Truworths International Limited (TRU) Earnings Call Transcript & Summary

Good afternoon, everybody. Welcome to the 2026 February Half Year Results Presentation of Truworths. In the room with me on virtual is Manny Cristaudo and Sarah Proudfoot, who are our joint Deputy CEOs. You all know them pretty well. And then there's Reon Smit, who's our Financial Director. I'm going to go through the presentation as speedy as I can because it will be published on the Internet in the next hour or 2 afterwards anyway, so that I can try and get to the questions-and-answer stage within 35 minutes or so. And then we've got at least 20, 25 minutes until 2:00 to answer questions. We have obviously read some of the initial analyst reports that came out this morning and yesterday. So we've tried to even include those responses in those -- in our presentation. So it follows our normal agenda. First and foremost, I'm going to talk once again about our business philosophy. This is not to annoy you or bore you. It's because I'm trying to give you a filter of how we think. And this filter affects our interactions with shareholders as well because -- when you give us input, whether it's positive input or critical input, we don't ignore it. We don't just blindly follow it. We filter it through our philosophy every single time because that's how we think. I'm trying to explain to you how we think. And essentially, it's a simple thing, especially for the new shareholders. I've said many times before, we publish it. We don't even mind publishing it because we think, well, if our competitors saw it, it didn't matter because you can't copy someone else's DNA. You don't want to be someone else. You have to be yourself, and this is us. This is what we are. So we say that we have 3 pillars to our business philosophy through which we filter every single thing we do, including feedback to and from shareholders. And the first one is the purpose, why do we exist? And the way we ask ourselves that question, we say, well, if tomorrow Truworths didn't exist instantly, the very first minute it didn't exist and the same for Office, then what gap will arise in that environment. That's really what we say. And then we talk about how we achieve and fill that gap. That's what our external purpose is as simple as that. Our value system is how do we internally interact with each other. Priority-wise, it means the first and foremost thing is innovation and passion and then contribution orientated. Now what do we mean? We mean when we recruit someone or when we promote someone or when we deal with anybody in our business, we always think first, not about how much do they want to earn or how much do we pay them, which you'll see as part of the outer circle or whether they like to work in teams, that's also important, but it's part of the outer circle it's more to do with the fact that we, first and foremost, need to know are they innovative and passionate. And secondly, are they contribution orientated? Do they contribute more than they consume and do they contribute before they consume? We think like that. So we've got these 2 sort of pillars. One is what role do we have in our societies and two, how do we govern ourselves. But now the more important part for you is how we judge whether or not we're doing it well or badly is we say, what do we think our stakeholders would say if we were doing it properly. So for customers, you can go and ask them because we see how they shop for us, we do surveys all the time. For staff, it's also quite easy. You go and do surveys and you talk to them and you see exit interviews. For shareholders, it's also not hard to see how they speak great about you because they tell you, shareholders publish reports, they talk to the press, and they tell us face-to-face. So it's not hard to get to know what they say. And then what our strategy is, which changes all the time, every -- we're permanently changing strategy is how do we get the difference between customers, staff and shareholders, what they say, but compared to what we wish they would say, which is the vision of what we wish they would say, how do we get them aligned? And our strategy is to realign them, bearing in mind, hardly ever are they aligned. I mean you never say this perfection. Shareholders, customers, staff, they're all saying exactly what we want. And then there's government. It doesn't work like that. They always say different things. So then we've got to have a strategy for dealing with it. Do we believe them? Do we want to change it? Do we want to change our strategy to deal with it? Or do we communicate differently? Those are our strategic imperatives. So all I'm trying to explain about this is that's our filter when we get communication to or from shareholders, customers or staff. Our filter is this business philosophy. And it's important for you to know that. So when you look at it, going to that filter, we are -- we try and say we are -- we want shareholders to say we are long-term investors in Truworths because we trust in management capacity to execute strategies, which are innovative and which deliver significant value over time. Sometimes they do say that and some always say, but some say the opposite. Management is too old and stuck in their ways. Company isn't moving forward. Don't they get it. You should be in the value space. Obviously, we don't ignore those things, but we filter it through our business philosophy. And then we debate it. Do we need to change strategy? Or even in the extreme, is there something wrong with the business philosophy, and then we decide one or another, obviously, in consultation with our Board and management. And that really is our process. I'm not debating the issue itself. I'm explaining the process to you. So we remain true to that business philosophy. We stick to it, and we are committed to it. That does not mean we don't change strategy. It means we don't change the business philosophy too easily, but the strategy we always are changing. We are geographically diversified well now in South Africa and the U.K. That, as you know, has been intentional and it's going well. always have been and always will be as long as this management team is in place, and I think this Board, strong cash generative in both businesses. We do not think in the sort of risk international macro environment that is so volatile, permanently volatile. Sometimes it's good, sometimes it's bad, one other, one good. We always believe that you better have a strong balance sheet. That is our fundamental mantra. Even when we bought Office, we said, will we be able to pay the debt off in 2 to 3 years. And that was critical to us. So we think like that all the time. Some of you call it a lazy balance sheet. We call it good retailing. It's -- but again, it's our business philosophy. We generated more than ZAR 1 billion cash as we sort of always do every 6 months. And then we bought back since -- it's just interesting to notice that we bought back ZAR 750 million worth of shares in the last period. And since 2020, we bought back ZAR 3.2 billion worth of shares. I think it's about 14% of the company, something like that. And there is a question I've already seen about how much more we're going to buy back. I don't think I'm going to tell you that. But I will tell you that every quarter, our Board looks at our solvency and our cash flow over the next 18 months, and we get a mandate from them every quarter, and we update it. Every single Board meeting, we update it and we form a view with them. It's a very clear mandate and then we implement it. When we do it, just so you know, I'm here to tell you the methodology as opposed to the quantum. What we do is we feed it through the buyback over time because we don't influence the share price. So we'll never buy more than -- I don't know what the figure is, maybe 15% of our volume in that day and never more than the volume average weighted price for the day. And we might feed it through over a month or 2 or 3 because we try to do it gradually over time, but always within the Board's mandate and always with a very clear focus on the cash flow. But we may actually -- the Board and we might take a more positive view when we think the business is particularly undervalued. We did do that after COVID because we could see that there was a fundamental misunderstanding. We explained everything to shareholders very transparently, but then we decided, well, there's still an opportunity, and we were aggressive. In another moment, we might be less so. So we managed it. And similarly, when our cash was under a bit of pressure because of the DC being built over the last 4, 5 or 3, 4 years, we were a bit more conservative. But still, we spent ZAR 750 million. We have stuck to this dividend cover of 1.5x for 12 years now without an exception. Even during COVID, we didn't say, well, careful it's COVID, we're not going to pay the dividend. We were one of the fewer companies, I think, that stuck to our dividend policy. And our 10-year average dividend yield that can talk to dividend cash flow as well as, I suppose, the valuation of the company has been 6.7%. And over the 10-year period, we just decided to look at that number. We don't normally, but we did. We have paid dividends of ZAR 17 billion. If you add that together with the share buybacks, it's probably over ZAR 24 million or ZAR 25 million over 10 years. So we are generating cash. The focus in '26, we have these focuses every year, sort of themes for a business. One year, a couple of years ago, it was opportunity in adversity. There is adversarial circumstances, what's the opportunity. So we do think like that. This year, happy to tell you, you might like it or not, we think you will like it, it's accelerate, but with discipline because we all know, I mean, it's not hard to know. It's a great business. It generates cash, strong balance sheet, great brands in 2 continents, well run, but Truworths Africa top line is a challenge. And Office could become one in the future. So what are we going to do there? And then we talk about accelerate while maintaining all the business philosophy disciplines that you know we are well known for. So the issue in our business is obvious. Everyone knows it. You know it, but I mean, I don't want you to think we don't know it. The obvious thing is that we have to get the top line within reason, going as much as we can, especially in Truworths Africa, but also in Office. We have -- we're doing a lot of things organically in Truworths. I mean, essentially, our business is an organic growth. We have made acquisitions over many years. We do believe in acquisitions, but it's within the constraint of the business philosophy and what our capabilities are. We're not a business that believes in a decentralized sort of a massive decentralized business. We don't think like that. We're not saying others are wrong. If they do, we don't think like that. We think how can we manage it properly, how can we make sure that if we are responsible for the asset, we can intervene actively, especially when it's not doing well. And so we think like that. So therefore, the acquisitions have to be strongly aligned within our capabilities, number one, and to our business philosophy. So therefore, you're dependent on organic growth when you think like that. And you can see what we're doing in a very aggressive growth in real estate and Office. Why? Because it's working. And on the Truworths side, we've got to be innovative with our brands, with our merchandise, with our thinking in this environment. And we are on a mission at the moment, a real mission to really accelerate our growth on top line, especially in Truworths Africa. Our new DC is working well now, and there's tons of capability that comes with that, but that's not all. It's really about the innovation in the merchandise, the way we think about our merchandise and our offering. And then credit, we try to do some novel things in the credit industry. The sort of -- the market is complicated. There's credit cards, there's our [indiscernible] credit, the debit cards. There's buy now, pay later. There's so much going on in the credit market and industry. We have to make sure in our credit environment, we are right up there with the best of them with the best form of credit packages and menu to offer the customers, but also our communication and the method of our communication and style is to be top notch. And then retail trading space, that goes without saying. In Truworths, there are all things happening there, but the percentage is always going to be 1%, 1.5% in good times, maybe 2%. But it's very hard when you've got sort of 850 stores in a country like South Africa to sort of add real estate in percentage terms that's significant. Office is the opposite. So therefore, we get back to the same old thing, which is it has to be organic and acquisitions that are aligned. And then e-commerce growth has been fantastic in Office, it's stable great at 45% or so of sales in Truworths. I think it's over 7% now from 2, not even 3 or 4 years ago. It's a very fast-growing area. South Africa, the customers do like to shop in malls, but the e-commerce opportunity is excellent. So we sort of have a 1-dimensional, 2-dimensional, we link the 2 together. So one customer, but with lots of multiple methods of shopping with us, one critical one being e-commerce, of course, other one stores. So we are making great headway there, I think. And then in Truworths case, we -- well, Truworths and Office, we basically run the 2 e-commerce and Office and Truworths as if they're one, 2 different teams that work together, almost hand-in-hand, and we enjoy working with that. And we know the Office people do, too. So the Office and Truworths really 2 continents, but a similar thinking, albeit 2 different markets, 2 different groups of customers and quite a lot different product but aligned and then invest in Office clear, store remodeling, new stores. We bought the DC. Why did we buy it? You've been asked a few questions, why did we buy it? There's a couple of million pounds. It was because we're there, we're in Kilmarnock there's nothing much else in Kilmarnock. For us, it's in Scotland. It's been there for a long, long time. The landlord was wanting to sell. It wasn't good for us to be in other people's hands. The money Office could accommodate. I think the cash flow is generated in about 2 months or something. So we decided it's strategically a good thing to do. By the way, that came with IFRS 16 implications, which is some of the questions, why is there such a big IFRS 16 other income gain in Office because of that. There's an impairment that we've created over time. So IFRS 16 comes in there and foreign exchange -- there are issues with foreign exchange changes. So those 2 things are the other income in Office. There's a big project in Office at the moment with the IT environment because we are trying to catch up as quickly as we can with Truworths. And there's a lot of focus on our own made-to-order range, our own branded shoes in Office. It used to be a much higher percentage than it is nowadays. But every last 2 years, it has been growing nicely. Margins is higher. There's a limit to how far we want it to grow, but it's going well at the moment, and maybe Sarah will talk to it later. And then the strength of e-commerce in Office is undeniable. I just want to move my screen around here because it's rocking. So this is the group. You're going to see these figures. You've already seen them, and you're going to get the presentation anyway. But the main thing we're highlighting at the bottom right there is that 14.4% down in cash generation. That's related to the timing. The true change on last year is 2% up in cash generation. And in the period, it's a significant amount of money. As you can see, ZAR 2.8 billion. Gross margin in the group, steady on last year. We still haven't quite got back to the 53.5%, which is group. Truworths is higher, as you know, Office is a bit lower. My guess, it's very hard to do it because the questions they're going to come again about it. So my guess is that Truworths will slowly keep on improving gross margin back to its historical norm, not fast, but slowly. Office will probably be stable at a slightly lower figure for a year or so, I'm guessing in the tough climate it operates. So on average, it might be like this with slight improvements as profit at Truworths improves itself. And that goes to other metrics, too. When we look at return on assets, return on equity, asset turnover, we're sort of getting to normalization now. I mean I can see return on equity has dropped from 56% at a high to 34%. But if you take out the impairment, the unwinding of COVID, the share buyback, this level that it's got, which is somewhere between 31% and 34%, 35% on return on equity, I'm really -- we did say this. We'll be disappointed if we can't stay within that range. And the same applies to return on assets. Return on assets of in the mid-20s upwards, that should be our norm. And we run a business. Remember, we don't think how do we gain market share at any cost. I know that is another strategy. Some of you believe in it, but read our business philosophy, we don't. We generate cash, and we want these returns to be stable at these levels. Our balance sheet, therefore, remains very strong. As you can see and as you already know, inventories are up a small amount, 5%. That's mainly Office Truworths inventories are not a problem in that way. But I'm not saying it's a problem in Office. That's due to Office expansion and there's a very healthy balance sheet. I've told you about share buybacks already. This is a little bit more vision into it. We have bought back 65 million shares since January. The average price was ZAR 49.60. The dividends you know about -- we've got an RCF facility, which we talk about the bottom right there. It's Just to make you understand and be clear, which I'm sure you do know, but we want to point it out that not only are we very cash generative and a strong balance sheet, we also have a facility that is a greater amount of headroom. And if you look at the net cash we would have had in the group, it's about ZAR 1.1 billion the true figure for the 6-month period. Group generated about ZAR 2 billion, but then share buybacks paid dividends, et cetera. And the latter tells you how it works from a group point of view. Looking at Truworths Africa, which is, as I said before, Truworths Africa is actually hard to do what we want, but not hard to understand. The expenses are great. The cash flow is great, the burn is good, strong management, great systems, but how do we get the top line to move. That is our challenge without sacrificing margin. So that is our challenge. And these numbers reflected the margins, everything is good, but the top line has caused a problem for Truworths Africa. And there, you can see it that the top line was down by 3% as was the gross. The expenses, we managed to contain at minus 2% and trade receivable cost was a big help there. But you can see all of our expenses, we managed very well. But you all know and you're all analytically inclined if your top line doesn't work, you can't do this forever as your solution. We have to solve this problem even though we understand there's a tough economy, it's constrained. So we are very aware of that. Whether we are successful in fixing it, we'll only know in the future, but I can assure you, it's not like we blind to it. We know. And you can see from this that -- I mean, remember, we've probably got a couple of hundred buyers, planners, more than a couple of hundred good [indiscernible] hundred in both businesses and forecasters and trend experts. And yet it's such a big business. Many of them don't even know each other. I mean it's not like they sit and share and everything is done the same. They all have their own strategies and their own DNAs and their own direction. And there are central activities that manage it, but they're sort of encouraged to differentiate, if you think about it. And yet it was across the board, the toughness from identity, which isn't even inventory. Why [indiscernible], which has got nothing to do with Emporium, Truworths Kids, Truworths menswear, ladieswear, even in menswear and ladieswear, there might be 10, 15, 20 teams in each. So I'm pointing out it would be easier to say that everything is great, but menswear has been a problem. We're going to focus on that. It's more a bigger picture issue about how it was across the board. And we have highlighted there that ladies is about 1/3. Men's is about 1/4 of our business. Kids has grown a lot. Identity is about 16%. Other is getting bigger. A big part of other is our Office London in South Africa, which -- but I mean, all of them, loads of living, jewelry, cellular, they're all going quite well. 6 there, but it's small and it's going to be incorporated into identity in the future. But Office London is a nice growing business. It's got limitations from a brand supply point of view, but increasingly reputation from Office U.K., but even the way we're running it and its sort of strong positioning and great results in South Africa, it's a growing business. In Truworths closed 31 stores, opened 22, a lot of that is movement of stores and making sure the real estate, the assets sweated as much as we can. We do a lot of that. As you see, we've got 812 stores. And the density whilst good by international -- well, especially South African standards, it has been declining from 40,000 to 35,000. Yes, the 40 was extreme. So I suppose you could draw a line from 2017 onwards and then we're static. But I mean, there's been inflation. So again, we're really talking about top line. And it's true we could cut the real estate to make our real estate smaller, but we're very careful with that. Real estate is hard to come by, and we are already in A+ positions in pretty much every place of South Africa. You don't want to give up great real estate, but we do consolidate when we've got small stores albeit in great real estate, and we can incorporate them into Emporium or add 2 or 3 small stores together. And for sure, we do that. But nevertheless, top line is the only thing that will fix that. Inflation, we had that hectic period in 2022 to 2024. Now inflation has been very low. You notice there's a bit of an uptick there. That's not because the rand isn't strong. You all know the rand is strong. And of course, that's good for inflation. But we have a strategic goal and a plan going on behind the scenes where I told you we're doing organic growth. Organic growth means merchandise. So our merchandise, we are elevating interestingly. We are actually putting better products, smarter products, higher quality product, which is dealing with the negative inflation from the strong rand with positive better merchandise, which is even more differentiated from our competitors. That's what we were anticipating a bit of inflation, 2%, 3%. Truworths Africa gross margin slightly up 0.4%. And as I said earlier on, every half year or so a year, we try and tweak that up a bit to try and get back to the 56%, 55.5%, 56%. In Truworths, stock turn is a little lower. We will try and fix it. Tough times gives you lower stock turn, higher markdown. I mean, obviously, we manage our stock [indiscernible] well, but if you're missing your sales plans because we don't plan minus sales growth, we plan positive sales growth. We plan more than double digits -- well, double digits if we can. So we don't think, well, let's plan minus. We don't. But then, of course, there are consequences, no matter how you manage, there's going to be overstock, and you have to manage that very carefully. So expenses were if you excluded foreign exchange losses and the trading expenses were actually down by 3%. I'm not going to go through this. You will see it afterwards. The trade receivable costs, let me focus 2 seconds on that 10% down. We're proud of that, and that's quite an important measure for you because the ZAR 82 million ECL movement is a good thing. I mean, because really that one is extraordinarily scientifically managed. There's no game plan. That is really the ECL allowance what it should be. And that means there is a mild improvement. It's not radical, but it's mild. And I have been saying that for at least 1.5 years, I think. And that's the truth. These things do not change suddenly. But it's very good to be able to say there's a steady and mild improvement that we think will continue. That's how we think. So the margins are great, but with top line pressure. CapEx, the DC is fully built now. Last year, we spent the last ZAR 150 million. Now it's just maintenance, although we are going to buy some extra land we are allowed to buy alongside our DC. The money is not significant, but next year, we'll put it in. We're only doing it next year, and that will be the last sort of investment we make that is for -- strategically for future. Store renovation in Truworths, ZAR 124 million, Gross was ZAR 134 million. There's another ZAR 50 million to go. We manage that. We don't need to spend a ton more Computer infrastructure, we manage that carefully. There's not a lot going on there. Cash flow, Truworths, extremely great cash generator business, ZAR 2.1 billion. It's a cash-generating machine, that and Office. The 2 of them are cash-generating machines. I mean the cash realization rate, 99%. You're not going to get much better than that. Office U.K. margins all pretty good. Profit before tax growth of 10%. Admittedly though, it only increased by 2% if you extract the IFRS 16 gains on lease modifications and foreign exchange. So Office is -- did have a bit of a challenging last few months. The U.K. environment is tough. I mean we don't want to kid about that. That's true. Our new stores, and when I say new, a lot of it is remodeled. Remodeling new stores are fantastic. Every one of you, if you saw the return on investment after tax of each decision, you would want to do it. I can assure you it's significantly better than the weighted average cost of capital by investment. By the way, that includes the Kilmarnock warehouse. We do that, we think like that. And it's much easier to get that than we are able to in South Africa. So that's why we are so aggressive. But nevertheless, there is a tough market out there and the like-for-like is not that easy at the moment in office. Are we positive? Part of the problem, and I'll say it quickly now because there's obviously going to be questions. Part of the problem really is macro in the U.K. But the other one is some of the biggest brands are backing at the moment. You know that because you see international reports from the biggest brands in the world. Those brands, which are the sort of mainstay of the business are not doing quite as well. There are green shoots in each of them. And then below them, there are lots of other brands and good ones that are doing a hell of well, but they don't make up for the tough ones. But we're starting to feel quite positive about some of the tough ones are having a tough time. So we'll see over the next 6 months, it will be interesting. Office grew by 10%. You know all that. It opened 5 new stores, closed one. That is going to escalate because there are quite a lot coming up. But I mean, again, a lot of what happens in Office is a new store comes up, but that's really an existing store that gets bigger or we rework it. mainly that. There are some new stores and there are quite a few coming in the future, but there's a lot of real estate work in the future in Office. And what I've just said accounts for why, although we've got a fantastic sales per meter in the U.K., it has not grown in the last 2 years. Gross profit trend, very good in Office, but I suspect the drop from 48.2% to 48% might even come down a bit. I'm not sure though, it's very hard to tell because MTO is growing and we might manage the stock even better. But my guess is you might have a slight downgrade in Office like it is there a bit more in the future. [indiscernible], I'm not sure. Truworths [indiscernible] is going to be slightly better. So you work it out from there yourselves. Office trading expenses also well controlled. Most of this extra is because of the new stores. I'm rushing a bit because I'm aware of the time constraints. And I know you're going to ask questions, but I also know we'll see many of you over the next few weeks. Office profit is very good. Margins are great, great business, but that IFRS 16 thing you know about. And there's a store renovation. There we spent GBP 4.5 million on the DC. It's not a massive amount of money, but it was strategically for sure, the right decision. So it would have been silly not to do it. Bear in mind, we even have the impairment that we could reverse now. But that's not the reason. We bought it strategically. It's the right decision to invest in it now look after it and it's going to be ours for a long time, so why not? And then projected there's another GBP 6 million in stores. So we're spending about GBP 12 million in stores in the U.K. But as I said, if you could see the numbers you'll want us to. And then there's the cash generation, great business, just like Truworths cash generating machine realization rate, 112% last year, 111%. Account management credit. TransUnion quarter '24, '25. I mean, for what I think that's 18 months, mainly. So it's 52% -- 52%, I mean, that means it's slightly positive, which is a good sign. But it actually is reflected in our book. It's slightly better, but not crazy better, but it's consistent and it's been for a long. That's a good thing, but it's not remarkable yet. So the book quality is [indiscernible], book quality is stable improving. Millions of applications we still get from young people. I don't know if I skipped something here, I don't. Millions of applications from young people. There's a higher opening rate. There's a good growth of good balances. improved customer engagement, and we've got some new credit product offering coming. And this is one I thought I'd skipped out, it comes afterwards. This is where we approved 100 accounts, let's say, because 100 apply, should I say. We approved, let's say, 25 of them on average. In this case, it was 29. We're getting better at slicing and dicing. And then there's a big gap for some reason between what's approved and what we're actually come and open. But that has gone up to one of the highs in the last 5 years of 18% now. But that gap of the 11% is something we're continuously working on. But as you can see, 18 out of 100 is not a bad number, especially when we're getting tons of applications. And there you are, it is a bit down, but that's because we've been clever about who we are enticing to open new accounts. But I mean, we're talking about 2 million, 2.5 million young people who are trying to open accounts with us every year. And by the way, when we -- every 6 months and when we don't open, they automatically become loyalty members, and we continuously work on that group. It's a very positive group. And here, you can see that it's about 23% or less in '24 and another 18%. So it's about over 40% or under 29 years old, 41 it says. Trade receivable stats, the main thing to show the ECL is getting slightly better and the accounts opened as a percentage of who apply is higher. This is an interesting one. We obviously -- these are stress now, I want to make the point. These are Truworths customers, not anyone else. We can't talk about what's happening elsewhere. But we can see Truworths customers who have overlapped with our competitors that we can see that's data available to us. So it's quite interesting because we can see that the average, which is the dotted line of the competitors when it comes to risk, the differentiation between low, high and medium risk is far lower than us. So if you look at Truworths, the highest risk has the lowest installment. You would imagine it's logical to do that. Medium risk, medium and the low risk has the highest installments. Obviously, you'd expect that. But we note then in our competitors, but I stress, this is our average of all the competitors that we see on our data has a much narrower band between medium, low and high risk. And in fact, in the last 6 months, it's almost static. They're almost the same. And you can see how the high risk has grown significantly. I'm specifically not saying any individual competitors. I must stress that again. It's the average of the big competitors. We do know the individual competitors, but we would never publish that. Sorry, I'm trying to move my screen and it's sort of got a bit stuck. Here we go. So some of our strategic projects, I've sort of alluded to it is aspirational fashion. We are interestingly on a mission to upgrade our fashion, not for value. We the opposite, and we're expanding aspirational brands, better quality and smarter product. Therefore, that causes a bit of inflation. We are on a mission with essential fashion basics. -- fabric consolidation to get better prices of better value and better product. We are enhancing the buying process. We've done an enormous amount of work in systems and the information available to buyers the way we're managing them and they're sort of working the inside organic part of the business, the most important, the merchandise. The new DC is fantastic. We're working on size curves, markdown optimization. We're very busy trying to organically accelerate with the vengeance. I'm not going to go through all of these new brands, and we're working on identity. There are some of them. We're sort of soon opening a new concept. I think it's in Johannesburg, the 2 big stores in the next 6 to 9 months. We're taking our ladies and men's jeans instead of having them separate men's and ladies, we're now putting it in a jeans store. It's going to be fantastic. Then we're taking all of our street brands. Those of you don't know, I'm sure you know what Street is, but the youngsters, the real, we're putting all of our brands together there, and we're opening some new ones. Offspring is one of the new ones. It's our U.K. We own the label Offspring, which is really a store concept of top end sneakers, but we're putting a clothing range in South Africa into Offspring. It's the sneaker. And we've got this Fuel, which is already ours and there's another called Moskow already in house. We're putting them in one store together. Then the elevated, we've got another strategy on elevated. So I'm just giving you a taste of this. Obviously, you can imagine there's much more to it. We've always had Daniel Hechter, but now we've got a new thing on top of that called Vesta. It's even elevated from Daniel Hechter, and it's going to be in a store to get the Hechter ladies, Hechter men with a one called Ovilla. It's Mediterranean, very sophisticated upmarket. So if you imagine a store where Hechter and then we've got our own Ethics Loads of Living. So together, they make the upmarket aspiration. You've seen the jeans upmarket aspiration, and I told you about our street. So that's our concept. And then identity, we're very busy with identity. Identity is a great brand. It's cheaper than Truworths. It's younger than Truworths. We incorporated Sync into it, which is cheaper than identity and even younger. So we think that's a little bit like Truworths. It's got its own little emporium evolving here, where we have got this younger, even more energetic than they already younger and well-priced product in Identity, we're putting them together, and we have started to do it with. I think it's going to be very successful. This is talking about what Identity stands for because we do think Identity has got lots of upside. And this is the DNA. We do -- just by the way, we do this DNA with every single brand, but not just at the high level, at the sub level, too. So that's the way we try and keep our buyers focused on the task. There's plenty of initiatives on supply chain. You can look at this afterwards and you can ask us questions. I've already alluded to most of it. But supply chain is everything leading to arriving in our stores, and that's 1 year's to 1.5 years' worth of effort to get that supply chain to be as best it can. And then, of course, once it arrives in our DC, getting it to store. Those are the 2 aspects of supply chain, and there's much effort going into both. The last leg is the customers, e-commerce, engagement strategies. We're loving AI. It's become part of our lives, they all tease me, I'm obsessed with it myself. We've had some fun and games with it recently with 1 or 2 shareholders. Yes, AI is the future. You've got to buy into AI. It's like saying I don't want to buy to calculator. The world is changing, and we are right there. We are in the forefront of it in all aspects of our communication, of our thinking of our technology, of our way we buy, but with always remembering that all of these things are with the art. Yes, you could talk about technology and science and systems and processes, but you better have the art. And the art is what actually makes it all work. But we're aware of it. And I'm telling you because it's so exciting. And of course, it's very much involved in the customer space and predictive modeling and all that stuff. So retail presence, we're going to call it the new Truworths Emporium before May, don't look it up. AI helped us, by the way. That's where we're moving our new stores on to. And that's going to be the new Emporium,[indiscernible] as we're calling it, a much more upmarket concept. This is the jeans store I mentioned earlier, men's, ladies together. I'll just give you a quick views of it. The jeanswear there's Inwear, a very young Inwear brand in Truworths, different look. It's very quirky, -- sort of [indiscernible], pretty young fashion. There's Ginger Mary, our internationally fashion but yet African inspired fashion, great brand. Lingerie, we make it into a shop, does well, shoe bags, accessories is not a department, a shop. We think like that now. How do we make them into a shop, even though it's within an emporium. Jewelry, how do we make them into a store. And then like everyone else, everybody is on a mission with this now. Elements Beauty, Elements is already good. We're making it into a proper beauty store like everyone else is. But in our case, we've got the major advantage. We've got our own beauty brands. Remember, we've got all the brands and we've got box them and customers love our brands, and they are famous in South Africa. And then we are able to put our brands on our products. So it gives us, we think, an advantage. And then we've got our kids emporium with our lovely brands, LTD. It's got a profile, DNA, Naartijie, South African, but unusual and then Earthchild, sustainable. Those 3 brands work brilliantly together. And then our men's store with [indiscernible], Uzzi, various others. giving a thing and there's our street wear store, again, within the store Fuel Offspring, Moskow, there's 1 or 2 others that are all part of the street thinking and concept all within our store. And by the way, when I say it's within a store, it's also going to be stand-alone. You could imagine in a mall, you'll have all these things in one big Truworths Emporium, but then stand-alone, in the appropriate sections of a big mall, you're going to have the street store in the street section and the elegant upmarket sophisticated context, villa Hechter in a different part of the mall, even though it's also in the main middle of the mall in the big emporium. That's how we are now thinking and talking to landlords. There's Loads of Living, homeway, and this is the new Hechter. Of course, this is just a diagram. I mean it's generated by 3D, but it's giving you a feel of Hechter Paris, the upmarket product followed by the traditional Daniel Hechter and then at the back in the new store, you will walk into a villa and context. There's the villa and there's it there. And then there's the Truth Man and there's the Identity. And of course, our South African-based Office London. We call Office London, that's the name for the South African. We wouldn't say Office London in the U.K., obviously. So Office London, it's great, doing nicely. And there's the think that we still have some stand-alone stores, but increasingly, it will become linked to Identity. Office U.K., lots going on with supplier base, suppliers, our main to order. We're busy with accessories. You can imagine you sell stocks easily and that kind of thing in Office U.K. But Office U.K. hasn't got tons of extra space. So that's primarily sneakers and brands. It's not apparel. And then there's a lot of work going on in the supply chain in Office 2. And I've told you we bought in UTC. We're very busy with the stores. And just by the way, that accelerates. So the next 12 months, more work on real estate. Not all new, some new, but not all new. There are some examples. Covent Garden opened recently. We've got to be in Covent Garden, great, doing nicely. There's Bristol Cabot. This is an interesting one. We had a brilliant Office store here, we've got this position next door to make it bigger. So we opened that's the new Office right next door. So we didn't want to give up the real estate. So this over here is Office, the inside. But now this is the offspring right next door in the same store that was before Office. So that's Offspring there and the right is Office. And the Offspring now, which, of course, is elevated. It's top of the triangle. Offspring is now starting to show its metal by being independent of Office and a different customer really. There is some overlap, but it's different and quite a lot of different products, and that's also become an opportunity and this all doing well. There's a Glasgow new store, Leeds Trinity, Plymouth, Westfield London, beautiful store. We've always been there, but we made it much bigger and look at that. It's -- I mean, it's from a small but dark funny little store, it's remarkable. Anyone in London, please go and visit Westfield. Portabella Road, brand new. It used to be a tiny little small store poky, -- it's still same physical side, but it's completely opened up. And it's only opened in the last few days, and it's doing great. I mean significantly up on what our viability in compared to last year. It's better in Office, what can I say? We've told you about the outlook. In constant currency, group retail sales actually grew by 1.5% in the first -- sorry, that's in the first 7 weeks of this part of the year. Truworths Africa up by 0.6%, margin up a bit more. Office U.K. up 3.4%. What's going to happen in the future? I don't know. But is it exciting? That's fantastic. We're very busy. Truworths Africa, I've already spoken on Office U.K. and thank you very much. I'm now going to get on to questions.

And let me see, I'm going to refresh here, and then I'm going to get my colleagues to participate. Oh God, there's lots of questions. So the one is about the other income, but I think I've answered that. What's the outlook for credit growth in the full year? I don't know. So I can't tell you because it reflects what's the outlook to our total growth. It's the same. I'll just tell you, we're on a mission of accelerate. That means accelerate with common sense and within our business philosophy. So that, of course, includes credit and new products of credit. What was internal inflation in Truworths Africa and what do you see for the full year? We said that, I have given you the answer to that. Why was space growth so strong why sales growth slowing so much? I mean, sale in mainly UK, is coming in a bit---. But I mean, I think I've tried to answer that because it's -- the new stores are doing well. But I mean you've got e-commerce and you've got the non-new stores. When I say new, I mean not remodeled because a lot of the new actually means not like-for-like and it's the existing stores remodeled. Those are having a bit of a tougher time. That is true. And I think I've told you why. Would it change for the better, in my opinion, in the next 12 months? Yes. Is office still going to be a success story? Yes. Is it as easy, maybe not. There are challenges in the U.K. economy and as I told you the top. Sarah, you're particularly very involved in office. Do you want to add anything to what I just said?

Michael, I don't think so. I mean it's -- the exciting part is the fact that the MTO is doing better, and there's a shift a bit towards smarter product on the ladies side. So that represents a new opportunity, but it's small in the scheme of things. So I think you've covered it well.

Okay. Then the share buybacks, mainly a question about that, do you want to answer that? They're asking what -- are you going to do more share buybacks and what's the maximum authority you have? You or Reon can either can answer if you want.

Yes. Michael, I can answer that. So I mean, share buybacks, we have permission from the Board to buy back shares at a certain -- up until a certain amount. We don't disclose what that is. But we buy back shares, as you've mentioned, Michael, when it's opportunistic to do so. So they might continue. We'll have to see how it goes, but we have got permission from the Board to buy back more.

The GP margin in Truworths, is that because of rand strength? It's not actually. The GP margin slight improvement has got nothing whatsoever to do with the rand strength. Actually, if you look at it on the average like-for-like, there's not so much rand strength in the period. If you think about it, the massive rand strength now, but that's not the reason. The reason is stock management and less markdown. That's the main reason. Please speak to the stock turn deterioration in Truworths Africa. It's interesting post results that show sales growth acceleration, improved margins. It seems to imply low markdown post Christmas. Is that correct? Yes, it is correct. Slightly lower improved margins. You mustn't think of stock turn and all that related to just post half year. It doesn't work like that. It's how you manage the stock in season and then the consequence of if your sales were bad for the 6 months, because you don't plan -- no one plans negative. And then on top of it all, you didn't manage it as well as you'd like. Then you do have higher markdowns in January, February and then in July, August. But I mean, you try to avoid that even when you're not trading well by managing it in season. So it's a whole process of managing stock and markdowns. So the end consequence is not so much harder in Office because in Truworths, our own product, our own fabric, own everything. And in the U.K., of course, it's brands and you order it 18 months ahead or something. I mean it's long [indiscernible]. So it is harder, but we've got disciplines and we apply them in Office as well. How should we think about the focus on accelerate with discipline, just opposed against prudence with the credit extension? Are you seeing intended acceleration in credit growth. Yes, but sensibly. So we like to say we like to say to you what's the word we say many optimism, we say no, you're on solid.

No, Michael, we tend to say we're cautiously optimistic.

That's right. So now what we're saying, we like to talk like this. We're cautiously optimistic. We are. I mean we're not lying. We are cautiously optimistic. But we're now happy to say the word cautiously can be slightly smaller and less bold and the optimistic can be slightly bigger and more bold. So that's genuinely how we feel. I can't tell you anything more than that because that's the truth. Yes, it's all about -- a lot of these questions are, do I think credit growth is going to cause accelerate? The answer is yes. But remembering, no customer in the world nowadays needs to shop at us because of credit. I mean when you think about it, it's ridiculous. They get credit cards, buy now, pay later, lay buys, cheap product from Temu and SHEIN and some of our competitors. I mean customers have unlimited choice and they [indiscernible]. So you couldn't say, oh, we've got credit, so they'll shop at us. It doesn't work like it. Maybe it did 20 years ago. Now you've got to have the merchandise that they want. And so yes, we can offer credit, and we will facilitate credit products and innovation credit. We're very busy with that. And yes, accelerate does mean it. But I can tell you with the overhang and there's no question. The only real issue is to have the merchandise that the customer really wants. That is it's got to be that. I'm not putting you under pressure, Sarah, because we're all involved in it. But I'm making the point, that's our role. We can't depend on credit. We use credit. I'm trying to see this is quite a long one, tailwinds, like-for-like in Office, mature store base. It's not a mature store base in Office. In fact the base, there's a lot of dynamism in office store base because it's a lot of -- I mean, whenever I go to visit the U.K., which is every 6 weeks or so, [indiscernible] goes a lot, Manny goes sometimes. I spend my life traveling around the country. It's amazing the opportunities. I mean, usually, I don't know where I've been because I've got trains everywhere, but it doesn't matter because there are opportunities everywhere. And we find them and we look and we're very careful about cannibalization, what we spend and how much on where. But the truth is there lots of opportunity for Office. So it's not -- it's a dynamic process. But true, the stores that we don't touch because we haven't got to them yet or because they don't warrant it, they're too small. Those are not doing nearly as well as the ones we've touched in the new ones. That is true. How much of Truworths product is imported? Sarah, do you want to answer that quickly? I would know how much Truworths product is imported?

Yes. It's pretty consistent just under half, so 45%. It does differ when you include areas like lingerie, which have a much higher component. But our preference is to always maintain a very strong local manufacturing contribution because of the flexibility and the speed that it brings in and it links directly to our design center and our very strong local manufacturing base.

Thank you, Sarah. Then the next question is, how should we think about -- there are 2 -- they're quite interesting. One is about inventory planning for the year ahead. Our purchases reflecting growth in volume? and nominal terms year for year, next 12 months. Look, I mean, the truth is we never plan minus 3% or whatever Truworths. I mean we would be -- I mean, that would be foolhardy. We always plan significantly more aggressive than that. So yes, we have planned more aggressive. We plan for acceleration. Will we do it? I don't know. Will we do close to it? I hope. I don't know. We try. But I can tell you, we'll manage it if we don't. And if we even get halfway, we'll be happy. So yes, we plan volume growth. Will we do it? I can't answer you. And then the store footprint in Office, have we reached our plateau? Is it like not going to get better? No, the next -- let me think we're now in February. I would say all the way through to November, there's accelerated growth in real estate. Bearing in mind, I'm not saying new stores and extra space. More often than not, it's existing stores, but better trading space, you can't compare, but there are new stores as well. There's a mixture of both, and it's accelerating. Really, this one wants to know are the IFRS 16 gains expected to continue over the second half and into financial year '27. Do you want to give some daylight to that?

Yes. Thank you, Michael. I think you answered the question earlier. The IFRS 16 gains that we saw in Office this year, we don't expect to continue. This relates specifically to the DC that you mentioned that we acquired. Obviously, in the ordinary course of business, there are IFRS 16 gains when we do lease terminations and modifications. That's just part of the business. But those are generally much smaller than what we've seen in this year. So no, we don't expect this to have a continuing impact.

Then, Reon another one for you because I think you might know the answer because I don't. Could you please elaborate on the U.K. numbers? Sales were 6% up, but space was 10%. Is this a weighted average space? What was the like-for-like sales for the period as well as post December sales 3%, but what is like-for-like?

Yes. So thank you, Michael. So firstly, we haven't disclosed the like-for-like sales. But just to answer the question on the space, no, the weighted average space, we've disclosed it on the slides, that was around 6.5% for the period.

Thank you. Then Manny, this is a good one for you. Again, I'm not -- I mean, I don't really agree with the premise of the question, but I can see the point. Why are the numbers of applications appear to come under pressure because it used to be 5 million, 5.5 million and now it's only 4.7 million or something million. By the way, I mean, you can do worse than 4 million, 5 million customers applying to open accounts for you every 6 months or whatever. I think there's 2.5 million there. And it says current period has seen a drop. Does this relate to consumer resonance -- is the problem? And what's the -- what has changed relative to the past? Manny, I think you want to shed some light on that?

Yes, Michael, I can do that. It's really to do with better targeting of prospects that we think we will -- that would qualify for an account. So it's -- we're still having lots of demand, as one can see, 2.5 million applications roughly opened in the 6 months. For the full year, it will be close to 5 million, I would think, of which we opened about 18% of those. So it's not -- it's nothing to do with a lack of demand. It's more to do with optimization of the campaigns and better targeting.

Okay. The next one is a question from someone who's on a mission for this permanently. Truworths Board is absent digital and e-commerce retail experience and to be frank, absent with fresh legs in the form of individuals with the latest retail and digital global developments and Truworths Online adding -- is it adding such skills to the Board in the form of additional nonexec constructive Board appointments to contribute input towards future-proofing Truworths. The premise of the question is ridiculous. It just shows a complete lack of understanding of the dynamics of an operating business. Firstly, the Board does not -- you can -- a management team that's dependent on the Board to drive those things is not worth the soft. The Board expects management to be able to do it. But anyway, if you just look at the CVs and that of our nonexec directors, you could call it fresh legs, but you don't know them. And they are incredibly dynamic, and we've got 9 new Board members over the last couple of years. But I mean, our business is -- you couldn't be more tuned into AI technology, e-commerce. So the premise of the question is, and I happen to know this guy. And actually, your preoccupation with AI and your lack of understanding of it is one of the problems. So we are into technology, and we've got plenty of fresh energy and legs in the Board, and there's continual reenergizing of the Board Directors. Every year, we appoint 1 or 2 new ones. And obviously, we look at current thinking and modern thinking and retail expertise and e-commerce, you have to look at expertise. And if you look at our value system, nonexecs are appointed in the same way. Can you share some detail, let me just see this one as to what the new credit products are planning. Manny, I don't know if you want to talk much about that, but they're asking -- I keep on referring to the credit products. Clearly, there's a buy now, pay later thing happening, but I mean, they want to know what do you want to tell them?

Well, I mean, we -- it's actually an interesting question because we've been testing a credit product now for the last 2.5 years, which is showing promise. And that has opportunity. It's really been an invite-only credit product that we've used. There's an opportunity now to move that into the open market. So that is an opportunity. And if we did that, of course, we did it in a very controlled fashion. And we've tested a number of other credit products recently, which have shown good promise. And again, we will do that in a controlled manner using the Champion Challenger methodology. But of late and recently, there's been quite a lot of progress with different credit products and so on. And so I think it's -- if it pans out, it's going to be quite an exciting way ahead in the next 2 or 3 years on credit.

The next one is they're quite interesting in these questions. Last year, we said we're going to launch stand-alone stores in some of the high-end brands, Daniel Hechter, Fuel, Ginger, Moskow. I think I've explained that. They're saying how many have we opened. Look, we -- you've got to think of the merchandise and the stores differently. The merchandise on to mission right now, is the winter season we're in, there's a lot of changes happening as we talk in all the brands, including ones you haven't mentioned. New stores, that's different. There we got the first 2 big ones opening in the later part of this year, around -- between August and November because the big stores opening in phases. And then there are a lot of stores that will follow that. So -- but then there's already -- we're going to do some store within store work. And so I can't tell you how many, but the new store element of that is going to still take time. The merchandise is we're busy with it already. How is the average age of your current credit customers change over the 10 years? Is it correct to assume high-risk credit are younger people? Obviously, that's true. It hasn't changed much over time because the people who are creditworthy tend to have proper jobs and more -- not proper, but more sustainable job with regular income, and therefore, you have to be a bit older. So that's always been the case. So we're filling in all the time with all these new customers who are younger and higher risk. But the big thing is how to deal with the new young customers who haven't got a lot of credit experience, they call thin files. We have to deal with that. And I think we're getting better at it. I interestingly think it's an opportunity of -- and that's what you can sort of start to see that thing of where there's -- as we just said, Manny just spoke about it, less millions of customers applying because we're targeting, but a greater percentage of us opening because that's a lot to do with that. I think I've answered all the rest of the questions. There was one other went through. Yes, there's something about 50%. Is there a future where Truworths South Africa reduces exposure to credit sales, that's from 70% down to 50% or below. So again, I need to explain it in a simple way. You could just as easily say to me, do I think that we can reduce credit cards from whatever it is now, 15% or whatever I have no idea down to 8%. I don't know because we don't sit and judge the method you use to pay us. We offer everything. So we offer credit, our own in-house credit, especially for those who can't get or want it for whatever reason, and they can't get credit cards or their debit cards haven't got enough money, so we do. We're not on a mission to change that because why should we? It gives us a lot of strength. But we have no problem with buy now, pay later and credit cards and debit cards. In fact, we are motivating and encouraging with our own buy now, pay later product. So we are universal about the payment measurements. So if it dropped from 70 to 50, which is really Truworths is higher than identity, if it ever dropped, it won't be because we've made a strategic decision to outsource it and let someone else run it for us or something we don't need to. We're generating the cash. We got all the expertise. But it will be because customers have chosen a different means of dealing with us, and we will -- we're fine with that. So that is the essence of it. Look, I mean, I've gone over the time, it's 02:04. And I realize I haven't properly answered all the questions. My colleagues haven't had enough time to talk -- and some of you are frustrated because I haven't answered it properly maybe. So there you see it says investorrelations@ trruworths.ca. You can give us your questions, and we will answer you as honestly as we can and as directly as you can. You want to give us a go, go for it, but we'll -- I can promise you we'll give it back to you as directly as you give it to us and as honestly and aboard and ethically. So please e-mail us. And then when you are still dissatisfied after the e-mail interaction, we for sure will see you. There are conferences coming up very soon, and we'll be at them. And if you want to talk to us with pleasure, we are very open to it. We will be as respectful to us as you are -- we will be as respectful to you as you are to us. So thank you very much, and thanks for joining us, and we look forward to speaking to you all again in the not-too-distant future.