment of our in-store omni selling devices delivered more than ZAR 0.5 billion in incremental sales this year from 0 the year before and is set to nearly double in the current year. This Indore transformation didn't just happen by accident. It took every part of our ecosystem working together with our store teams, brands and the Bash team working as one, deliver the future of retail. Let's take a closer look at Bash in action, and then Ralph will take us through a detailed review of our financial results and credit.

TFG made a bet on omnichannel. I believe that the future of retail wouldn't be online or in-store at both working as one. And 3 years ago, Bash was the first move today, it's the proof this year, that crossed ZAR 3.2 billion in revenue. That's the equivalent of more than 300 TFG stores. But just a revenue story. It's a story of platform changing how TFG works from the inside out. Our most significant unlock this year was the store. TFG has thousands of stores for years, those stores could only sell what was on their shelf, batch store can. Today, every store is an omni store. Over 3,200 stores 23,000 active staff empowered with devices selling the full range if we size [indiscernible] ZAR 53 million growth year-on-year near every rent incremental and sales that would have walked out the door of a store orders were click and collect and customers returning to store browsing spending more. It's not just a digital team. It's a store traffic engine. And we gave store teams more than product access, real-time data in their hands insight into action on the floor. Beyond the store, the platform performed 8.1 million app downloads to 147 million visits, 77% of com orders placed by the app and cash delivery now moves 1/3 of our parcels 35% cheaper than third-party careers. We also deepened the platform's utility for every shopper online and in-store. The Bash wallet is now with customers manage their TFG money account access their TFG awards and redeem vouchers, whether they're checking out doing more. The numbers reflect a platform that's maturing ZAR 1.3 billion in gross profit, a 41% e-commerce margin growth that is profitable and not just fast Three years in, that infrastructure is in place. The stores are activated and South Africa is shopping directly and that store is still evolving. What started as a mobile to sell anywhere on the floor now runs across 3 formats, mobile [indiscernible] with a target of ZAR 895 million in its sites. The store with out limits now scaling. It's the future of [indiscernible] and we are just getting started.

Thanks, Anthony. Well, as you've heard then, a disappointing result in 3 tough markets with little indication that the trading environments will get any better soon. Peak season is critical to our full year results, and it was significantly weaker than we'd planned for. and with both international businesses coming off even more sharply in the second half. So looking at the key metrics, turnover were up 7.1% to ZAR 62 billion. 2.8% without White Stuff. Gross profit up 4.5% to ZAR 30 billion. Again, without White Stuff, it was 0.5% off from last year. And with gross margin at a group level, 120 basis points lower. Group EBIT down 22%, perhaps the metric most indicative of this year's actual trading performance. Headline earnings per share after funding costs down 33.5% to ZAR 6.54 per share and earnings per share, which then takes into account the brand impairments we indicated back in January, down 58%. On the balance sheet, we took a disciplined approach to stock clearance and group inventories finished up just 1.7%. The debt has booked up 5% to ZAR 9.5 billion and so net debt lower than at the half with ZAR 7 billion of the 8 supporting the debtors book. Return on capital employed, excluding the impairment charge, down from 15% last year to 11% now. And the final dividend of ZAR 1.40 per share takes the total for the year to ZAR 270 per share, with the cover at 2.5x headline earnings per share. I've included sales charts again this year. In Africa, June and September impacted the interim result. And then in the second half, December was up at 2 pot in the base. I've added GP rands to the chart in the background to indicate just how important December is to us. It's effectively a double month, and that explains then why the trend line in blue takes a sharp dip at that point. You can see then Q4 showed some recovery, especially in March, but not sufficient to offset December. And it's not a trend. The impact upon the consumer of fuel prices has barely hit -- interest rates are up. So H1 of 2027 is likely to be tough. And with higher fuel and freight input costs, the risk to the supply side is significant too. As I said at the interim mark, our international businesses have often provided a hedge against different macros, but not this year. Looking at London, the blue trend line is a pro forma view that includes White stop as if we had acquired it at the beginning of the prior year. As Anthony has shown, consumer demand contracted further in the U.K. And while White Stuff and Hobbs both performed satisfactory, Phase 8 battled. Dresses continue to struggle as a category, department stores traded poorly as a channel our key partner suffered a catastrophic cyber attack. Across all the brands, we closed 62 concession maps and 36 stores. Australia. This is a good business. It's well run, but it's pushing against the challenging macro environment. In November, it looked like trade was improving, as you can see in the trend line, but then a really tough December, again, the key month and it never really recovered from there. We've gone through the key metrics for the group already, and I'm going to go through each of the divisions separately. But at the group level, you can see on the right how was much worse than H1. partly White Stuff not lump in the first half, but as you've seen from the sales chart, H2 conditions deteriorating further. This chart shows it more clearly, H1 down 10% with the U.K. shielded by non-comp white stuff, but then H2's peak season underperformance and then white stuff now in the base. Back to the group and the brand impairment charge, which we signaled back in January, it's abnormal, it's noncash, but it's also an indication that the brand carrying values of Phase I in the U.K. and Tarocash in Australia are right now not represented by forecast cash flows. Finance costs, starting with IFRS 16, interest on capitalized leases up 10% with new stores and a chunk of leases in Australia that had been in holdover. At some point, it makes sense to reset to fix a lower rate or a shorter period and that creates a higher charge to the P&L as you initially capitalize the lease or the asset. And then interest on our debt, also up 8%, with growth in the book a full year of White Stuff funding and last October's share buyback. So the increase in finance costs negatively leveraging the result further still. On to Africa, 2/3 of sales, 4/5 of EBIT. As usual, I'm going to break it into retail and financial services, then retail again into our 2 channels, stores and online. Here, I've split it into H1 and H2. And you can see that the negative leverage in H2 stemmed from a lower GP in rands, which was up just 1.8%. And I'm going to speak to other income and bad debt shortly, but first, let's look at expenses in the table below. Costs were up 7% with like-for-like store costs growing just below that. Looking at the table on the right, then we address the ZAR 16 billion. 2/3 of that emanates from stores and variable online costs. The other third is overhead. We are highly operationally get. It's a function of managing 28 brands. The number that stands out here though is the $0.09 increase in second half costs. If full year costs were up 7% that extra 2 is about ZAR 150 million for the half, a function of the timing of product spend across the 2 arms where you can see the expenses grew just 5% in the first half. We did cut ZAR 300 million from planned costs in the second half. What we haven't yet done, what we couldn't do within the space of a couple of months is conclude on a deeper assessment of how the business must function differently, leaner for a longer cyclical downturn than anticipated and for a structurally different retail landscape. That's what we're working hard to do as we speak. And then depreciation up 14%, a function of previous year's CapEx, half from the inflation lag on maintenance spend. And above that, we're looking at the cost of expansion activities broadly explained by stores, IT spend and logistics. The new DC in River fields came on stream fully last September. So the benefits of centralization from a store allocation and online fulfillment perspective, are now coming to fruition. We simply couldn't modernize the business without this key enabler, which brings me on to our channels then and first stores. It's clear from sales and GP at the top there that stores struggled with GP rands basically flat despite new stores. A store costs nearly the same to run, whether it's busy or empty. Store expenses were tightly managed, but a sales miss can translate into a larger profit miss. And so profit was back 22% with annual margin, fully costed with overhead down from 10% last year to 7.5% and return on capital employed, down 2.5% to 11 million. This is clearly not where it needs to be and why we have increased return requirements for our new stores. And some of what we've missed in stores is due to those customers together with entirely new customers choosing to shop online. We've made up 8% of our sales this year but hit 10% by the end of it. Bash's growth has been consistently above 40% per annum since inception. And our online sales margin is now the same as the store channel with all our brands under 1 roof dep. Our business has the scale, the buying power, customer data, brand equity to win online. And recognizing that online is going to redevelop country levels, it's important for us to understand the drivers and profitability of this channel on a fully costed basis, where stores incur rent and staff costs, online spends on precision marketing and last-mile fulfillment. And with the growth we're seeing, profitability fully costed, will be comparable with the store portfolio within a few years. Both channels are important to our business and will always be so. They aren't separate businesses, brand management, design, buying and planning, procurement, supply chain and logistics is all done century. And the latter half of that list centralized. And in omni, the benefits become all the more mutual. Before allocated costs, Sash made ZAR ZAR 350 million in profit this year. we choose to allocate overhead to help us make better capital allocation decisions. Financial services, credit and insurance. Roughly 1/4 of our Africa sales are on TFG money. When we offer credit, we want to ensure that we don't subsidize retail margin and showing a fully costed and geared ROE that's broadly in line with our cost of equity does just that. This year, lower interest rates compressed the yield limiting interest income to 1% growth despite a 5% bigger book and credit sales up 4.6%, slightly below cash sales at 5.2. It was fees and insurance premiums, mainly from new credit life policies we wrote that raised net other income growth of 6%. The second reason that profit in ROE fell this year was due to bad debts Write-offs net of recoveries were up 11% against very high collections last year, assisted by 2 pot, and the net provision charge this year was ZAR 160 million higher. In November, I said the growth in the net bad debt charge might come in just under 20% for the full year, dependent on growth in collections. Collections did take strain as the year progressed. So the provision over the entire book increased 70 basis points, and we ended just above 20% at 22. London, A poor result, even though our own channels traded well, growing at 6.5% with online, up 10% both on a pro forma White Stuff basis. But concession sales, again, pro forma, declined 6%. And there still a major cyber incident impacted our biggest online partner with sales coming off a massive 25%. It's a solid channel we lost profit, and then we had to deal with the excess stock. That then hit margin, which was also impacted by U.S. tariffs and it's against White Stuff lower-margin mix now in for the full year. And last year, we enjoyed the benefit of deep clearance on some fully written down product. I've included 2 additional P&Ls on this very busy slide. The legacy business where the pain was really felt in Phase 8 and this includes GBP 30 million brand impairment and a full year-on-year pro forma White Stuff P&L where you can see sales up nicely, but margin impacted by the factors I've just mentioned. Australia has been an equally tough macro environment. Rate increases where this time last year, it looked like there would be decreases. You saw how that impacted sales in the chart I showed earlier, what may have looked like a modestly improving trend was not to be. And the sharpest reaction to the global fuel crisis has occurred in Australia, where the cost of living predicament has already been keenly felt for some time. So like the P&L without the $29 million impairment charge, sales down 1.5% and 2.4% down in H2 after it had been tracking flat at the half year. Some of that related to the partial EBIT from department store [indiscernible] as well as the exit from underperforming stores. Online underperformed in 2026, down 3%. And Deep has already changed the structure they're putting online trading teams back under direct brand control and were up 5% so far for 2027. I Margin pressure held GP dollars flat as the team traded a poor year as best as anyone could, but it's the expenses that hurt up $19 million, 5% and with rent escalations despite the new lease outcomes and higher legislative wage rates. And you can see the same delta at the EBIT level. Cash flow. While EBITDA for the group was lower, you can see that the draw on working capital was also modest with inventory management having been a key factor. You can also see there the relatively low impact of the debtors book this year, CapEx at ZAR 2 billion, that's cash flow, not the actual capital expenditure, which was lower and more on both those just now. So despite the poor year, we generated sufficient cash to pay the dividends, and so the increase in debt can really be ascribed to the share buyback. In fact, the cash flow for H2 was itself over ZAR 2 billion. So despite the poor season, you can see clearly how we can still generate and bank cash with disciplined clearance even if you have to take the pain of markdown. I'm going to start the balance sheet section with net debt; and take you through CapEx, inventory and then the book. I added this slide at the half year to describe the shape of our debt. You can see that the peak sees inventory funding had all gone by year-end, leaving EUR 8 billion, mostly funding the book. The balance basically represents the white stuff funding in the U.K. Net debt there is GBP 50 million and there's $60 million of excess cash in Australia. And on the [indiscernible] I've added the slot showing the result of our refinancing activities. This is regular rescheduling of our long-term debt profile. And as you can see, there are no major repayments now until 2030, ahead of which time we'll reprofile once again. A word on covenants. The key one is the net debt to EBITDA ratio, which closed at 1.68x against a covenant of 2.75 enough headroom even at the [indiscernible] coming up in September as we build inventors towards peak season. So then looking at CapEx, ZAR 200 million higher in 2026, but broadly in line with where it's been in prior years, except for 2023 when we built out the DC. And you can see that we continue to invest in our logistics infrastructure, this year, online fulfillment and central pick for beauty, on supply chain, on logistics network. IT spend, is mainly maintenance, with the only material new projects underway last year being the new merchandise planning system and the new credit origination platform. At the half year, I said we'd spend a further GBP 400 million on store CapEx in H2, but I indicated a higher degree of risk off, and we pulled back ZAR 200 million of that. We won't shy away from developments that we believe are still right but we are tightening our hurdle rates and payback criteria. Our success with Bash really demonstrates that customers are increasingly shopping us online, and that will allow us to pull back on store growth. Stores are a high fixed cost asset in a structurally declining channel. Our job is to ensure that the fleet remains profitable by managing it with total discipline and closing without sentiment. Every store in every brand must earn its place. CapEx for 2027 will accordingly be lower than in 2026. Inventory, up 11% at the half year, which over and above price movement and the beauty rollout still implied a couple of percent overhang from winter. Well, despite buying for a normal peak season never came, we've taken our medicine, which you've seen in margin and we finished the year having cleared that stock. You can see that at the bottom of the page that inventory Health is in line with the prior year. As explained earlier, it's been a tough year for the book not surprising given the cycle, and that gives context to the conservative approach we've taken to new credit approvals. Growth in balances of 5% of just 1% more accounts. Demand is still there, 4 million applications, but the quality isn't, and that's seen a reduction in the [indiscernible] rate to 18.7% for the year and, in fact, lower still at 7.7% in H2. The provision then at 18.6% is higher than last year, but it's in line with 2024, and we think that's okay. It's back to normal levels after 2 years of improvement and still below the 20% mark we saw back in 2022 and 2023. And there's now another factor at play by now, Paylater or BNPL. BNPL providers offer short-term financing options that allow our customers to split the cost of purchases into 3 or 4 interest-free installments. We added the 2 largest providers in both stores and online just ahead of peak. We now offer 3 options and the uptake, especially online, has been meaningful. The retailer pays for it with an outsized merchant fee, but rates have recently come down, and it provides an attractive credit growth alternative to our own book. So in conclusion, a disappointing result across all regions with a poor peak season in H2. Conditions deteriorating through into Q4 in the U.K. and Australia. Rent, staffing and operating costs in stores as well as central overhead, not fixing sufficiently as sales and margins came under pressure. But Flex, they will. inventory is well managed, CapEx reduced and planned CapEx lower still. Cash generation is strong, especially in the second half, ensuring net debt landed right on plan. And with that, back to Anthony for the outlook.

Thanks, Ralph. Let's switch from the year that was to how we are [indiscernible] the group to enhance both profitability and capital returns. We are planning on the basis that consumer conditions will remain under pressure for some time across each of our territories and may potentially deteriorate further until a durable solution is found to their [indiscernible] war inflation cools and consumer sentiment improves. How we are going to run our business is directly aligned with this cautious outlook. Turnover growth may well be muted. but we will manage inventory and grow it very carefully and in line with this reality. We are going to continue to manage costs very tightly as we extend the cost-saving initiatives of last year. We managed a good outcome 2 years ago in FY '25 using the same approach. Capital is being held tightly with investments proceeding only where the business case is significantly derisked and yet still compelling. Strategically, we are looking at ways to aggressively reduce structural operating expenses to derisk operational leverage. While this approach will apply across the entire [indiscernible] we also have very specific initiatives and levers applicable to each territory. In respect to our Africa business, we've been operating in an extremely low growth environment for more than a day with reform led recovery yet further delayed. Despite this, we've built a great business with deep digital capabilities and incredible brands. Strategically, we are going to be aggressively leveraging Bash and omni fulfillment capabilities to move towards a more capital-light model, optimizing our store footprint in light of economic reality and the increasing reach and penetration that bachelors, aggressively driving our margin-rich fintech business. We recently made a number of senior leadership appointments and changes to allow us to better drive our combined credit Bash, value-added services and rewards portfolios into a more cohesive fintech direction. We've been successful in each of these endeavors individually. but see substantial untapped potential in leveraging their combined scale, capabilities and customer relationships. We are also reviewing marginal brands and rationalizing our brand structures. Our Africa business has assembled an incredible portfolio of 28 loved brands over many years, which have helped us to more than double the Africa business over the past 10 years. However, as I've already pointed out, growth [indiscernible] at a cost and the portfolio has increased complexity and diluted returns in a tough market. There is a need for us to simplify our structures and structurally reduce our cost of doing business. Two years ago, we commenced with Project [indiscernible], where we started to organize related plans into what we refer to as stacks. At the time, this felt both difficult and risky in terms of what we might stand to lose an individual brand identity. So we move cautiously. In reality, there has only delivered upside and none of our original fears transpired. In the year ahead, we are going to be moving forward with the next phase of [indiscernible], which will allow us to further consolidate our operating structures, remove layers and increase agility. This would also enable us to fold structures of marginal brands into a more efficient, simpler operating structure. Switching focus to our international businesses, which have historically contributed more than 25% of our group profits which have had -- which have been under relentless pressure over the past year. Despite strong geographic fundamentals, Australia is now entering a third year of structural ground with almost all post-covid saving buffers depleted. That said, we own a unique asset in Australia. the largest stand-alone [indiscernible] on the continent with historically healthy operating margins throughout the cycle, a growing omnichannel capability and a disciplined and experienced local management team that has been able to weather a downturn better than most. Dean, Troy and our Australian team are going to be very focused on reviewing marginal brands we have recently taken the decision to terminate [indiscernible] trial and retain this as an online-led business, actively optimizing their store footprint as online penetration near 10%. This presents real profit and capital efficiency opportunities and strategically reviewing the extent of our New Zeeland business, given the precipitous decline in the New Zealand economy. The U.K. consumer and retail market has been under the greatest pressure all of our territories over the past year. Consumer confidence never really recovered post COVID. inflation having come back into range is going to accelerate again and specifically relevant to fashion retail, department store in session channels have been and remain under real structural pressure. We have 3 high-quality brands and Hobbs, White Stuff and Whistles. and they have meaningful upside when conditions normalize. Phase 8, however, faces the greatest challenges, especially in respect of their high historical reliance on department store channels as illustrated by the end impairment. With these factors in mind, Justin Emma and the U.K. team are going to be very focused on rightsizing the Phase 8 costs and footprint to reduce their drag on profits and meaningfully expanding their own customer channels and select new [indiscernible] opportunities as traditional third-party channels continue to suffer. In terms of post year-end trade, we've seen a continuation of the tough trading conditions I've spoken about in the presentation. In Africa, we have improved margin in April and May, but sales have been subdued coming off a high prior year base and facing into a tough cost of living environment. In London, April was tough, whilst May showed perhaps a temporary uptick buoyed by unusually warm weather and higher footfall [indiscernible] margin was remained strong. In Australia, trade remains tough. But again, margin has been strong. Needless to say, expense have been held very tightly across all the businesses. In conclusion, we expect the environment to remain tougher for longer, and we are acting accordingly. Every part of our business is continuing to take the required tactical actions, and I have shared the strategic actions that each of our territories will be focused on delivering. At a group level, we have 4 clear priorities to reset profitability and returns. Leveraging Bash and our fulfillment leadership to make our business more capital light and efficient, closing and performing in marginal stores and sharpening our brand portfolio. enhancing intake and credit capabilities with their structurally higher operating margins and returns, reducing complexity and operating model and structurally lowering our cost of doing business. That concludes the formal part of our presentation. We'll take a 5-minute break and be back thereafter to take questions. Thank you. [Break]

Welcome back, everybody, and thank you for the questions that you've sent through to us between Ralf and myself, we will try to give you as much detail as we can share on the group in the South African business. And as I mentioned in the introduction, we have our U.K. and Australian teams online, ready to answer any specific questions that come through for them. Okay. The first question is, can 100 to 200 basis point gross margin uplift still be achieved and over what period? I think the answer is we absolutely believe so. I think if we look back to FY '25, for example, we had a year with relatively suppressed sales. We bought for a lower sales outlook, really pushed full price sales. and we achieved about 150 basis point uplift in FY '25. The reality is market was a lot tougher as this year, it progressed into FY '26. It was well below our expectation going into the year. We are extremely disciplined in dealing with the balance sheet and any excess buildup of stock. We don't carry stock forward into future periods. We know that's not a good idea in fan retail. And that's really the reason we took the pain in the current year. The period over which we expect the recovery, I think I shared in the outlook section, the 2 months in, we've bought for lower anticipated sales. We've had a strong large recovery to date. I guess the health warning with all of this [indiscernible] is that we still have an Iran wall that appears to be far from resolved, that is driving a significant increase at the moment in fuel prices and energy prices. We may not yet have seen the full impact of that consumer wallet, and it is difficult to predict how this plays out, not the least of which is we just don't know how long it goes on for. We do think in a normalized environment, it's a 3-year period to build a 150 to 200 basis point upside. The starting point, I guess, is what's in question at the moment. Okay, a question, actually a very good one. How can you be certain that BAS sales are not simply cannibalizing store sales? Something we obsess about. We have a very, very high proportion of our swaps in effect, over 86% of our swaps or people who present their rewards cards on transactions. So we've really got, I think, some very good data and insights in terms of who's shopping were. Our data to date suggests that there's been really minimal cannibalization I think realistically though, over time, more and more South Africans following a global trend are sitting at home, clicking on a and kind of choosing convenience over necessarily driving off to a shopping mall. I think there has to be cannibalization at some point. But I don't think cannibalization is necessarily dogma in the room. The reality is that our omni shoppers and our online shoppers tend to have higher baskets. We've proven that the gross margin on the Bash platform is now in line with what we've been able to achieve in stores. Bash isn't a discount online outlet. And the reality is that if this happens over time, what we're simply doing is meeting what customers are telling us they prefer, and it allows us to really become more capital light and capital efficient over the next 3 to 5 years because that's a period. I think that there's still quite a lot of acceleration and upside in on sales. question around what remedial action has been taken with respect to Phase II. Justin, I'm going to pass that one to yourself. I know a lot of work is going into that at the moment.

Okay. I think 5 key elements, Anthony, to ask a question question. A lot of them you've already touched on, but the first one is to streamline the product range, focusing on price quality. The second one is to reposition Phase II as a brand for every event. We're going to be driving efficiencies through then we need to improve product planning and accuracy. And then lastly, as you've mentioned, a rationalization of the store portfolio. As the 5 key elements of the Phase I turnaround strategy.

Great, Justin. Thank you very much. Ralph, I'm going to pass the next one to you. It kind of goes into allocated costs and bash profitability. I note the Dash profit of ZAR 350 million pre-allocation of costs what profit did Bash make after allocated costs?

Yes. The slide actually showed the post allocation number of ZAR 95 million. The allocations are absolutely everything from the allocation of head of costs of the buying and planning and all those various functions that I mentioned is store picking when it's -- when the product is picked in stores. All the overheads are allocated to that -- to bring to GBP 95 million. So still profit-making, whichever way you look at it now?

Thank you, Ralph. Another question related to Bash, what is the higher penetration of online, I mean, for the existing store estate and cost structures in the stores? Again, a very relevant question. We've got certain stores depending on the brand, where online contribution is well in total digits. The reality over time means that we can do with smaller stores. And I think the size by overall store estate, if you model this forward over a 3- to 5-year period, by definition, will be smaller than what we have today. Then the question goes on to ask around the staffing of the stores. I think those move pretty mad in line with the size of the store. I think I did speak in my outlook section around our project [indiscernible]. Over the last couple of years, we've been able to share staff very efficiently across different brands, different stores. There's another phase of that work underway at the moment. And I think there are further efficiencies that will come out of that. Rolf a question on the share buyback. How do we feel about a buyback at ZAR 105 versus the current market?

Yes. Well, 105 was the market price in September. It was a year ago. It was post GNU things were still looking pretty good. Obviously, the whole market has come down. Retail is all declined us, obviously, the most and there's a war on, which only started on the 28th of February. So I think directionally, we would like to think that there is still intrinsic value above the current level.

Thank you, Ralph. At what point do you intend to stop funding international brands and redirect capital towards debt reduction, Africa Bash and other high-return categories. Great question. I think a couple of pieces to unpack around that. I think if we look at the 2 international businesses separately, our Australian business has returned probably more than 2/3 of the original purchase price back to South Africa in dividends. and owns some fixed assets that they funded themselves, which effectively now at our balance sheet, which have intrinsic value in them. So net-net, from an Australian point of view, they've actually been a big contributor. Our London business has required very little funding over the last 5 or 6 years despite some of the disruptions, including COVID. But I think from -- to kind of maybe answer the question a little bit more broadly, both our international businesses are self-funded. And we have an absolute focus on delivering the best returns that we can across each one of those geographies. And clearly, right now, the biggest upside for us does it in Africa. Another question on buybacks. Will TFG poor share buybacks. It's only answer that very generically. I think the buyback that we just referenced on the Ralph explain was, if I'm not incorrect, the first buyback in our history. I think you recognize buybacks as being valuable in terms of returning value to shareholders. I think there are a number of pieces that need to be judged at any point in time around buybacks. And principally, it's intrinsic value that we see in the share versus how comfortable we are from debt reduction perspective. In other words, you can apply that money to different causes. Another question that was linked from the same person. [indiscernible] Stores you expect to close in South Africa over the near term. For the year ahead, we've -- and I think we shared those numbers in the presentation. It will be likely just over 100, bearing in mind that we've got about a 2.5 year into lease time frame given that our leases tend to be 5 years. So there's a certain number that you are able to address in any point in time. And yes, that will continue into the future. Related question, what percentage of your stores are marginal. And then a question around the cost although the return on equity impact of closing those stores. I'll deal with the first one. We've got about 300 stores that are currently marginal, even the ones that are loss-making are generally minimally loss-making and a lot of that is -- have kind of fallen into that bucket over the last 6 months as things have got tighter. They wouldn't have necessarily been marginal or loss making 12 months ago. That doesn't mean we're not dealing with them as I explained. We'll go as quickly as we can given the lease profile. And then, Ralph, maybe just some thoughts on what that means from a cost base and a returns perspective.

Yes. So interesting that dichotomy is that there are no real fixed costs to a store, but the marginal stores in themselves, they cover their variable costs but that's not good enough. They don't generate the returns and therefore, they lower the average cost of returns or the average returns over the whole shape of the chain. So by being much more focused on eliminating the marginal stores we increase the average, but we have to then take out overhead at the center to cater for that smaller base.

Thanks, Ralph. Then a question around what impact the Iran wars having on input costs for our business? And the question goes on to specifically around raw material and sportswear and apparel I can only give a forecast input based on where fuel prices are at the moment because that tends to drive most of what the question was centered around. At cut fuel prices, if you extrapolate that for the balance of the year, we're probably looking at a distribution and transport exposure of about ZAR 100 million. To be honest, I think that is probably the least of the issues if this will continue. And I think we'd be more concerned, frankly, on consumer demand. Going back to the input piece, we successfully [indiscernible] fully renegotiated our transport contracts in South Africa last year. So there's a bit of an offset against that ZAR 100 million upside. The balance of the question was really around things like sportswear and apparel. I guess the good news touch wood is that the rand has continued to trade very strongly against the U.S. dollar, which is the reference currency for most of our inputs. [Audio Gap] I think certainly, also from an organic perspective, I think the element of inorganic kind of growth on the top line over the next couple of years is probably more unlikely. And then returns, the teen [Audio Gap] The field is performing? And are there going to be any benefits within FY '27. River fields is fully complete, fully operational. We have all our fashion brands in River fields already as we've been at pains to explain, we were very, very deliberate and careful in terms of putting the brands in one at a time. We've seen other catastrophic DC trend drivers that's kind of like ranging your ERP, you do it very cautiously. Touchwood, we got through that process without dropping a beat. The benefits in terms of the business case around operational efficiency, are definitely all there. We look at availability in store. Time In the DC, et cetera, those are already flowing. We do expect this to be one of the main contributors to the gross margin expansion over the next couple of years that I've touched on. Again, very difficult though to isolate it to show it given all the macro noise over the last 12 months, but looking forward, absolutely. Then a question on what has led to bad debts increasing. Debbie Check having any impact, Ralph, you?

Yes. So I have kind of quite a detailed analysis of the fact that there were a number of different factors. Obviously, in any given year, there's the growth in the book itself. So there's a kind of a quantity component, there's a quality component and that did deteriorate somewhat. And then recoveries were lower than the previous year when recoveries were extremely high. Debbi Check, not really. We actually have about half of our of our customers pay us in store, and that's something that's encouraged by most retail providers of credit because it provides the opportunity for our customers to come in and shop you again on their account.

Great. And then a question on inventory levels for TFG Africa and whether there's any risk to GP margins in the first half. I think we've shown both the levels, but more importantly, the aging of our stock buckets for each of our territories. And I think you can see there that both from an overall bottom point of view as well as an aging perspective, we're going into the new year with what we feel are appropriate levels of stock -- the stock is largely fresh. We dealt with the overhang of bit of [indiscernible] press year during the course of the year. We've started theyear as showed in the outlook trading at much more healthy models. Again, very difficult to call what does the rest of the year look like at this point. But we've certainly kind of off to a good start. If market demand will be determined as the year plays out. Question on targeted capital structure of for you. What is targeted capital structure look like over the short to medium term? Do you believe that you are going to continue to pay dividends and share buybacks?

Yes. So the graph I put up that showed the shape of our debt provides a sense that we've got about billion that covers 70% of our book and provides a natural hedge there. So we're pretty happy with that ZAR 7 billion. There is a ramp of about ZAR 1 billion, which is kind of made up of the white stuff overhang, if you like the funding that acquisition in the U.K., and we've got cash in Australia. So we'd like to pay that down. But generally speaking, we like the shape of that debt because of the -- most of it is funding the book. Share buybacks, that really depends on the shape of the debt. We're not going to rush into do share buybacks, whilst in this cycle, we prefer to kind of cut that debt somewhat. We will continue to pay dividends. I would think so.

Yes. Great. Another question going back to the debtors book. What is the outlook for bad debts in FY '27, what is the quality of the debtors book look like at the moment?

So yes, it's -- again, it is a function of the growth in the book. The book growth has actually come off a little bit for the first -- at the beginning of the year. That could change. So that has a major component of what happens with the actual charge I think the recoveries were kind of normal to high this year. So it all really depends on the consumer, depending on the state of what happens with the fuel price perhaps. And of course, it depends on what we're doing with our approval rates, so I think it's still going to be a tough year, but we'll measure and manage it accordingly.

Thanks, Ralph. Question framed around, we've highlighted that the sports category had the largest GP margin contraction in the portfolio. did the category trends change the GP margin level in the second half. Again, that goes back to my slide that showed each of our stacks we really cleared brand were in particular, very aggressively during the course of the year. Bearing in mind that the lead time on branded footwear is kind of 9 months plus. So we were locked into what was come last year pretty much from the beginning of the year. That was dealt with by year-end, and that's why there was that extent of margin compression on branded footwear. As I indicated in the outlook, we've seen virtually the opposite outcome for the first couple of months for sports in particular and footwear where sales are far more muted, but the GP margins have pretty much recovered what they dropped last year, and that's what we're aiming to try and achieve for the balance of the year. Question on impairment. Are there any one-off impacts, GP expenses that have impacted FY '26 -- sorry, aside from the impairment, are there any one-off impacts, GP expenses, finance costs that have impacted FY '26, but unlikely to repeat into FY '27, particularly for South Africa.

Yes. So the obvious -- there is the obvious noncomp this year where White stock was only in for 5 months of the previous year. So that kind of corrects itself and that becomes comp for 2027. There were no particular kind of abnormal items in the numbers as such. But what we do in trying to provide the detail we've done by improving our disclosure of the various segments of Africa and breaking down to give you more detail granularity detail of the legacy and the White stop business in London, for example, is to provide you with as much detail as we can on kind of the shape and the direction of the levers of the business. but nothing really that stands out that we haven't covered.

Great. And then a question that I've already answered, but I think it's important enough to just reiterate the answer again, it's an absolutely natural question. please you explain the input cost pressures you're seeing from current geopolitical events? And what is your outlook for gross margin, the input cost pressures modeled on today's fuel prices, primarily around logistics and shipping. If they stayed the same for the balance of this whole financial year would probably be about ZAR 100 million with some offset on the new transport contracts we have in place and gross margin, current kind of conditions holding we'd be looking to flow back pretty much whatever we dropped last year and pretty much in the same proportion across the categories. . A question -- another question, Ralph, on the book. Your TFG Africa credit book continues to grow faster than cash sales. Can you break down the proportion of new accounts coming from low risk versus higher risk? Are we seeing consumer stress? I think maybe, sorry, just to jump in there. It might just be worth also picking up credit versus cash post year-end and accept rates.

Yes. So for the year, credit and cash was similar. I gave the numbers earlier on. It was like 4.5% for credit, 5.5% for cash. About 1/3 of our book is low risk in 1 and 2 in kind of the technical pilots, about 1/3 in the Midland or a little bit more in the middle. And then obviously, by looking at the shape of our book and the fact we run about an 18% bad debt provision, you can imagine there is a fair amount at the higher risk end. So as I said, we're also -- there are also other factors at play like buy now pay later. The consumer -- yes, the consumer is under a bit more stress as you can imagine, and could still be under more stress still with the fuel cost. So it's all something that we're managing quite carefully.

Great. Ralph, and I know the next one is one that you've spent a lot of time looking at. What is the 3-year margin target for Bash? .

Yes. So listen, whether it's 3 years, whether it's 4 years, whether it's 5 years, it doesn't really matter the trajectory is very clear, that the fixed cost component in Bash, which is a whole host of engineers doing doing a lot of clever stuff with the data and with the whole online experience and customer experience and intelligence behind that, we are clearly -- it's a capital-light investment. It's growing at 40%. The trajectory is clear. We've [indiscernible] even fully costed. They've made 10% pre-allocations. So in 3 or 4 years, it's very likely that we will get to a position where the fully costed operational profit of BAT is the same as the stores perhaps even better.

Great. Thanks, Ralph. A question, actually, a very insightful question. What might motivate the sale of the debtors book. Is it bad timing for such a transaction given higher bad debt costs. I'll give it to go, Ralph and if you want to add, please do. I think the -- I covered in my outlook piece, first of all, that we've made a number of changes internally over the last couple of months to really bring together the various parts of what becomes a fintech player going forward. We've got a very, very profitable and successful VAS business. To date, it's operated pretty much on an analog basis in store. But the progress in the profitability and the operating margins over the last 2 years have been pretty astonishing. We've got the -- probably the largest rewards base in South Africa, 40 million-plus South African customers. 15 million to 16 million active. We've got a large and a very well-led credit book and we've got a bash platform that has north of 12 million downloads. There's a massive opportunity to put all of those components together. We've recently moved them all under 1 leadership structure. And I think we'll be seeing a lot of progress out of that area over the next couple of years. Going back to the book itself, quite right, even if you were wanting to sell or dispose of a book or frankly, any asset, timing is relatively important. And I think the valuations around pretty much most things at the moment, including any debtors book are unlikely to be kind of at reasonable levels.

Yes. I mean the book is an incredibly important component of our business. It generates 1/4 of our sales. So our customers are -- the relationship we have with our customers, is super important. So it's perhaps not so much the sale of debtors work. It's the funding of the debtors book or the way in which you can structure it so that it's appropriately providing the right returns Again, as you can see in the last couple of years, we've changed the way we report on it to indicate how we fund it, and there are opportunities to enhance the way in which we look at it further still. But the most important thing is, as Anthony said, is making sure it's doing a lot of heavy lifting across a much broader, much more structurally modern fintech way of thinking about it.

Right. question, given the weak revenue growth environment, do you see earnings growth in the current year? super difficult one to answer as we really don't know how the year is going to play out. What I said it earlier, I can just reiterate it. We've planned for significantly lower growth, which I think plays into where the question was coming from. We are buying inventory with that very much in mind. We plan to sell at this point a lot more full price and less on markdown than we did last year, i.e., at a higher gross margin. We're doing absolutely everything we can, both tactically and strategically on costs. We've been through similar environments in the past. Again, our reference FY '25, where we actually, I think, under the circumstances, produced pretty good results in a really tough top line environment. And we've had a couple of those cycles over the last 5 years with [indiscernible] load shedding, et cetera. So the intention is absolutely to pull all of those levers. And yes, we just need to see how the macro in the year plays out. . And I thank everyone that was the last question. Thank you, again, very much for joining us, taking the time. I know it's been a busy day, and thank you for the questions. Enjoy. p