Wesfarmers Limited (WES) Earnings Call Transcript & Summary

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Well, good morning, everyone here in Sydney, and welcome to everyone that has dialed in online. Thanks for joining us for our Annual Strategy Briefing Day. I'd like to begin by acknowledging that we're meeting here today on the lands of the Gadigal people of the Eora nation and pay respect to elders past and present. This week is National Reconciliation week with tomorrow marking the 30th anniversary of the High Court's historic decision in Mabo #2. This year's theme for a National Reconciliation week is, Be Brave Make Change. And at Wesfarmers, our vision for reconciliation is in Australia that affords equal and equitable opportunities to all, including for Aboriginal and Torres Strait Islander people. And for us, this includes achieving parity in our workforce and increasing Aboriginal and Torres Strait Islander suppliers in our supply chain. Now I'm really happy to have most of our divisional managing directors here today and a number of our divisional leaders. And sorry that Ian Hansen can't be here today. Ian will be joining us online. Unfortunately, Ian succumbed to COVID, but probably fortunate that he's the only one of our leadership team that can't be here in person today. And I know that Ian is really disappointed not to be here today to share some of the amazing work that is going on across the WesCEF division. I also wanted to welcome 2 of our new managing directors in our leadership team, Nicole Sheffield, and Emily Amos, who will be here for their first briefing day and we look forward to introducing their businesses to you. Now I'll make some opening remarks about the group and our group strategy. And then Anthony Gianotti, our CFO, will talk to capital allocation and balance sheet. Then Naomi Flutter, our Head of Corporate Affairs, will provide an update on sustainability. After that, Anthony, Naomi and I will take any questions. And then we'll move on to the divisional presentations. Now I'll start on Slide 4, and this is a slide that will be familiar with many of you. Now since listing -- since the listing of Wesfarmers in 1984, Wesfarmers has been guided by the consistent objective to provide a satisfactory return to shareholders. Now we define satisfactory as a top quartile shareholder return over the long term. And I'd like to emphasize that we do focus over the long term. We believe that it's only possible to create long-term value by anticipating the needs of customers, looking after team members, treating our suppliers fairly and ethically, taking care of the environment, acting with integrity and contributing positively to the communities in which we operate. Now we see these areas as being key elements of our strategies and operations rather than occurring in a silo or being in conflict with our core objective. And hopefully, you'll see this come through today. Turning to Slide 5. The Wesfarmers operating model or what we call the Wesfarmers Way, provides a clarity of focus and also the flexibility to manage the portfolio to ensure that our capital is allocated to areas that will generate superior returns over the long term. Now the Wesfarmers Way helps to avoid many of the pitfalls of traditional conglomerates, whilst also addressing many of the challenges faced by monoline businesses. Now in a world where the rate of change and disruption across industries is accelerating through digitization, decarbonization and geopolitics generally. The focus and flexibility afforded in the Wesfarmers Way has never been more relevant. Now we have 4 overarching strategies focused on delivering shareholder value. Strengthening our existing businesses, securing growth opportunities, renewing the portfolio through value-added transactions and ensuring a focus on sustainability and responsible management. Now underpinning these strategies are some unique aspects of our model that I think provide us with competitive advantage. The Wesfarmers model of divisional autonomy drives accountability and focus. Divisional leaders within Wesfarmers enjoy the ability to focus their time on running their businesses for the long term and benefit from access to capital and corporate and specialist support. The performance over the long term from businesses such as Bunnings, Kmart, the WesCEF division and Officeworks relative to their listed and unlisted peers, highlights value of divisional autonomy as a performance driver. Now secondly, active capital allocation and portfolio management is also a key focus at a group level. There's lots of capital out there at the moment from a multitude of private listed and sovereign entities, all chasing similar opportunities. Now despite this competitive advantage, Wesfarmers has some unique capabilities as an allocator of capital, and Anthony will speak to some of these shortly. Capital in Wesfarmers is available for all opportunities that are considered to be accretive to shareholders, and we control this quite tightly. As I mentioned earlier, active management of the portfolio allows us to reallocate capital as the world and opportunities around us change. Now an emerging source of competitive advantage in Wesfarmers is the digital and data capabilities that we're developing through OneDigital. This is another example of the evolution of the Wesfarmers model and leveraging unique assets that will reinforce our group strategies and support long-term value creation. When you look around the world, there are various leading global private capital groups and other organizations that are pursuing similar strategies in data and digital. Quite simply, these opportunities were not around when Wesfarmers IPO-ed in 1984 nor were the opportunities available at the same scale and effectiveness a decade ago. What makes the Wesfarmers approach unique is the scale, the quality of networks and brands that underpin OneDigital, and we'll speak more about that later. Now last year, I spoke to 3 key priorities for the group that are directed at driving superior long-term performance and are aligned with our overarching strategies, and I'll provide an update on these now. So turning to Slide 6. I'm really pleased with the progress that we've made with respect to the goals we set ourselves this time last year. We recently established OneDigital, which will bring together the group's digitally native businesses, including our subscription program that is still in development, OnePass. Our group data platform that is now up and running, and our marketplace business Catch. Now it's important to highlight that OneDigital is very different to our more mature divisions. It's in a development phase, which involves an investment in building capabilities and new businesses. It provides value-added services and benefits to our divisions and Australian households over and above what each division is able to do on their own. Now over time, it will generate new revenue streams for the group. And as a purely digital asset, it will play an important role as a platform from which to access leading digital talent for the group. Under our divisional autonomy model, each division is expected to have their own best-in-class data and digital capabilities that they simply require to be competitive. Now what good looks like will differ depending on the industry and the segments in which they operate? As you would imagine, what good looks like for a Bunnings commercial customer or retail customer is very different to what a customer at Target or Kmart would expect. This is why our strong divisional focus is critical. Now we're starting from a position of strength. We have over 150 million digital interactions each month, over 40 million transactions as well as a network of over 1,500 retail stores. And we see our stores as being critical to having a scalable omnichannels model, which we think is a really important differentiator to our purely digital competitors. Now I'll give some context on how we're thinking about the investment required to develop and operationalize the shared data asset, our subscription program and how we expect to realize benefits from this investment. And Nicole will talk more about this later today. But I apologize in advance that we're not going to share all of what we have planned, given that we operate in a very competitive and dynamic market, and we're not prepared to lay out our plans for our competitors. Now last year, similar time this time last year, I said that we expected to incur incremental costs of around $100 million in FY '22 for the setup of OneDigital. Now we're likely to underspend this in FY '22 by about $30 million, but this is largely due to just the phasing of investment. So we expect that underspend to flow through into FY '23. And we would expect a similar level of investment around $100 million next year. Now it's important to remember that this is very much around setup and investment in capability. This is not something that we'd expect to be a recurring expense. And we would expect that in FY '23, the majority of the investment around the setup of capabilities and importantly, the launch of our OnePass subscription program, those costs will largely be incurred in FY '23. Now we'll monitor the investment very closely, and we have a lot of capacity to dial up and dial down the investment as we're seeing the benefits flow through. For a group with over $30 billion of retail sales, this is a fairly modest amount to invest to deliver what will be material incremental benefits to our retail divisions and customers. And from a group capital allocation perspective, it's a great investment for the future, and we're able to measure the benefits that accrue to our divisions and the group quite clearly. Now the benefits in terms of what will come from this, the benefits will come from higher sales in our divisions, more cost-effective marketing, a better and more effective acquisition of new customers, higher frequency of spend from existing customers, better conversion rates through our digital channels and also a number of ancillary revenue streams. Indeed, we're already capturing some of these benefits across our businesses. Now going to the other 2 focus areas: platforms for long-term growth and accelerating the pace of continuous improvement. I'll let our teams talk about that through the day. Now turning to Slide 7. I wanted to talk a bit about the Wesfarmers' portfolio. You'll recall that after the demerger of Coles, I mentioned that the Wesfarmers' portfolio at the time included some of Australia's leading businesses that provided a high degree of defensiveness whilst also providing greater capacity for growth. And this is a very powerful combination. Now 3.5 years later, I'm pleased to say that our core businesses are stronger with larger addressable markets and remain well positioned. We have addressed some historical issues with the reset of target and with profit now improving. And we've also added some new businesses with significant growth potential. You will hear today how our businesses have continued to expand range and addressable market through product development and merchandising capabilities, leveraging digital channels and also through bolt-on acquisitions, such as Beaumont Tiles and Adelaide Tools. And we've also moved into new categories such as Coregas' successful move into the health care sector. Now Wesfarmers businesses benefit from offering a very diverse range of products and services. With an orientation towards essential and everyday consumer products and industrial products necessary in critical industries. This orientation towards essential products has been further strengthened with the addition of the health division and Covalent Lithium. This provides a high degree of resilience across the portfolio. Now like most businesses, our businesses benefit from economic growth and a strong economy, but the diversity of our businesses and the strong value credentials of our retail operations, provides points of competitive advantage during times of weaker demand when value matters more to customers. Now we've also allocated capital to high-growth opportunities, some of which are set out on this table. Since the demerger of Coles, we've also shown discipline around where we invest our capital. Now those that have followed Wesfarmers for some time recognize that we don't operate in a static market. And this is often misunderstood by those that like to define companies by virtue of 1 sector or the market. And this is appropriate for many monoline companies, but it simply doesn't work with Wesfarmers. What has sustained Wesfarmers performance over the decades has been the ongoing expansion of addressable market and an investment strategy supported by logical incrementalism. We are a builder of businesses and at the same time allocating capital to new sectors and opportunities. Together with a conservative balance sheet, this is why Wesfarmers often outperforms during tough economic conditions because of our focus on the long term and the various platforms we have for growth. Now turning to Slide 8. Today, you'll hear from our divisional managing directors, but I thought I'd just provide some high-level comments on how we see the various businesses across the portfolio. Now Bunnings is clearly a remarkable business that has demonstrated its capacity to grow its proposition and to expand its offer over many years now. The progress Bunnings has made on the digital side of the business has been incredible in recent years and benchmarks very well in Australia and New Zealand. And the team are evolving their offer to match the best of what we see globally. Kmart is a clear value leader and it's a great time to have the lowest price everyday necessities. Kmart has evolved its business to be as much a product development company as a retailer. And these unique product development capabilities and the scale they have provide structural cost advantages that means that Kmart is able to mitigate cost pressures that others simply can't. Ian Bailey and his team have made excellent progress digitizing the operations, and you'll hear more about that today. And the reset of the target network and cost base combined with better product and execution has transitioned this business to be a profitable business within the portfolio. Now WesCEF is a real platform for growth across the group. Its existing businesses play a very important role in supporting critical industries. And as we reported in the first half, they're benefiting from current market conditions. But importantly, in underpinning our enhanced zero commitments -- net zero commitments, Wesfarmers Chemicals, Energy & Fertilisers offers growth potential through capacity expansion and adjacencies such as lithium. Officeworks is also constantly expanding its addressable market, evolving its range and bringing new services and products to households and businesses with a structural shift to more working from home, Officeworks is well positioned to meet these changing customer demands. Industrial and Safety as shown some encouraging performance improvements, and the business remains focused on improving its product and service offering and being a reliable supplier to its industrial customers. And then turning to Catch. Catch has been a really good acquisition for the group. And we see it as playing an important role within the digital ecosystem. We've learned a lot over the last few years and made good progress transitioning what was a very small deals based online retailer to one that now has the capacity to be a scalable marketplace with emerging third-party fulfillment capabilities. The niche first-party retail business has been challenging for us in recent years, but we've been really pleased with the growth and performance of the marketplace, which is where we see the more material opportunity going forward. And then at the bottom of this slide, I've highlighted Health and OneDigital, which as I said, you'll hear more of today. So then turning to Slide 9 and just some key messages I'd like to leave with you. Wesfarmers is well positioned for the post-COVID environment, having strengthened the capabilities of existing businesses and with new platforms for future growth. The Australian economy is in relatively good shape with low unemployment and high accumulated household savings, providing a strong base. Now we manage our businesses for the long term, and we prepare for a range of scenarios. And there are clearly some macro risks on the horizon that need to be navigated. This includes broad-based inflationary pressure, rising interest rates and also labor shortages. These risks are not unique to Australia and indeed, they are global trends that we're seeing. And we need to be mindful of the impact on demand should inflationary pressure impact costs and the cost of living for -- and cost of doing business pressures for business. Now our businesses are well equipped to manage and adjust to inflationary pressures, and we have numerous productivity enhancing initiatives underway across the group. Indeed, the essential and diversified nature of our products and services across consumer and commercial markets positions us well for the future. For our retail businesses, we see this as an opportunity to profitably grow share whilst extending our value credentials. The Wesfarmers portfolio continues to evolve and the next few years, we'll see the further development of our growth platforms. This includes the expansion of WesCEF through the Mt Holland lithium project investing in the growth and improved performance of API in our new health division; and finally, developing a large scale and differentiated retail ecosystem. Now we continue to make pleasing progress across our priorities, and I look forward to our MDs providing you with an update of their strategic initiatives today. Now with that, I'll hand over to Anthony Gianotti and then look forward to taking your questions shortly.

Great. Thanks, Rob, and good morning, everyone. It's great to be doing this in person today. I'll start on Slide 11. And what I've set out here is the 3 key areas that I want to talk to today. As you'd expect, these are all directed at supporting our primary objective of providing a satisfactory return to our shareholders. The first is active capital allocation and portfolio management. And this is to ensure that we continue to direct capital towards those opportunities with the greatest capacity to deliver long-term earnings growth and strong cash flow generation. The second is around disciplined working capital management, and this has been a feature of Wesfarmers financial disciplines for a long time. More recently, however, we've had to adopt a more flexible approach to managing our working capital to respond to the external environment. Over the past 2 years, we've made deliberate decisions to hold increased inventory weights to prioritize availability during periods of extreme supply chain disruptions experienced through COVID. I'll talk more about this later. And finally, I'll give an update on where we're at from a balance sheet perspective and the steps that we've taken more recently to ensure we have the flexibility to respond to the external environment and retain the capacity to support our ongoing investment. It is worth noting that these areas of focus have been consistent for some time and is supported by strong commercial capabilities across our operating divisions and through our corporate office functions, including our business development team that works closely with our divisions on evaluating our investment opportunities. Turning now to Slide 12 and starting with an approach to -- our approach, sorry, to capital allocation and portfolio management. Wesfarmers' capabilities as an active allocator of capital are a key feature of our model. And as Rob said earlier, provides us with an important source of competitive advantage. We're not committed to any one sector, we can reallocate capital and deploy new capital to provide our shareholders with exposure to the assets that will best support superior long-term returns. This long-term perspective and disciplined focus on returns are the lenses that we bring to all of our investment decisions. Over time, we've developed a set of unique characteristics that support how we are able to allocate capital and generate these returns. We're disciplined and buy and sell businesses without emotional attachment. We have a long-term investment horizon and are under no pressure to deploy capital. We have the ability to extract synergies through the expansion of our existing businesses and the ability to leverage unique data and digital platforms. We also have access to a strong and flexible balance sheet. And finally, we've developed a reputation as a trusted and responsible long-term partner and acquirer of assets. Leveraging these capabilities, we look to allocate capital in 3 related ways. Firstly, within our existing businesses; secondly, in adjacent opportunities and lastly, through value-adding transactions. Set out on this slide are some recent examples for each of these forms, and many of these Rob has already spoken to in his earlier presentation. Now turning to Slide 13. As I said earlier, our approach to investment is focused on strengthening our core businesses, creating new avenues for growth and driving long-term returns. This is true across all types of investments we make, whether it be CapEx, OpEx or through M&A opportunities. Financial discipline is applied across all these forms of investment and the development of robust business cases is required to support each investment decision that we make. As many of you would be aware, our investment decisions also have regard to sustainability considerations and where relevant, we apply a shadow carbon price in both our corporate planning and our investment evaluation processes. While there are common themes that apply across all these forms of investment, there are also necessary differences to how we drive these disciplines across the different opportunities. Firstly, for CapEx-related investments, our divisional autonomy model empowers and supports our divisions to focus on delivering superior returns and our active capital allocation approach ensures that capital is allocated to the businesses best positioned to deliver superior returns over the long term. Divisional performance is assessed against the achievement of internally set performance hurdles. Hurdle rates for divisional CapEx projects are set annually and they have regard to the underlying risk and reward characteristics inherent in the investment that we're making. Discounted cash flow and return on capital analysis is conducted on all major corporate and divisional CapEx proposals. And a delegation of authority framework ensures that we can move quickly while maintaining review processes depending on the size of the project. Post-implementation reviews are also routinely conducted to refine our internal processes and better inform future decision-making. In recent years, in addition to more traditional capital investments, we've also accelerated investment in data and digital, which tend to be more OpEx intensive investments across the group. These investments are critical to the long-term success of Wesfarmers and our businesses, but require a different and new processes, agile ways of working that don't sit naturally within the frameworks for traditional capital investment. Despite this, we retain our commercial discipline through regular check-ins and close monitoring of relevant operational metrics, including benefits realization, customer churn, customer lifetime value as well as engagement or promoter scores. And we're always bringing the focus back to making sure we are building products that solve meaningful problems for our customers to drive deeper customer engagement and enhance long-term value. As the scope of these investments has broadened, we are putting in place additional controls, particularly to ensure that the time frames for the realization of financial benefits associated with these investments are reasonable and that meaningful progress on key indicators of success are monitored and achieved. Finally, our approach to M&A is governed by an objective evaluation of opportunities. Firstly, we are focused on ensuring acquisitions are assessed against a risk-adjusted cost of capital appropriate for the specific asset. We look for opportunities where Wesfarmers can add unique value or provide capabilities to enhance the value of M&A opportunities. But we view any post-transaction synergies skeptically and we evaluate these separately to the underlying business case. We remain focused on the long-term earnings prospects of potential targets and comprehensive due diligence processes are conducted across the commercial and financial aspects of any transaction, supported by our internal teams and our external consultants. As I mentioned before, we review the sustainability credentials on all M&A opportunities and we'll walk away from any investment that does not align with our group values. Turning now to Slide 14 and covering off on our approach to working capital management. The management of working capital remains a key discipline for Wesfarmers with our long-term approach focused on driving capital efficiency. The natural shape of the group's working capital profile is impacted by the seasonality within our retail and our fertilizer businesses, in particular, where we typically see higher inventory levels in the first half of the financial year. In more recent times, through the disruptive impact of COVID, being disciplined on working capital has required making deliberate decisions to provide greater flexibility to support growth in earnings. Our priority temporarily shifted from capital efficiency to inventory availability, making sure we had stock for customers in what was a volatile external environment. At the start of COVID, you'll recall that we saw lower than usual inventory as the result of strong demand for products across our retail divisions. And then during the '21 financial year as global and domestic supply chains became increasingly disrupted, working capital increased as the businesses took proactive steps to target increased stock weights in some categories to mitigate availability issues. It's important to note that our investment in inventory across Kmart and Target in particular, was directed to non-seasonal lines to avoid a risk of excessive clearance activity. As we called out at the first half, inventories remained well above normal levels, particularly in Kmart and WesCEF. Kmart's elevated inventory balance was the result of a combination of domestic supply chain constraints and lockdowns, combined with the purchasing decisions I just mentioned to manage COVID-related disruptions. WesCEF's elevated inventory position was due to higher global fertilizer prices, which were around 3x higher than we've seen in prior years. And this was reflected in the value of accumulated stock in readiness for the main growing season in the second half of the financial year. The group remains focused on disciplined working capital management, and we expect inventory levels to normalize over time. In the near term, though, inventory levels are expected to remain elevated at the end of the '22 financial year, noting that this is driven by a number of factors, including the acquisition of API and the associated new working capital balance that, that brings with it, a higher cost of goods sold due to inflation and elevated commodity prices as well as the continued approach to hold additional nonseasonal stock in some of our retail businesses as we continue to work through and manage the impact of global supply chain disruptions, particularly in China. Turning now to Slide 15, where I'll talk to CapEx and our balance sheet. The group's continued to invest actively for growth across various CapEx, acquisition and OpEx initiatives that I discussed earlier. Since 2017, the growth in net CapEx has reflected ongoing investment in the Mt Holland lithium project, investment in data and digital initiatives and continued investment across our store networks, most notably for Kmart Group with the planned conversions and closures of Target stores completed in the 2021 financial year. For the 2022 financial year, we expect net capital expenditure for the group to be between $900 million and $1 billion. And this estimate includes around $320 million to support the development of the Mt Holland lithium project as well as other expenditure on ongoing data and digital investment. With respect to our balance sheet, we've continued to optimize our debt maturity profile and reduce our cost of borrowing. And we're pleased to have taken the opportunities to lock in around $1.9 billion of long-term funding at attractive rates of between 1.9% and 3% through the issue of the Australian and Euro sustainability-linked bond that we did in calendar year 2021. Net financial debt was $2.6 billion at the end of the first half and that comprises -- sorry, compares to a net cash position at the full year of just over $100 million. The increase in net debt was largely driven by the distribution of the $2.3 billion capital return that we made to shareholders at the end of the last calendar year, and that was part of the repositioning of our balance sheet. We continue to maintain our strong investment-grade credit ratings with both Standard & Poor's and Moody's, and we have significant headroom to the target metrics. We're pleased with the strength of our balance sheet, having repositioned our debt profile and reduce our cost of funding. This will provide us with flexibility to respond to volatility in the external environment whilst at the same time, allowing us to accelerate investment across the group and opportunistically invest in M&A in a disciplined way. Thank you. And with that, I'll hand over to Naomi I'm happy to take any questions at the conclusion of Naomi's session.

Thank you, Anthony, and good morning, everyone. Today, I'll touch on 4 aspects of how we think about ESG. First, how ESG considerations are embedded and strategic across the group; second, how ESG-aligned actions deliver significant impact along with commercial and financial value. Third, how our ambition is evolving, especially as regards our most material ESG issues. And lastly, how our actions are aligned with Wesfarmers purpose. Turning to Slide 17. This sets out our 10 most material ESG issues. Each year, we seek internal and external feedback to shape our priorities, including from our Board, our leadership teams, investors, lenders, insurers and NGOs. Without going through these issues individually, it's worth highlighting some trends. Among internal stakeholders, safety ranks first. This focus has always held us in good stead, particularly during COVID, and all stakeholders now appreciate its criticality. Among other issues, climate resilience and human rights are long-standing priorities. In recent years, appreciation for the materiality of circular economy and data ethics has increased. We know that many of these material issues like climate, conduct, inclusion, also resonate with the community and are aligned with the SDGs. Also, across these issues, progress is almost universally the product of many individual actions. Turning to Slide 18, our approach to the management of ESG issues. On all these issues, there are extensive laws and regulations, which were clearly required to follow. My comments today are chiefly directed to those additional actions, which we choose to prioritize knowing that they're linked strongly to our purpose and help build better, stronger and more resilient businesses. To assess and prioritize ESG strategies, we use a framework which focuses on their capacity to deliver financial impact and drive resilience. And we assess this over the long term, meaning that we take account of or we internalize many factors that others treat as externalities. Group-wide, there are thousands of examples of ESG-aligned actions that deliver benefits. And it's hard to give a sense of the depth and breadth of this work through our reporting. Recently, we sought to better communicate measures and their value, knowing that they're increasingly appreciated for their impact on earnings and resilience amongst investors and important also to many others, including our team members. This communications task remains an area of continued focus. Stepping through our framework First, we look to understand the impact that actions may have on costs, seeking strategies to better manage or even reduce expenses. What we've learned is that there are opportunities across every function for ESG-linked strategies to deliver savings, sometimes one-off and others sustained. For instance, Officeworks waste management strategies divert 90% of operational waste from landfill, with total waste down 8% this year as they focus on becoming a 0 waste business. This reduces their exposure to rising fuel and landfill charges. In some stores, Officeworks has even seen waste recovery generate net income at certain times. Likewise, Kmart's work in packaging reduces resource use and can save freight costs as does the collection and the use of rainwater for operational purposes by Bunnings and WesCEF. Second, we favor strategies that deliver revenue growth. These kinds of opportunities often arise when there are changes in customer and community expectations. For instance, increasing electrification of the economy created an opportunity to invest in lithium. Likewise, many of our businesses benefit from expanding and changing addressable markets. Like products that meet the preferences of an increasingly conscious consumer. As a third factor, we seek strategies that build resilience by better managing existing and emerging risk and enhancing our reputation, reducing volatility over the long term. I'll give some examples on the next slides. Turning to Slide 19. Across Wesfarmers, we've long managed our businesses with carbon awareness. This accelerated in recent years with the introduction of the climate change policy and through ongoing risk and opportunity analysis. Our businesses have decoupled emissions and turnover, reducing emissions while growing sales. And today, we're on track to meet our ambitious climate targets, which remain leading among global peers. Earlier this year, WesCEF announced a 2050 net zero target with a medium-term commitment to reduce emissions by 30% by 2030. Ian will talk further to this shortly. However, WesCEF's target is built on a decade of experience decarbonizing and emissions-intensive business, and they're backed by credible road maps developed through significant internal expertise and investment. Group-wide, our strategic approach to climate resilience is driving impact and value. For instance, last week, I visited a new Bunnings in East Melton in Melbourne. This new format store is over 30% more energy efficient and 1/3 of its electricity is generated behind the meter with rooftop solar, meaning that energy costs are down nearly 40% on a per square meter basis. For the group, climate awareness is also lowering our cost of capital. As Anthony mentioned, last year, we issued $2 billion in sustainability-linked bonds with 2 climate-related targets, delivering a meaningful discount in margin. While we've achieved much in recent years, there's still plenty of opportunities, particularly as we further build out our climate capabilities and better use ESG data to drive strategy. Turning now to Slide 20, recognizing that there are limited resources in our world, circular businesses keep them at their highest value for as long as possible by design. Group-wide, there's no shortage of opportunities to realize the economic value of prudent resource use. Indeed, there are material circular opportunities throughout the product life cycle. First, in product design and materials, second, in product life and use; and third, in product end-of-life options. In coming years, we expect to see more strategies deployed faster in each of these 3 areas, but there are also many existing examples. When it comes to product design, our early focus has been on packaging, where we've delivered some encouraging outcomes. For instance, Kmart has replaced nearly 100% of its expanded polystyrene packaging with recyclable alternatives, removing enough styrene to fill nearly 300,000 bean bags a year. Kmart is also starting to replace its white laminated boxes with raw unbleached cardboard that is recyclable. And I think the product looks better on the shelf. These kinds of changes can take time, but collaboration across our merch and our environment teams is accelerating our ability to specify raw materials that are recycled and sustainable, recyclable or compostable. For me, it's always particularly interesting to see how customers embrace these kinds of changes because they had a highly intuitive appreciation for circular issues. This means that there are categories where they prefer the new aesthetic and sales increase at higher price points and margins as evidenced in some of Officeworks greener choices range. We also expect progress as regards product end of life, which in retail is partly about educating and supporting customers to dispose of products responsibly. In this regard, Bunnings and Officeworks enable recycling of resources embedded in a product at end of life, when in the past, they were considered waste. A favorite recent development of mine is with printer cartridges, which we've collected now for 15 years. Some are now used to provide feedstock for specialty artist pens also sold in-store at Officeworks. Our industrial businesses have opportunities too. With Covalent, we hope to sell byproducts from the refinery for use in construction and as road base and another buy-in product to global soap manufacturers. The alternative would be to transport them back to the mine pit with all the associated costs and emissions. Looking forward, we expect a proliferation of circular opportunities, which we'll start to report on with the introduction of measurable, meaningful and comparable indicators to demonstrate progress. Turning to my final Slide 21. I want to close briefly by reflecting on the group's long-standing commitments to reconciliation. As many of you would know, before we demerged Coles, Wesfarmers was one of the largest private employers of Aboriginal and Torres Strait Islander Australians. Post demerger, it was clear that there was work to do in the rest of the group, and the entire Wesfarmers family was really pleased to end 2021 having regained proportional representation with over 3% of our Australian workforce identifying as Aboriginal and Torres Strait Islander people. We're particularly proud of the role our retail businesses have played in youth employment, where we recognized an opportunity to meaningfully contribute to closing a gap in indigenous youth employment. Since 2019, we've recruited around 1,200 indigenous youth in casual part-time roles designed specifically to sit comfortably alongside their schooling. But there's still more that we can do, which we hope to address through collaborations with other large employers of youth. Importantly, while our focus on indigenous employment clearly delivers great outcomes for our team members and their communities. There's also evidence that it's good for our businesses. Group-wide, our indigenous team members have shown better retention than average, delivering recruitment and training cost savings. And we're confident that strategies like Kmart's deadly stores program also support financial performance of their stores as teams better reflect the local communities where they're operating. Looking forward, our next frontier is to increase representation at all levels of Wesfarmers. And earlier this year, we launched a program supporting high potential indigenous leaders to earn a Cert IV in indigenous leadership. And last month, the inaugural cohort of 20 leaders completed the coursework for this credential. Together with active sponsorship from our MDs, we're hoping to accelerate these team members progression, supporting our aspiration to achieve proportional representation at more senior levels. I hope this overview has provided some insight into our strategic focus on ESG issues. And with that, Rob, Anthony and I would now be happy to take your questions. Thank you.

Thanks, Naomi. If you wish to ask a question in the room, please take position behind 1 of the 2 microphones and I will ask the questions submitted online. I'll start with a question from Michael Simotas at Jefferies and then hand to David. Michael asks, you've called out higher inventory levels given -- and given various reasons for this. Stock availability has been tight to date, but how nimble can you be if demand slows quickly? Is there any risk you end up with too much stock?

Thanks, Michael. I might take that question. Look, it's clearly the factor that we're thinking through quite carefully. I think what you heard me say today is we have been quite deliberate in the way that we've invested in inventory. We have tried to stay away from seasonal inventory and invested in more 365 product, which should alleviate this issue around having to have excessive clearance activity. I think there's also other factors that will drive the dollar value of inventory increasing that I also called out. So cost of goods sold is obviously increasing, that will flow through. As I mentioned on the WesCEF, there will be increases there as well. So I don't -- we will need to act fairly quickly, but we're also conscious of the fact that there continue to be global supply chain disruptions, as I noted, in China. So we will revert to more normal levels of working capital and inventory management as those issues dissipate. But I think we're managing it as best we can and still prioritizing availability to make sure that we're maximizing our EBIT benefit as well. So hopefully, that gives you some idea as to how we're managing that.

Anthony, it's David Errington over here. Just a quick follow-up on that, and then I'll ask you a question. But on the inventory, looking at it from a different angle. Given the world has changed so much, how much of a competitive advantage is it for you that you've got the balance sheet relative to other retailers that wouldn't be able to do what you can do because at the moment, every one that I talk to saying it's not an issue of selling the inventory. It's an issue of getting the inventory. So I'm coming up from a different angle that this is a competitive advantage for Wesfarmers, not an added cost. That's the first part, if you could elaborate. But my next question is, on the digital platform, you gave -- Rob, I think you gave some really good KPIs and Anthony, you did too. But they seem to be focused on sales acquisition type areas. The digital initially is on sales. And I'm a bit old fashioned, I suppose. I'm getting a bit old, I'm closer to the end than the start. There's no fact -- no rumor about that. But I like to see profits rather than sales. And a lot of these digital aspirations tend to be more focused on sales as opposed to profit. So how can you guys look at -- or what are you guys going to look at in terms of making sure that this just doesn't become a bottom pit in terms of getting sales? And the costs just keep flowing out.

Sure. Thanks, David. I'll start on the first question. I think you're absolutely right. And that's why when we were making the conscious decision. And if I look at return on capital, for example, there's 2 parts to that equation, as you know. And I think our focus was making sure that we grew earnings. And we know that when we don't have inventory availability, that really hurts us. And if you look at our balance sheet, we talked about our cost of funding and our debt position in terms of drawn bank debt is very cost effective. So you're absolutely right, an investment in inventory in the right way. I would stress it needs to be in the right way. We don't want to overinvest in seasonal stock that creates a massive clearance which doesn't flow through to margin. But I think sensible investment in inventory to prioritize availability, which I think we've done, I think, is the right thing. And you're absolutely right when you do the maths, our cost of funding with the level of investment that we're making is much more cost effective to ensure that we've got availability and good margin pass-through.

David, I'll answer the second question. But just a final point on that one. I think not only you're right, I think the access -- the strong balance sheet, the access to capital that we have gives us that opportunity. But I think -- if you think about businesses like Bunnings and Kmart, both those businesses generate very strong returns on capital. So we are able to make a deliberate decision to carry more inventory, maybe except a slightly lower stock turn in order to prioritize availability. And for a lot of businesses that are fighting to survive month-to-month. They just don't have that luxury, whereas we can still generate a very strong return on capital notwithstanding that we're being a little bit more cautious on the inventory side. I think you're absolutely right in terms of the opportunities around leveraging data are far more than sales related. I did call out some of the marketing effectiveness ones, and that's not just about sales. That is about we spend hundreds of millions of dollars on marketing across the group. A lot of that spend is migrating from more traditional forms to digital forms of marketing. The effectiveness of that spend is improved, obviously, through really good customer insights and data. On top of that, we already have some of the busiest websites in the country. So leveraging those very valuable assets that we have will materially improve marketing effectiveness and that goes straight to the bottom line. I didn't call out a lot of the things that are already happening and they have been happening in terms of productivity and efficiency initiatives since we set up the AAC. So we've already operationalized a lot of data initiatives that focus on demand planning, demand forecast, demand planning, ways in which we can more effectively carry the right inventory in the right stores at the right time. So there's a lot of inventory-related issues. Also areas around workforce management, RAN management in-store is another area where we're leveraging that data. Now all of that, I'd say probably my reason for not calling that out is a lot of that is happening already. And you're absolutely right. When we set up the AAC, we had a really strong focus on benefit realization. And in fact, when we started off, the easier ones to go after where the productivity profitability benefits, now that we have much deeper customer insight, it gives us the opportunity to focus on more marketing sales generation opportunities, but I would stress it's not about sales for the sake of sales, sales for the sake of profitability.

Maybe, Dave, just to add. I think the other factor is we also look at frequency and retention because it's not about sales at any point in time. It's about retention of those sales on an ongoing basis. So we look closely at things like frequency and looking at that improving and obviously, retention of customers, which is key.

Rob, it's Ben here from Jarden. Just interested in your point, Rob, about divisional autonomy and you say how important it is. But then at the same time, you're talking about scale, 150 million transactions a month -- sorry, website hits and 40 million transactions. It's how you thinking about digital autonomy changing? Because personally, my view is you're probably going to do the business a bit of a disservice if you're trying to keep them as solid as they have been historically. And you've got such an opportunity to build range. And I think last year, you said the correlation between range and penetration. And also, we look at the back end around supply chain and endless aisles. Should we be thinking that your thoughts around autonomy at the division level is changing, you would think about aggregated supply chain cross-dock, et cetera, and then sort of a more centralized sales platform that it integrates all the brands at the front end?

Yes. So on that, I'd start by saying that we start with an orientation of being really strong on the power of divisional autonomy. And when you talk about areas like data and digital capabilities, you need to recognize that each of our divisions are quite different. And what makes Bunnings really successful is having a digital engagement with customers that is uniquely designed to meet the needs of a Bunnings' commercial or consumer customer, which will be different to what a Target customer wants or what an Officeworks customer wants. And indeed, in Officeworks, what a retail customer wants is slightly different to what a commercial customer wants. So that's why I emphasize the importance of the divisions having their own very unique capabilities related to their business. What you also find across the Wesfarmers Group is all of our divisional teams are incredibly commercial. So if there are opportunities for us to collaborate and share perspectives, well, quite frankly, we don't need to push that from the corporate center. It happens already. So container shipping. There's a reason why we collaborate on container shipping and each of our divisions extract enormous commercial benefits from leveraging our scale whilst also meeting their needs. I think there are examples. So I don't see what we're doing is compromising divisional autonomy. I see it as just being value adding for our divisions. Already, our divisions have numerous third-party relationships. What we're finding is that some of the more valuable and cost-effective relationships on the digital and data side are coming internally. So for example, sharing different software capabilities, adopting common ways of working across a number of our businesses. A good example, if I think about supply chain is without anything being dictated centrally, we've started to use similar AMR technology and software across a number of our automated fulfillment sites. So if you look at the new CFC that Officeworks is set up in Darriman, in Victoria using the same technology and software that we're using in Catch. Another example, I guess, is where we're getting into some of the -- probably the opportunities that you mentioned is over the years, we have used 3PL solutions for supply chain. So I know Officeworks users 3PL, Kmart has 3PL. What we're doing at the moment with Catch and Kmart with Fulfilled by Catch is a really great way of leveraging supply chain capability to move to a much more efficient online fulfillment solution, leveraging the same type of technology I talked about across investments for Catch and Kmart. So I think we will see more of that over time. And interestingly, we benchmarked the commercial arrangements to ensure that Kmart was getting as good, if not a better deal than they could get externally and also to ensure that it made sense financially. So over time, I think there will be more opportunities to collaborate in areas around last mile fulfillment, leveraging similar technology, maybe also some of our distribution center capabilities. But I think it would -- we'd do it in an incremental way. And I can't imagine a situation where we're necessarily driving a deep integration of supply chain across the group because simply, it wouldn't add value -- it wouldn't add that much value.

Sorry, just a final follow-up on that. So is there an aspiration and not to be the Amazon of Australia, but arguably, you guys along with Woolies is probably best positioned to do something on that line. It doesn't sound like there's aspirations to fully aggregate the eyeballs you've got at the moment, the range. Because in theory, you're the best position to do it locally, I would have thought.

Well, I think there's opportunities to leverage the eyeballs and to improve the customer experience across our different brands. I think if you want to -- if you think about the unique proposition that we have, we have some fantastic brands and fantastic propositions in different segments. I wouldn't want to dilute the unique and more curated approach that we have across different segments by aggregating it all into a very generic marketplace, for example. I think that would be doing customers a disservice. But there are clearly opportunities to leverage technology, supply chain within the marketplace to provide a broader aim. So for example, Kmart's product being available on the Catch marketplace is a good step forward. But -- so we'll very much be customer-led on this. And I think that -- I won't broadcast in advance exactly what we're going to do. But there are opportunities we see to incrementally improve the availability of products online across the marketplace. Importantly, to make it a more seamless experience. So if you even look at what Nicole will talk about later with the evolution of the OnePass subscription program, you're now able to buy products across Catch, Kmart and Target with the one login, the one password, a far more seamless experience across those 3 retail brands. So I guess that's a sign of things to come.

It's Bryan Raymond, JPMorgan. So just continuing on the digital investment piece. The $100 million or so run rate that you've got at the moment in terms of investment at a group level. Just wanted to understand the profile of that as you go forward because I think it's fair to say you guys are probably early in the journey on some of these things. There's lots of opportunity ahead and you're probably not market leaders in online and in many of your businesses other than maybe Officeworks, obviously, which is well down that path. Should we expect this to roll off? Or should we expect it to accelerate because as an argument, you could say on both sides.

Well, Bryan, first thing I'd emphasize is the $100 million is not a run rate. This is not -- we're not just going to spend $100 million every year on this. The $100 million is in relation to setup costs, in relation to launch costs. I also -- I don't necessarily agree with your comment that we're behind on this. If you think about what we're actually doing and where this investment is going in terms of in terms of developing what we're developing with OnePass and a more seamless subscription program across all of our retail businesses, both online and in store. No one does that in Australia. There is no precedent in Australia. So we are the first to do this. So that is quite a unique opportunity. So that is going to require a fair bit of investment. The great thing is that, from my point of view, there's not a lot of downside around the investment we're making. Once we get through the heavy lifting around this investment and the launch, we will have delivered a far more seamless shopping experience across all of our digital channels, all of our retail stores that retains the best of what each of our division stands for, whilst making it a far more seamless experience for customers and being able to leverage the customer data across the group. So I feel quite comfortable with the investment we're making. And then going forward, look, I would expect the investment to come down over time, but this is a very dynamic area. So we will -- what good looks like today is simply not going to be good enough in a year's time or 2 years' time. So I think we will continue to be investing. But over time, the economic model will be such that we will clearly be generating incremental profits from what an incremental sales from what we're doing, incremental revenue streams. And I would expect that the net cost of the investment to decrease over time. So I wouldn't -- so it's premature, I guess, to kind of get to where you're getting to what's the cost going to be in FY '23 -- sorry, FY '24? Time will tell. Time will tell. But emphasizing the $100 million is very much around an investment, a setup, a launch investment.

So we should -- just to follow up, sorry. So we should think about that $100 million is a bit of a net figure. And at the moment, it's in that setup phase, there's not much earnings or revenue to go against it and over time, that will -- so the people work, the actual labor costs and systems costs will still be there, but there will be some offsetting earnings to fractionalize.

Yes, absolutely. And look, there will always be -- at the end of the day, what drives us is creating value at a group level. So we're not going to get into an overly complex process of trying to split out. We will know it because we'll monitor it, but we're not going to be reporting separately. Well, here's the incremental value that Kmart has generated from OnePass or OneDigital, but we will be monitoring that very, very closely. So there will be some costs that will be recurring, but there will be certainly not at the level that we're seeing through the investment phase.

It's Lisa Deng from Goldman Sachs. I had a question on M&A. Thank you so much for illustrating the rigorous process we have around assessment, the actual investment itself. But could you give us a little bit more flavor in terms of the types of assets that Wesfarmers might be most interested in, whether it's the industry, the segment, the types of capabilities, the type of strategic assets that we might look for? And then conversely, it seems like we are building and investing heavily behind a consumer retail ecosystem. So on those businesses that may have less synergistic characteristics, would we think about lower investment or potential divestments out of it?

Well, just on that, I -- if you think about where we've made most of our investment recently, we made a very significant investment through the Mt Holland lithium project, which is obviously non-consumer-based. The API investment, although there is a consumer lens to that, it also creates an opportunity to gain exposure into a new sector of health. So we're not -- I should emphasize that our M&A strategy is not driven by trying to support the ecosystem agenda if that's what you're getting at. And in fact, we are quite skeptical of M&A strategies that are trying to reinforce a broader strategy because often what that can do is it can lead you to make investments that may not necessarily be in the interest of shareholders, but that you convince yourself are strategically aligned. And we've seen many examples of companies with no KPIs around doing M&A. And in fact, it makes our life a lot more difficult, quite frankly, when we do M&A. Our life is a lot easier when we don't do M&A. We're also very skeptical about the value -- the ability of M&A to improve returns for the buying shareholders. So we start with a skeptical position. But there are times when unique opportunities arise, and we saw that with Kidman and we saw that with obviously API. We -- as Anthony said, we're also -- we're mindful that there are some businesses and assets where that more logically sit within Wesfarmers and where our management capabilities give us a greater confidence of our ability to create value. We have an orientation towards businesses where we can see a path to continue to invest and grow capital. We'd much prefer to invest in something where we can keep investing rather than invest in something where all the investment is done, and we just have to pay a lot of goodwill. As Anthony said earlier, we obviously think about synergies. And there's no question that as we develop our digital capabilities and our data capabilities, there's some really interesting synergies that come from that. But the way we think about synergies is that's to our account, right? That's what we want to take. We want to capture and we want to flow the benefit through to our shareholders. So we're skeptical about paying away synergy value to someone else who hasn't delivered those synergies for us. So looking forward over the next couple of years, I don't know if we'll do any more major acquisitions, we may not. It will all depend on whether the opportunities arise. But as Anthony said, we've got a really strong balance sheet. We've built a lot of capability across the group. We have more options and optionality than we've ever had before. But at the end of the day, we'd only do M&A if we felt it was in shareholders' interest.

Rob, Anthony. Shaun Cousins, UBS. Just 2 questions. You've highlighted your confidence around OneDigital, getting to profitability. Catch will soon be part of that division, fiscal '23 onwards. How do you see the prospect for Catch to get to profitability, particularly given that was a disappointing first half result in the first-party product? And my second question is to Naomi, just around how are you sort of balancing the idea in the Kmart and Target in particular, around driving apparel sales, given that recycling is quite difficult in the apparel space and your price points can lend itself to a little bit of fast fashion consumption, which is great for sales, but obviously disappointing from an ESG perspective. So can you just talk a bit about the balance and how the company thinks about that, please?

Thanks, Shaun. So just on cash. Yes, so going forward, I would expect the Catch would become profitable over time. But we also see that there's a fair bit of investment required over the next few years. The investment is really around scaling up the marketplace, developing fulfillment capabilities. As I said earlier, I think the opportunity for Fulfilled by Catch gives us a unique opportunity to fractionalize some of those investment costs advantages that other stand-alone marketplace businesses wouldn't have. You're right as well that we're a bit disappointed with the performance of the first-party business of Catch and the losses were a bit ahead of where we expected, not materially ahead but a bit ahead. So I expect the next few years in Catch will continue to be a strong investment phase. But what I would expect is I would expect over time, over the next few years, that those losses to decrease. And also, we're monitoring very closely the metrics and performance of the marketplace. And as I said, the marketplace is performing really well. We're really pleased with that. But we do need to invest in some more automation technology to improve it. So I'd expect -- bottom line is I'd expect the losses to decrease over time. But for the next couple of years, we still have a fairly significant investment program within Catch.

Thanks, Shaun, for the question about garments. So garment waste is definitely a major issue in Australia and internationally as well. And as you'd expect and as you can probably see, if you do a sort of a detailed walk through the store, we're already taking some actions in that regard. But certainly, there's a lot more that will be possible with time. Some of the ways in which we're approaching this issue is around the materials that go into the products. So wherever possible specifying recycled or recyclable materials. BCI cotton would be a terrific example. But likewise, there's whole activewear ranges at Target that are made out of plastic PET bottles. It's called REPREVE. And it's another really good example of those products that sell at a higher price point with absolutely compelling margins. In Australia, there are some very natural channels through which you can collect end-of-life garments as well. We're very good at doing things that probably don't have any further use actually to charities. And as increasingly businesses like Kmart and Target are looking to specify recycled feedstocks, that -- what used to be a waste stream is actually an opportunity now. And I suspect what you will see is whole industries start to arrive here in Australia and internationally, which capture particularly polyester and nylons but also cottons for reuse. And that will be an industry that appears in Australia and in other developed markets. I think our aspiration would be first to mass on some of those fully recycled polyesters. And Kmart has got some really terrific ambitions around cellulose as well as polyester and nylon, which are on their better together website. So it's a great question. Thanks, John.

Rob, Anthony, I have a question from Phil Kimber at Evans & Partners. And then in the interest of time, we'll just take the questions in the queue now and then move on to Ian's session. Phil asks, in the last few months, there have been significant changes that could impact the consumer, record petrol prices, interest rate rise, new government. Is there any color you can provide on what you're seeing with respect to the consumer and their behavior over recent months?

Thanks, Phil. So -- in terms of shopping behavior, we haven't seen any real changes in shopping behavior. So the Australian consumer is still in pretty good shape, as I mentioned earlier, in terms of unemployment is low savings levels, although they've come down a little bit, is still relatively high, although interest rates are moving upwards. They're still a lot lower than they were and still at very, very low levels relative to what you'd expect historically. So overall consumer demand is still quite healthy. We have noticed through some of our feedback, customer feedback work that -- and focus group work that there are some concerns creeping in. There's concerns about inflation. There's concerns about what may happen longer term with interest rates, but that isn't necessarily translating to any changes in shopping behavior. As I said earlier, though, that we run our businesses thinking through a whole range of scenarios. I think it's more likely than not that over the next year, we will see customers start to be more value conscious. So this is something that we're very much focused on across our group. So whilst we keep reinforcing the importance of retaining our leading price credentials, quite frankly, through COVID, that didn't matter as much. If you're trying to maximize profitability through COVID, you would have aggressively put your prices up and you probably would have got away with it. We haven't done that. We've kept our prices low, and I think that will serve us well because I do believe over the next year or so, we will see customer behavior modify a bit to see customers and businesses be more value conscious.

It's Craig Woolford from MST. Can you clarify the digital, IT and supply chain CapEx? What's in this year's number, but more importantly, over the next 2 to 3 years, given there is this focus on your digital investment, you've talked about OpEx, but there's not a lot of clarity on the CapEx that might attach to that. And I guess the reason behind it is there does seem to be an opportunity that does provide a marketplace or an ecosystem. Does that need some CapEx to make that a reality?

Yes, Craig, thanks. I don't have a specific number for you, but I know for a fact that, that number obviously is growing. But as you know, that shift in spend, particularly about IT and digital is moving more to OpEx, which is why we also call that out. We'll certainly provide more of an update at the full year and give you a better indication of what that split is, but certainly, it's growing, as you would expect.

Yes, Craig, just on that, and you'll hear -- it's probably best, you'll hear through the day today, each of our divisions, certainly, our retail divisions are investing heavily in technology and supply chain is a big part of that as well. I'd say the investment is more incremental rather than transformative type investments. We already have in a number of our businesses, pretty good automated technology there, and there's opportunities to further invest and expand on that. Coming back to Catch, the point I mentioned earlier is we are investing more in Catch. And that is -- that will address the issue that you're focused on, which is building out the marketplace capabilities, building out automation capabilities that will help accelerate that at scale and also the fulfillment capabilities there. So that is certainly addressing the issue that you've highlighted.

Madeleine Beaumont from BlackRock. I just wanted to do a follow-up question on Lisa's question about M&A, specifically about the technology sector. I mean, a lot of your data in digital, it's all been pretty much organic supporting businesses. Yet it's a sector that has clearly changed in terms of valuation in the listed markets certainly. And I was just wondering if you think as a team you have actually the capacity and ability to really analyze these businesses and whether you think about investing as purely as a portfolio mispriced asset rather than as an integrated asset?

It's a really good question. We have, over the years, looked at a number of these or you might call them more tech or digital companies, and we've struggled to get our head around the valuation. Valuations have come off a fair way. So perhaps there are opportunities. Across the Wesfarmers Group now, we have some remarkable talent and capability in the tech space and the digital space with -- and I think you'll hear from people like Mike and Nicole and Ian today, the quality of the talent that we've brought into the group is quite amazing. We also have some very deep partnerships with other tech groups, both locally and around the world that we do work with very closely. So I'm very confident that -- and I won't kind of list the names of companies that people have come from. But if you imagine some of the leading Australian and international tech groups and digital groups out there, many of those -- many people from those businesses have chosen to come and work at Wesfarmers. So I'm very happy that we've got the capability to analyze those opportunities. I think that the challenge is still valuation. So look, time will tell whether we can -- I think we can do a good job of evaluating the opportunity, whether or not we can get to the point of having the confidence to invest in those opportunities. Time will tell.

It's Adrian Lemme from Citi. Just interested in the cost pressures across the business. So the minimum wage decision will come through the middle of this year. Can we understand should that stuff just wash through the business? Or are there targeted programs to try to offset this inflation coming through?

Well, obviously, there are a number of areas of cost pressures. I think we've talked a lot about the COGS pressure around raw material costs and so forth. We've also talked about freight costs, both domestic and international container shipping fuel cost increases and so forth. And then as you rightly say, there is -- we are seeing across our businesses in a number of areas, fairly strong wage pressure, driven by labor shortages. We -- through our EBAs and on the retail side of our business, most of our businesses have EBAs and we have wage escalation baked into those. What ends up happening with the minimum wage and awards could flow through to that depending on where the outcomes are. The way we're thinking about this is we think about it from 2 points of view. First of all, internally within our business, how do we manage wage pressure. We would like to see real wages go up because we think that real wage growth is good, good for our team, good for consumer spending. But you can only deliver sustainable real wage growth if there is -- if there are productivity improvements. Now we're taking ownership of that internally by a lot of the productivity initiatives. And I mentioned earlier that each of our businesses have a number of productivity initiatives that are within our control to go after to find ways to drive productivity that will enable us to absorb some wage increases. But then there are also some structural issues we face as a country. Certainly, the problems that we're seeing in EBAs that are making it a lot harder for companies to unlock those productivity benefits and share the benefits with our teams. So we are hopeful that in the coming months, we can find a way of breaking this impasse that is essentially holding real wage growth back. The other broader factor I'd mention, and it's beyond Wesfarmers is that a lot of our -- we have over 1 million business customers across our group, particularly groups like Bunnings, Officeworks and Blackwoods. We have over 1 million business customers. Not all of those businesses have EBAs. They might be subject to awards and so forth. And there is a limited capacity for these businesses to simply absorb wage inflation. And the consequences of them absorbing wage inflation is going to be that they put prices up even more. And some of these businesses may not have the same capacity as Wesfarmers does to invest in productivity-enhancing initiatives. So I think this is one that we're monitoring quite closely. I think it is a risk. As we look to the year ahead, it is a risk that if we see significant wage inflation without corresponding productivity benefits, then that will just flow through to much higher prices and could be a dampener on demand.

It's Ross Curran from Macquarie. May I sneak 2 questions is that all right? The first one is around the capital allocation framework. And you've got some exceptionally high returning businesses like Bunnings and you got some divisions that consistently deliver below group average returns, but are well run relative to their own competitors. You've just acquired API. And traditionally, pharmacy distribution tends to be quite a low return business. So 1, 2 years down the track, how do you continue to allocate capital to businesses that structurally generate lower returns?

Well, Ross, just on the API side, you're right that traditionally, relatively low return on capital business, but it is quite a resilient business. And as I said, in many ways, the regulation and the scale delivers a certainty around those earnings streams. So from a risk-based assessment, the risks are lower, the returns are lower. The opportunities for us across API and health are really to invest in other areas. Now it's not to say we won't invest in wholesale, we will. And in fact, the wholesale business is a very strategic asset and capability having a national supply chain capability, having direct relationships and partnerships with every pharmacy group in Australia. That has great strategic value that can be leveraged into other areas where we can invest capital at much higher rates. So that goes to the retail side of the business, the digital side of the business, even businesses like clear skincare presents some interesting growth opportunities.

And then secondly, just specifically around New Zealand. So New Zealand is a bit further along the journey on inflation than we are in Australia. Are you seeing inflation impact returns in your New Zealand business relative to Australia at the moment?

Well, you're right that certainly, inflation is well ahead in New Zealand, both on the COGS side but also on the -- particularly on the labor side. And it's -- look, it is something that we're monitoring closely. At this stage, at least our -- the sales of our businesses over there, particularly businesses like Bunnings and Kmart and our Blackwoods business are holding up pretty well. But it's worth remembering that all of those businesses do have a really strong value orientation. And as I said, at times when customers are more value conscious then that generally serves our business as well. But look, too early to tell in terms of broader shifts in consumer spending. But all I'd say is, yes, we're seeing significant inflationary pressure and our businesses are trading reasonably well.

Sorry, the question was less about top line, more about profitability. So are you seeing your margins get squeezed there?

Yes. Not necessarily, no. So we've seen -- what we've seen is we've seen prices adjust to compensate -- to some degree, to compensate for the price. What we haven't seen yet and what I'd say time will tell, and this will be interesting read for Australia is we're now -- only now starting to see significant wage pressure in New Zealand. So we're only just starting to see that flow through. So the implications of if you're seeing 5%-plus type wage escalation, that will start to flow through and have an impact over the next 6 months and beyond. So it's still too early to assess that. What I was really getting at is more of the COGS inflation pressure has been ahead of Australia.

Sorry, I'm conscious of time, and I might now hand over to Ian Hansen to give the WesCEF summary, and we also have Aaron Hood here in person for Q&A. So Ian, over to you.

Good morning, everyone. First, we really would have enjoyed the opportunity of being in Sydney with you today, having contracted COVID earlier this week. That's not possible. And I also apologize for my somewhat croaky voice. I'd love to start by providing a brief overview of the Wesfarmers Chemicals, Energy & Fertilisers, vision of WesCEF followed by an update on each business unit, finishing with a future outlook. So turning to Slide 24. WesCEF's vision is to grow a portfolio of leading sustainable businesses, providing products into critical industries. And as I move through this presentation, it will become evident that we are guided by our vision in our decision-making and strategic process. This slide outlines the 3 operating business segments within a division, Chemicals, Energy and Fertilisers, which have market-leading positions and a track record of strong operational performance, but also lithium, which is a newly established segment with assets currently under construction. I would like to highlight WesCEF's continued focus on safety, in particular, Safe Person, Safe Process, Safe Place campaign, which is at the very core of WesCEF strategies. So now on to Slide 25. WesCEF businesses play an important role in providing key products to critical industries. Our chemicals businesses, specifically CSBP Chemicals and Australian Gold Reagents support the mining industry. The CSBP fertilizer business underpins agricultural production. And the energy portfolio through clean heat and EVOL LNG provide gas to homes and businesses for energy and remote sites, in particular mines off the electricity group for remote power generation. The technical capabilities and skills within WesCEF provide an avenue to continue pursuing growth and adjacent opportunities, which form the basis of our strategic focus areas this year. WesCEF's net zero commitment and road map is an extension of the long-standing focus within the business on improving the emissions intensity of products, and this commitment will support the continued growth of the division. Turning to Slide 26. The majority of our assets are located in Kwinana about 30 kilometers south of the Perth CBD. It's an important and strategic industrial area in Western Australia, which supports downstream manufacturing and chemical processing. Many of the operations in the area are interlinked by our utilities, rail access and port facilities. The industrial sites in the area are also interconnected commercially, supplying feedstock products in other operations generally via pipeline. This map shows a footprint of our existing Kwinana processing facilities, and we look forward to adding to this landscape in the near future with the orange section highlighting the location of the Covalent Lithium refinery. Now to Slide 27 on divisional integration. It's a busy slide, but what this slide tries to demonstrate is our businesses have many interdependencies and utilize similar feedstock. This provides the economies of scale that come not only from an operational perspective such as sourcing, producing and distributing, but the shared service structure, which our business model utilizes where we leverage skills, knowledge and capabilities. I'd also like to highlight the significance of gas within portfolio. Aside from natural gas being distributed by Kleenheat Western Australia network and used to produce LPG and LNG, it's a key feedstock in the production of sodium cyanide and ammonia. This ammonia, which is supplement of our imports, is either sold to nickel producers or used within CSBP to manufacture ammonium nitrate, fertilizers and sodium cyanide. Gas will also be used in the lithium hydroxide refinery. Now moving on to Slide 28 regarding commodity prices. At the half yearly results presentation in February, I outlined that WesCEF's earnings are, amongst other things, heavily dependent on commodity prices. This graph illustrates the global pricing of the 2 main commodities which our division sells, ammonia and LPG, using the Saudi CP as a proxy for LPG. The ammonia price is also a proxy for nitrogen-based fertilizers and global ammonium nitrate prices, as these products are manufactured from an ammonia base. As you can see, both ammonia and LPG are currently trading at or near historic highs. The increased ammonia price was initially driven by higher gas costs in Europe as well as a number of international plant outages and then subsequently, the impact of the Russia/Ukraine conflict. I think you're all aware of the oil price movements, and the Saudi CP or LPG price correlates strongly with Brent oil. These higher prices are favorable to us being a locally based manufacturer, although they have resulted in increased working capital, which the team is closely managing. A large number of our customer contracts have feedstock price pass-through embedded in those contracts, which allows the business to realize gains on lower-cost manufactured product. In regards to supply chain disruptions and the current geopolitical situation, our Fertilisers business has ceased importing the liquid fertilizer urea ammonium nitrate, which we brand Flexi-N, from Russia, our major source to supplement local manufacturing. Alternative supply arrangements have been put in place. Additionally, shipping and logistical challenges are being experienced throughout our businesses. Additive feedstocks or spare parts and equipment or new components such as those required by Covalent are impacted by these supply chain issues. Turning to Slide 29. WesCEF has 5 key strategic focus areas. Firstly, decarbonization. We are conscious of our environmental footprint and have released our road map to net zero, which I'll discuss in more detail short. Secondly, we are considering projects which will leverage existing infrastructure and expand our chemical footprint to capitalize on opportunities in the market. Thirdly, we are focused on providing all necessary resources and support to Covalent to ensure successful project execution as well as evaluating adjacent and downstream opportunities in the growing electric vehicle battery materials sector. And in regards to energy, we're investigating opportunities in electrification and related technologies to support the transition to clean energy. And finally, we're investing in enablers to optimize our business processes. This includes considering the benefits of a new ERP solution, increased investments in data and digital capability and ongoing continual refinement of our maintenance and operational strategies. Turning to Slide 30. In April, we were very pleased to release details of our road map to net zero. This defines the 3 phases of WesCEF's decarbonization journey, including our interim targets and ultimate commitment of net zero by 2050. Our baseline year is FY '20 as it is recent and indicative of normal operations. Our Scope 1 and 2 emissions in that year were about 950,000 tonnes. And importantly, if it weren't for the abatement already delivered via historical investment and optimization, representing the gold section on the left-hand side of the slide, that baseline will be closer to 1.7 million tonnes. In other words, WesCEF is already abating about 40% to 45% of its emissions. We are currently in Phase 2, where we're striving to reduce our emissions by 30% on the -- by 2030 relative to the FY '20 baseline. We are considering the commercial and technical challenges in upgrading abatement catalysts and leveraging renewable energy. And during the second phase, we will also be doing the groundwork to support Phase 3 post 2030. Partnerships and transparency are going to be key to progressing the collective journey to net zero as organizations and government bodies work together to investigate and evolve technology. For example, WesCEF has partnered with Mitsui to explore the feasibility of building a low-carbon ammonia plant, including carbon capture and storage. We're also working with APA Group to undertake a prefeasibility study to assess the viability to produce and transport green hydrogen via APA's Parmelia Gas Pipeline in WA Southwest region. Importantly, climate change is front of mind when we consider growth opportunities. Unless a project has a clear and credible path to net zero by 2050, we will not pursue it, and we won't undertake a material production capacity expansion unless it reduces the emissions intensity of that product for WesCEF. Moving to Slide 31. In terms of our investment in lithium, Covalent continues to progress the construction and development of the mine, concentrator and the refinery. Pictures to the left are the completed Mt Holland village and aerodrome; and to the right, the civil works, the concentrator and the Kwinana refinery, which are currently underway. While it has been a challenging design and construction environment with some cost inflation and managing the impacts of COVID and supply chain disruptions, the project remains in line with original guidance. WesCEF's priority is to support Covalent to ensure successful project execution. We are also exploring the opportunity to expand the mine and refinery to capitalize on the strong market -- forecast market dynamics. The current favorable market is encouraging, and WesCEF is in discussions with a range of commercial offtake partners for our lithium hydroxide. We want to adopt a successful long-term approach to offtake partnership as the industry matures. Additionally, WesCEF continues to evaluate step-out opportunities and downstream investments within the battery minerals thematic. Moving on to Slide 32. Overall, our Chemicals businesses are benefiting from unprecedented global commodity prices. Ammonium nitrate demand from WA mining and agricultural customers in the form of urea ammonium nitrate remains strong due to the robust iron ore and grain prices. Sodium cyanide international customers are recovering from COVID-related disruptions. And successful planned maintenance shutdowns over the past 6 months have delivered strong output and operational efficiencies, which have benefited across our businesses given the strong global commodity prices. We continue to evaluate opportunities to leverage existing infrastructure to expand production capacity at our ammonia, ammonium nitrate and sodium cyanide businesses. The sodium cyanide expansion project, which will support the growing gold market, is currently in the feasibility and engineering design study stage with a final investment decision expected in the second half of this calendar year. The ammonia expansion project, which is designed to replace the 50% of our ammonia requirements which are currently imported, is also in the preliminary feasibility and technology evaluation phase with the business continuing to assess lower emission technologies. We're also looking at how we might debottleneck our nitric acid and, therefore, our ammonium nitrate production capacity. To Slide 33. Our Energy business continues to benefit from a strong Saudi CP and also the closure of the other domestic LPG producer in Western Australia, that is BP's Kwinana refinery, back in 2021. The LPG business recently repurposed one of its existing propane storage tanks to condensate storage, which has allowed it to capitalize on this market opportunity. The natural gas retail business maintains a strong focus on customer service to drive customer retention and continued growth. And in regards to growth, Kleenheat is investigating opportunities in battery energy storage, infrastructure and associated electrification. Kleenheat is also assessing a new customer relationship management and utility billing system to enable and enhance -- sorry, to enhance customer service. Moving to Slide 34 for an update on Fertilisers. A strong harvest in 2021, coupled with good seasonal rainfall so far in 2022 and strong grain prices, supports positive grower sentiment. While the business is experiencing increased competition following investment in storage infrastructure by competitors, we continue to be focused on initiatives to ensure we provide the best reliability, the best experience and the best advice to our grower customers. The business continues to assess additional storage assets across regional locations and invest in corrosion management across its aging assets to ensure a safe and reliable operating environment. Moving to Slide 35 to comment on outlook. Production and demand of ammonium nitrate is expected to remain stable. And as mentioned earlier, the sodium cyanide market is strengthening. Both the Chemicals and Energy businesses are expected to continue to benefit from strong global ammonia and energy pricing. The Fertilisers business is expecting solid earnings following good rains and based on the positive grower sentiment. However, overall earnings for Chemicals, Energy and Fertilisers will continue to be impacted by international commodity prices, exchange rates, competitive factors and seasonal outcomes. So now I'd invite Aaron Hood, who is with you in Sydney, the Chief Financial Officer of WesCEF, to join me in answering any questions you might have.

Am I on? There we go. Aaron, I just wanted to ask, the prices of the products you're selling are up a lot. But you obviously import, I think you said, 50% of ammonia. Can you just talk through the interplay there and how that will play through the P&L, presuming prices kind of hold? Is there a headwind in the very short term? How does that kind of flow through over the next little while?

Yes. Thanks, Tom. So I think the -- Anthony made the point around working capital first. So in ferts and those kind of businesses, we have obviously had to invest in holding that inventory as prices have risen. But a lot of those businesses are really a gross margin-style operation for us. So we're looking to price obviously on top of those commodities. And you'll see next year, we'll probably benefit, particularly in the ammonia business.

And how is the pricing mechanism works? So if spot moves up, do you immediately get like the margin on that? Or do you have to kind of already provide for a product at the older price, so there's actually a headwind in the short term?

So I think we've previously explained in the ammonia business, that is a particular impact. So we have a quarterly lag mechanism in that market. So a rising price environment will have a short-term impact, but then that will wash through as prices retreat or stay stable.

It's David Errington. Ian, on your presentation, too, I think, in 2019, it seems so long ago, I think it was '19, we came away with -- one of the key messages was a competitive advantage of WesCEF was your ability to procure gas and the capability of the gas through the pipeline, and you're a manufacturer of ammonia, whereas all the competitors were basically importers of ammonia. And clearly, with ammonia prices, as Tom was alluding to, has gone from, what, $300 to over USD 1,000, being able to be a manufacturer with the procurement of gas is a key competitive advantage. Now the question is, can you give us a bit of an update, please, on those gas arrangements? Because my understanding is those gas inputs are pretty well fixed in price. Obviously, you're not going to go into the commercial details. But can you go into a little bit of how you procure your gas? Is it such a big competitive advantage, obviously, relative to the importers? And I really raise my eyebrows where you're looking to replace your import of ammonia. So you're going to produce more ammonia, which means you're going to double capacity, which means that you must be able to access the gas. So the question is, can you give us a bit of an overlay of this key competitive advantage you've got on a key critical input such as natural gas?

Yes. Thanks, David. And Aaron, jump in as you see fit. So a couple of things. The gas market in Western Australia is different to the East Coast. There is a dom gas reservation policy, a domestic gas reservation policy existing in Western Australia, whereby exporters of gas via LNG, they must reserve a certain percentage for the domestic market. That obviously doesn't exist on the East Coast, so point one. In terms of our normal gas procurement, because we procure gas not only for our chemical plant but also for Kleenheat for its resale, for its LPG or its LNG, we can aggregate our gas demand, which means we've got a fairly large gas book. And we can take advantage of opportunities as the market provides for taking gas either in short-term spot. Or generally, we are in medium-term contracts, 1- to 5-year contracts, for our gas offtake with a range of providers. With respect to the ammonia expansion, one of the key enablers of that will be the arrangement that we have entered into with Strike Energy, which is public information and which is still subject to them achieving FID on the development of their West Erregulla gas field. But should they achieve FID, then we have 100 terajoules -- petajoules, sorry, at 25 terajoules a day for a 10-year period at a competitive price. Aaron, do you want to add anything to that?

I'll just add on that particular -- that was as a result of us supporting the initial exploration appraisal of that opportunity. So that may be a feature going forward. Also, the difference with that project being Perth Basin is it's much more attractive for some of those Perth Basin gas opportunities to bring that gas south to Kwinana, and that's very additive for our business. So the Mitsui partnership, which Ian referred to as well, is really going to depend on that feature as well.

But as an input cost, just to clarify, the input cost of gas doesn't move up and down. It's pretty well settled. Irrespective of the ammonia price going up and down, your gas input cost is pretty stable. Is that a fair call?

Only under contract. So we have a range of term contracts, typically 1- to 3-year style provision. The concept that Ian spoke to re Strike is a much longer tenure opportunity.

But the majority would be under contract, wouldn't it?

Yes.

It's Craig Woolford from MST. Just obviously, you've got a good backdrop in pricing. I'd be interested in any commentary or feedback about the domestic cost pressures, labor, availability of labor, absenteeism as well as any other domestic inputs that go into your WesCEF businesses.

I might start. Aaron, you can add to that. Because the majority of our operations are in Western Australia, we were fortunate, to some extent, because Western Australia did have a hard quarter and didn't have as much COVID as the rest of the nation, and we're continuing our operations relatively well over the last 2 years. Since the border has opened up, then obviously, COVID has come in, and we're a little bit behind the rest of the state -- the rest of the nation. And so we're suffering a little bit now, as I personally, with absenteeism due to COVID. But during that first 2-year period, we were able to put in place many processes and systems to ensure that our operations weren't impacted by -- when the border opened up again. So to date, we've got by okay from a COVID perspective. What we are seeing, of course, is pressure on labor. I think the last unemployment rate in Western Australia was about 3.4% or something like that. The labor shortages are significant and challenging, getting truck drivers to move our products around. I don't know if the mine sites have got the same challenges. It's a challenging environment when you add the COVID issues -- overlay those issues. But notwithstanding that, to date, we have been able to fulfill our obligations with respect to our customers. And also, Covalent has been able to continue with its construction operation.

Great. Shaun Cousins, UBS. Ian and Aaron, just 2 questions regarding the WA explosive grade ammonium nitrate market. Just talk a bit about where you see equilibrium. I thought that one stage was going to be the mid-2020s, but are we getting closer to that? And then secondly, where are you at in terms of contract renewals? And there seemed to be some large contracts that you entered into prior to -- or pardon me, as Burrup was getting up and running as you tried to lock in sort of supply. Can you just talk a little bit about when we should start to see some contract renewals and how you're thinking of what is a tighter market, a stronger environment backdrop there in terms of how contract renewals could possibly be in your favor or you change terms, et cetera, please?

Yes. So we do see the EGAN, explosive grade market, come into balance in the next couple of years. We've always said the mid-2020s. That might be 2024. It might be late 2023. It might be 2025. But we would certainly see strong demand, helped a lot, of course, by the higher iron ore price, which I don't think anyone had projected a few years ago, the continued strong higher iron ore price. In terms of contract renewals, we don't really divulge the dates of the renewals of the major contracts, but we have said that they're up in the mid-2020s or early mid-2020s. And so we're engaging with those large customer groups now to commence discussions on renewing those contracts.

Aaron, Ian, I've got a couple of questions on lithium. The first from Michael Simotas says, "Given supply chain constraints for components, lower than expected -- yes, and lower-than-expected CapEx, are you still confident that you'll be producing hydroxide in the second half of calendar year '24?" And then the second part of his question is, "Would you potentially sell spodumene ahead of this date if market prices are attractive?" And then Phil Kimber from Evans & Partners just wanted to clarify on how do offtake agreements typically work for lithium. Are they set off a reference price like spot? There were significant offtake agreements already in place at Kidman. Do they still exist or were they canceled as part of the WES takeover?

Aaron, if you want to take those because I didn't quite pick up the first question.

Sure. No worries. So on timing, obviously, we're still committing to the second half of calendar 2024 for the project. I think Ian walked through the progress out at site. This calendar year is obviously a critical phase for the project. Last year was primarily around the awarding of the contracts, and now we're seeing the rollout of that construction phase. So a very intense period coming up. In terms of spodumene and early sales, there is an opportunity in our mine plan and sequencing where we will have an inventory build of spodumene ahead of the refinery being commissioned. I think us and our joint venture partner, SQM, are very well aligned on opportunities to maximize value for the project. And we're commencing discussions at the moment around whether we want to monetize that opportunity rather than have it sit there building as inventory. And that could provide some future optionality as well on where and what we do with that spodumene. The last question on offtakes, we are looking to have a range of primarily term-based contracts, so call it 3- to 5-year rolling contracts with OEMs and battery manufacturers. Most of the pricing frameworks in those agreements allows us to participate in the market price there, and that will refer to certain indexes or reference prices within that. The last part of that question, Simon? The original agreements that were on foot when we purchased Kidman. So there were 3 agreements in place. That was Tesla, Mitsui and LG. We continue to be in discussions with a range of parties, including those on lithium. We haven't continued to -- we haven't made an announcement or formalized any agreement since purchasing Kidman and continuing to participate in that industry at the moment.

So it's Bryan Raymond from JPMorgan. Just 2 quick ones. So first of all, just on the Mt Holland expansion. Is there any more color you can provide there? Is it going to be focused on mine life, annual production, et cetera? And what sort of incremental CapEx we should be thinking about there? Is this a material expansion of that mine?

Yes. I think last year, we referred to some of the initial capital decisions primarily at the mine and concentrator were made to seize the opportunity to expand that mine circa 2x. So the water pipeline, the accommodation, the aerodrome, the crushing facilities on the mine have all been sized for a future expansion. So clearly, the second phase of the project, if we proceed to a mine expansion, you'll get some economies of scale as a result of that. The joint ventures are in the process now of laying out the scope of the feasibility study for an expansion. I suspect the initial phase will be focusing on the mine and concentrator to allow us the opportunity to see how the commissioning and performance of the refinery performs, and then we can make a decision then on the refinery in the future. Importantly, in Kwinana, that map that Ian showed, the orange square to the north of our operations, currently, the refinery footprint would only consume about half of that facility. So we have the opportunity to expand in Kwinana.

Okay. Excellent. And then just on the BP refinery closure, can you just give us some color around what impact that's had on market pricing or volume or the opportunity that's given you with a major competitor closing down?

I mean, it's really impacted us in the LPG business. And where prior, we were reliant on both domestic and export markets, it's much more of a domestic-facing business for us at the moment. We haven't commented on the relative margins of those 2. But I think we've flagged that the domestic market is more favorable for us as a local manufacturer and supplier.

Aaron, we have a question from Brook Campbell-Crawford, who asks whether you can provide a breakdown of how much ammonia is feeding technical AN production at the moment versus fertilizers. And also, are you shipping any product over to the East Coast at the moment?

I think as Ian flagged, so just ammonia as a flow-through product for us, obviously, we manufacture about 50% of our requirements. So that's the first point. And then we don't actually disclose the -- how much the ammonia business supports ferts other than we can say the majority at the moment is supporting the explosive market where traditionally, we have received better margins. That's obviously given the state of play at the moment getting a lot closer.

It's Ross Curran from Macquarie. Just back on Mt Holland. So since the project has started, there has been a couple of things that maybe we weren't expecting initially like adding the water pipeline, like a bit more wage inflation initially expected. But the budget hasn't changed. So there's clearly a buffer in there for unexpected changes. How much of the buffer have we used up now? And like how much -- at what point do we need to revisit that sort of profile?

Just on the first point, so I think you asked last year re the water pipeline and the crushing facilities, et cetera. When we made the announcement to proceed with the project in February, those elements were factored into that FID announcement and the capital estimate we provided. Clearly, in the market we've been in with steel prices, labor, et cetera, we had a contingency component within our project estimate. The contingency has been partly consumed, which you'd expect in the rollout of a construction project and the award of those contracts. But we're not going to disclose the remaining contingency other than we're still committing to that initial FID announcement.

Okay. Thanks, Ian. Thanks, Aaron. There are no further questions. For everyone in the room, we'll take a brief morning tea break, and we'll come back for Bunnings starting at 10:35. [Break]

All right. Good morning. It's an absolute pleasure to be speaking to you in person today after a couple of years of absence, and we have a really exciting agenda to take you through. We've got our Chief Financial Officer, Rachael McVitty, with us this morning, and she'll be joining me to answer questions following the presentation and a special hello to all those that are following us on the webcast. So let's get into it and turn to Slide 40. And the thing we've always been really conscious of at Bunnings is making the right strategic choices and investments to achieve long-term sustainable financial performance. We're focused on profitable growth, engaging our customers more to earn the right to be chosen first. We grow the market, and we grow our participation. This disciplined approach has helped our business and team remain resilient through housing and economic cycles. And the last 2 years have seen a considerable shift in the way that DIY customers see their homes: a safe sanctuary, a home office and classroom as well as an asset that underpins their financial security. Equally, this period has seen our Trade business continue to grow with many more trades, businesses and organizations choosing the convenience, value and offer that Bunnings provides. We continue to redefine and expand our addressable market. And today, the market we serve has grown to $100 billion, illustrating the pride and importance Australians and New Zealanders place in building, maintaining and improving their homes. It also reflects the expanding ways we can support our commercial customers and their growing willingness to trust us as a partner to help their businesses succeed. For those of you who have followed us for a while will know, we have a track record of ensuring our offer remains competitive and relevant, whether housing -- household budgets are facing headwinds or tailwinds. When our customers face budget pressures, we generally see them taking on more DIY projects and a strong take-up of our value lines. When customers have more room in their budget, we see them taking on larger projects with the help of trades and choosing more premium products from our range. Throughout the cycle, however, there's always been a need to build, improve and maintain homes. Turning to Slide 41. When we consider the market today, we see strong growth opportunities across customer segments, product categories, services and channels. We're focused on creating more ways to inspire and support our customers to build, improve and maintain, whether it's catering to our customers' love of DIY, property investors or the growing demand for services and installation. It also includes partnering with builders to supply them more throughout the entire build process as well as serving tradies and small businesses and a range of organizations from TAFEs through to local councils and aged care facilities to keep their operations and communities running. How we bring this offer to life for our customers continues to evolve through new channels, new services and new solutions. We continue to expand the ways we serve our customers in-store, online and on-site. Over 270 account managers and in-home consultants are out on the road every day visiting customers in their homes, workplaces or on construction sites, helping them with their product and project needs. Our 3 pillars remain core to how we deliver for our customers: lowest prices, widest range and, of course, best experience. They are delivered through channels that, through our investments in technology and network, are increasingly integrated and seamless, allowing choice for our customers on when and how they interact with Bunnings. Of course, it's all anchored by our philosophy of building trust through what we do, making a positive difference with our customers, suppliers, team and community. Turning to Slide 42. The last 2 years have been profound on almost every level for our business. We've achieved transformative acceleration of our capabilities not only in our technology but across our network design and commercial offer. But a bit like our tagline, this is just the beginning for our next stages of evolution and growth. Our strategic agenda on this slide is how we take this forward. It's highly disciplined and focused, defining how we will continue to achieve sustainable and profitable growth. Building the best team and making a positive difference are all about investing in our team and the communities in which we live and work. Consumer growth is our ambition to drive a stronger offer across price, range and experience and expanding into new product categories, services and solutions. Our commercial growth strategy is about providing greater value, service and convenience to builders, organizations and trades and deepening our capability to be a trusted partner. Supply chain evolution speaks to the logical next steps to better service our stores, our customers' online orders and our trade customers with a reliable and flexible model. Underpinning this is our investment in tech and innovation to continue creating seamless connected experiences for our customers, driving deeper customer insights as well as engagement and boosting operational efficiency across the business. And I'll take you through these slides in more -- these in more detail on the following slides, I should say. Turning to Slide 43. Our team are the heart and soul of our business. Most of them were on the front line of the pandemic working tirelessly to assist customers to stay safe and productive in their homes. With the store trading environment and team absenteeism normalizing, we are creating more opportunities to reengage with our teams, increase grassroots community activity and strengthen our unique culture. We've made it easier for our team to pursue internal career pathways and access the right learning experiences to keep building their skills, capability and confidence. We're doing this right across the career arc, from new cadetships and graduate programs right through to more support for our valuable mature-aged team. Our permanent team retention rate remains industry-leading. Not only does strong retention mean we have more knowledgeable and engaged team on the floor to serve our customers, but it also represents a significant cost of doing business benefit. We're making improvements to our safety programs to sharpen our focus on how we move products safely through our supply chains, our warehouses and to the end customer. Turning to Slide 44. We see our sustainability agenda as integral to ensuring our business remains relevant and profitable into the future. We have a clear pathway in place to achieve net zero Scope 1 and 2 emissions by 2030, and we're deepening our Scope 3 reporting and developing a road map as a foundation to establishing a future Scope 3 target. We're well on the way to achieving 100% renewable electricity with over 50% renewable energy currently powering our network, including 100% renewable electricity in New Zealand. We're also generating solar power ourselves. And this year, we'll install our 100th solar PV system. Our partnership with our suppliers -- in partnership with our suppliers, we're continuing our work to minimize total packaging, swapping more recycled materials and ensure necessary packaging is recyclable. This financial year, we introduced a battery recycling program for all stores, making battery recycling even easier for our customers. Community engagement is a part of who we are. Our teams live, work and raise their family in local communities right across Australia and New Zealand. When communities in New South Wales and Queensland were impacted by storms and flooding earlier this year, our teams were there. Our team and suppliers sent emergency stock supplies, set up temporary stores and nationally got behind team-run barbecue fundraisers. The team remains closely involved in the recovery and rebuild effort even in the 3 locations our stores are temporarily closed, recognizing the essential role we play in building and keeping our customers' homes safe. Coming out the other side of the pandemic, we're strengthening our community connection by ramping up hands-on activities, DIY workshops, kids' learning activities, product donations and in-store fundraising. Turning to Slide 45. Our long-standing pillars of lowest price, widest range and best experience are pivotal in growing our consumer segment. We have a long-standing commitment to being the lowest cost operator. With increased cost of living pressures, we see a real opportunity to deepen trust with our customers by continuing to focus on value. We are leveraging our purchasing scale to secure product at very competitive prices, and we have a disciplined approach to removing costs to provide customers value every day. Inflationary pressures have been well documented, and we continue to work hard to mitigate inflation through efficiencies or alternative sourcing. But there are times where we do need to pass this through in price. We remain committed to ensuring we offer the best value in the market to maintain customer trust on lowest prices. Our own brand -- I should start again. Our own brand range continues to grow and has never been stronger with names such as All Set and Garden Basics giving customers incredible prices and names such as Full Boar and Matador and Mimosa providing outstanding value. With customers well and truly back exploring our stores, we've increased the frequency of our range reviews to present the very best of the latest products. We've identified a range of opportunities to optimize and expand our existing offer to cater to strong customer interest, including smart security, outdoor furniture and cleaning with a renewed focus on healthy homes. We're also optimizing space in our stores, reviewing how we display our products to maximize ease of shop and inventory productivity. And this is showing up in new easier-to-shop layouts through our power tools, our new-look paint shop concepts and the improvements to product information for our barbecues and colocating accessories as well as the introduction of appliances in selected stores. No matter which channels our customers choose, we strive to create the best experience each and every day. That means having friendly, helpful and knowledgeable team available to assist in our stores as well as seamless experiences online. In December, we launched Flybuys to reward our retail customers shopping across Australia. Combined with Bunnings' new data and analytics capabilities, the program is allowing us to understand our customers better and tailor the customer experience. Be it in-store, online, in-home or on-site, we are focused on being the easiest to shop with. We're making enhancements to our service desks, making it easier to pay around the store through mobile point of sale and improving our drive-and-collect and click-and-collect capabilities. We're using technology to remove millions of unnecessary task hours in our stores so our team can spend more time with their customers. Investments like push-to-talk communications for the team and greater automation of our processes are helping our team to be more efficient and responsive and ultimately enhance the customer experience. Turning to Slide 46. Over the past 10 years, Bunnings has evolved from a warehouse model offering around 34,000 hardware and home improvement products to an omnichannel business with over 110,000 home, commercial and lifestyle products across our in-store, online and marketplace offers. We're focused on growth across all of our product categories with some specific examples, including expanding our home -- our room furniture solutions to help our customers organize their homes, strengthening our garden and garden decor offer by extending and localizing our plant ranges and improving service in our nurseries. Further, in kitchen and bathroom, we're increasing our range of customizable and modular products and introducing more complementary accessories. And we're pursuing all new categories, too. We're seeing strong interest for in-home services where Bunnings designs, assembles and installs solutions for our customers. For the first time, we're introducing design consultants to help our customers design their dream bathrooms. We're already a destination for pet enclosures, so there's a natural opportunity to expand our pet offering. And we're introducing new pet categories from collars, toys, bowls and beds through to smart pet products. And we're lining up a new range of products to help caravan and RV owners maintain their home on wheels. Our online marketplace offer allows us to offer customers in their home living items that complement our core range. Launched in 2019, it already offers around 30,000 products such as dining room, living room, bedroom, home office, kitchenware, health and fitness and appliances. And I expect the marketplace range to be well over 100,000 products in the next 12 or so months. Turning to Slide 47. Our commercial growth -- our commercial business continues to be a strong growth engine. We have a well-embedded strategy that's helping us to be a better partner to builders, trades and organizations and to service more of their business. And we've been strengthening the offer. This means creating more convenient store experiences with the rollout of the new trade service desk design and time-saving options such as self-checkout by the PowerPass app and Load'N'Go. We've invested in capability to focus on trade products and brands and are excited by the interest and support that we're getting from our suppliers. We're stocking more of the brands and products that trade customers need. This includes expanding our offer in commercial landscaping, work wear, tools and timber. We're trialing new fulfillment solutions to ensure that our orders get to site on time and in full even better, and we're developing a number of capabilities to drive growth and customer engagement. This includes specialist service teams and continuing to enhance our PowerPass app and trade e-commerce platforms. And we're also introducing new supply and in-store services, including joinery, windows and flooring to save our builders time. Tool Kit Depot is now established in Western Australia with 4 stores, and a refresh of all stores in South Australia is almost complete. And our network planning for national coverage is shaping up really well. As you know, we completed the acquisition of Beaumont Tiles in November last year, and it's a terrific business and a real asset for addressing the needs of our builder customers and flooring trades. Our immediate focus is making it really easy for our builder and trade customers to access the Beaumont range as part of their broader projects. And we're also exploring network expansion opportunities with Western Australia, a priority region, and broadening the Beaumont range into categories like bathroom and timber flooring. Lastly, we have a huge asset in our PowerPass program, which has around 1 million active members. We've just started accepting PowerPass at Tool Kit Depot, and we'll be bringing it to Beaumont Tiles just as soon as we can. In the coming months, we'll be improving the program so that it provides even greater value to our customers. It is more data-driven and more relevant and engages members with experiences that help them run and grow their businesses more effectively. Turning to Slide 48. We're optimizing our capabilities, brands and assets to partner across more phases of the build, from frame to fix through to finishing. There are significant opportunities for us to participate more strongly in the frame to fix element of the build, and we're addressing this through stronger project management capabilities and an expanded frame and truss network. Our frame and truss sites in Australia supply high-quality roof trusses, floor trusses and wall frames. Speaking to a frame and truss provider is one of the very first steps a builder makes in planning a new house. To support more builders, we're opening 3 new sites over the next 2 years with the first in Melbourne's outer west planned to open in the first half of the new financial year. We see opportunities in the fit-out stage of the build, and Beaumont Tiles as well as our improved commercial product and solutions range are key to this. We're also working hard to be chosen more for the finishing stage with categories such as paint and smart home, areas of focus for us. And across the build process, we're focused on kitting out the trades even more with the materials, consumables and professional tools that they need to get the job done, be it through our warehouses, trade centers or Tool Kit Depot. Turning to Slide 49. We are very fortunate to have many and incredible long-standing partnerships with some of Australia, New Zealand and the world's most trusted brands and suppliers. These partners play an important role in the Bunnings supply chain, providing us with the ability to focus on growing our store network and serving our customers well. Bunnings directly controls its supply chain for globally sourced product via our distribution center network, but most of our products come direct from local suppliers who source product on our behalf. These suppliers replenish our store network largely through third-party logistics providers. The strength of this model was clear during the pandemic where, along with our supplier partners, we were able to handle unprecedented volumes of stock and maintain industry-leading in-stock availability of around 90% for our customers. Turning to Slide 50. In the short to medium term, our priority is on ways to improve stock flow, mitigate cost pressure and maintain resilience in our supply chain, recognizing that supply chain variability is likely to remain for some time. We continue to leverage the unique strengths we've built in our supply chain and see some high-value opportunities to continue to evolve our model. And these focus on supporting more efficient store replenishment and better use of space in-store; highly reliable and a flexible customer fulfillment to service a range of customer needs from fast home delivery for emergency repairs through to planned large quantity, bulky orders for commercial customers and everything in between; and our continued growth in product ranges across consumer and commercial. And as we always do, we'll take a measured approach: start small, test and learn, and then we'll scale. Some of the current opportunities include continuing to offer -- to improve our in-store click-and-collect capabilities, developing stronger transport management capabilities underpinned by data and technology, introducing fulfillment centers to support our growing range in channels to market across consumer and commercial; as an example here, we have our first full fulfillment and transport management centers operational in Victoria. And together, they currently manage store and customer deliveries for half of our Melbourne metropolitan network; adding additional products to our existing cross-stock programs where it makes sense to optimize store replenishment and stock availability; and implementing technology where it makes sense. Turning now to Slide 51. We've always had a variety of different but complementary store formats and sites across our network, reflecting our disciplined approach to investment and the evolving needs of the communities we serve. Our small format stores are perfect for smaller regions or communities where we can tailor our range and provide a convenience offer. Our standard warehouse provides more space to lay out our full product range and display more of our kitchen, bathroom, power garden and outdoor ranges. And our large warehouses allow us to include space for more showroom experiences with even more dedicated space for our trade customers. If we consider the next 5 years, we see lots of runway ahead for network growth and upgrading existing sites. We're forecasting 15 to 20 expansions, upgrades or new Bunnings warehouses and small formats per year. Our new Bunnings store in Pymble in Sydney's north is a great example of how we evolve our formats to best service our local communities. Historically, we serve the area through a small format store down the road in Gordon. However, around 10 years ago, we saw the demographics were shifting, and we set about identifying the right site and the right format to meet community demand. So now we've transitioned from a 1,200-square meter high street store to an over 15,300-square meter warehouse, and I look forward to taking many of you through this today after today's session concludes. Our warehouse offer is supported by our trade centers, which are dedicated to efficiently replenishing our trade customers and are particularly well suited to bulkier products and larger quantities. They're specifically located in areas where we see sustained building and business activity. And our network will continue to expand over time, supporting delivery to site and our commercial growth. I spoke about our frame and truss network earlier, and we also plan to expand our Tool Kit Depot store network beyond Western and South Australia in the new financial year, moving into regions where we see strong underserved demand for professional tools. Our various formats are complementary, and they're all underpinned by our investment in technology and our integrated supply chain, which includes 5 major company-operated distribution centers and a range of third party-operated nodes across Australia and New Zealand. As mentioned, we've opened our first full fulfillment center and see opportunities to expand this model in line with online growth. Turning to Slide 52. Technology, data and customer insights are now key enablers of our business. Our e-commerce platforms, omnichannel capability and data analytics are supporting millions of customers every week, inspiring them to take on new projects, helping them to discover products, plan their shop, navigate in store and get support online during their project through our online community. To illustrate how these elements all work together in unison, let me show you with this short video. [Presentation]

All right. Let's turn to Slide 54. When we think about the customer life cycle and the typical product journey that a customer has, we see data and technology as enablers for an increasingly connected Bunnings experience, whether the customers are in-store, on-site, at home or on the go. Over every step of the customer journey, new technology is helping to make their experience better. Pre-shop is about making our inspiration content more accessible to thousands -- through thousands of online videos, articles and on social media. And it includes richer product discovery moments on our website and in our e-mail communications. That's allowing customers to assemble a digital project list with all the products they need and choose online purchase or a digital map for their items to be found in their local store. During the shop, we're focusing on making the online and in-store experience frictionless and in the future, making it easy to book an in-store consultation or purchase items online and arrange home delivery or while browsing our physical aisles. And then there's post-shop, where it's all about serving up our trusted DIY advice and guides to help customers with their project or suggesting a project they might like to tackle next. Joining OnePass presents a great opportunity to offer our retail customers a stronger digital experience. We plan to start participating in the program towards the end of the year, and we're working to ensure we deliver a great customer experience while ensuring the Bunnings proposition supports long-term sustainable growth. Turning to Slide 55. To support an omnichannel business model, we are leveraging data like never before. We've invested in a new cloud-based data platform with significant capability to support insights using data from our store network, buildings, customers, systems and one of Australia's most visited retail websites, bunnings.com.au. It is also complemented by new data insights from the Flybuys program and in the future, the OnePass program. These insights are driving more relevant information and personalized customer communication, deepening their engagement with Bunnings. Data and technology are now allowing us to reengineer processes to achieve a reduction in the cost of doing business. 1.5 million hours of productivity gains were delivered in the last 2 years through technology-enabled business improvement. And a further 2.5 million more hours have been identified, allowing us to reinvest in price and service. Turning to Slide 56 and bringing this presentation to a close. The team and I are incredibly excited about the opportunities ahead of us. We continue to innovate, to grow the market and our ability to participate in it across products, services and experience. And we have a clear focus on growth, both in consumer and commercial, while continuing to actively manage cost and supply chain variability. There's been a structural shift in the way customers value their homes as a place to work, live and entertain. And we'll continue to support customers with the essential items they need for repairs and maintenance when they need it across the home and continue to inspire them to build on the many DIY skills acquired over the last couple of years. We see a solid pipeline of renovation and building activity ahead and are strengthening our capabilities, brands and assets to participate across more phases of the build. We're leveraging our data and digital investments to drive operational simplicity, business efficiency and deeper connection with our customers, teams and suppliers. Our business is focused on bringing incredible value to our customers and driving a strong and competitive offer. I'm now going to invite Rachael to join me, and we look forward to taking your questions. Thank you very much.

Mike, it's David Errington over here. Can I just ask one question? I'm trying to get what your message you're trying to give us when you're talking about supply chain evolution. I know that you've got, what did you say, you've got 1,600 suppliers that are effectively your individual wholesalers. And I'd like to ask, first point, are they going through some duress at the moment, too, because of cost inflations and transportation, logistics challenges? And then can you just -- in a nutshell, when you're talking about supply chain evolution, is this you saying that you're going to take on more yourself because of need? Or is it -- I'm trying to work out this supply chain evolution. Is this a necessity? Is it going to be an added burden to you? Or is this an opportunity for you to enhance your business going forward?

Yes. Thanks, David. Great questions. If I start with where our suppliers are at, I think right across the retail industry, everyone's finding all sorts of interesting things with port opening and closing and access to shipping and those sorts of things. And certainly, Bunnings and our suppliers aren't immune from that. But we're not seeing duress. We're not having tough conversations with our suppliers. But what we do know is that as our online penetration grows, fulfillment from store is less effective. We got a firsthand view of that through the lockdowns where now Melbourne and Auckland and some Sydney stores were doing 100% of DIY orders online. Stores were carnaged, to be truthful. But getting out of that and back to sort of those low levels of penetration we're seeing at the moment, we now know that through things like our fulfillment center, which we've been testing and learning from in North Laverton in Melbourne, it's been really good for us to learn how we can fulfill really cost effectively for our online orders and some trade orders as well. So they're examples of first steps. If I think about cross-stock, there's opportunities there, and we should be thinking about these as low capital investments. Our product set, the way stock moves through our supply chain, there's not much we've seen globally. And as you know, we study the global market very closely. That's suggesting that there's lots of high-end technology we'd be looking to put in these sort of centers anyway. Been running cross-stocks for a long time, particularly in our Greenlife area. Some of our suppliers, we'll take Dulux, for example, world-class supply chain, very sophisticated manufacturing process. Us doing anything with that supply chain would bring no value to anyone. And that's what we're all about. We're all about unlocking value for customers, unlocking value for our team in terms of productivity, unlocking value for our suppliers and taking cost out of the supply chain for them. There's lots of little suppliers in Bunnings who are probably not as efficient with their supply chains as they could. Could we bring value through some cross-stocking of those low-hanging smaller suppliers where we could consolidate products in a cross-stock facility, ship it to store in a more efficient manner, make it more efficient in-store from a back dock to shelf logistics point of view, take some cost pressure off suppliers? That's how we're thinking about it. What we're not thinking about is wholesale, big bang transformation, capital-intensive, tech-intensive, business disruptive. That's not how we would want to sort of look to create value. I think that would do the opposite.

So it's not an evolution. It's an enhancement.

Logical enhancement, logical next steps, yes. Thanks, David.

Tom Kierath from Barrenjoey. Just interested in Rob's comments at the top saying that there hasn't been a change in the trading environment. I mean, if I look -- since you guys last reported in February, it's basically rained nonstop in Queensland, New South Wales. Like is what Rob's saying there and what you're saying that there hasn't been an impact from all that rain? I mean, you talk to suppliers, and they're like things have really slowed down. It's not a housing issue, it's a weather issue. Just be interested in your comments on how you're seeing things.

We've seen ultimate disruption in some markets because we've had stores go under water and had to close those. But that sustained wet weather, we've experienced those cycles before in those markets. And yes, some categories will not perform as well. No one is going to be out oiling a deck in pouring rain, but there's a lot in power gardening. There's a lot in insect control. A lot of other categories actually perform very strongly. So I think depending on the suppliers you're speaking to, you'll see slightly different position. But on the other side, we've seen very good weather conditions in other parts of the country. So I think if you look store by store or region by region, you might see a little bit of variability, Tom. But I think that trading environment has been pretty consistent throughout.

And when you have weather impacts, is it permanent disruption in demand? Or does that come back when things -- when the sun comes out?

A bit of both. If you've got a really wet week and then a really fine week, you'll sort of see a correction. If it's sustained periods of time, you might see a shift in categories across the period. But they tend to normalize over the long term.

Bryan Raymond, JPMorgan. Just on -- I mean, the housing cycle has obviously had a bit of an evolution of late with rising mortgage rates, et cetera. I'm just interested in how you guys look at your range and your sales mix around the amount of sales that are linked to either the sale of a house or the purchase of a house versus just ongoing repair and maintenance of existing homes. Is that something you look at and consider, trying to work out that housing data effect essentially? Yes.

Yes. It's a really interesting area. We do look at it closely. Obviously, when you prepare a house for sale and then you sell it and then you move -- and someone else moves in, there's the dressing it and then there's a personalization. And churn, churn is really useful for sort of driving activity in that space. But we've been through these cycles before. And certainly, housing churn is remaining quite robust, notwithstanding what's happening with rates at the moment. But should that change, what we'd anticipate is what we've seen in the past, which is customers revert to doing more on their existing home. And I think with -- I mentioned in my remarks that we've seen this sort of structural shift. It's well recognized now that people aren't returning to the office 5 days a week. That means people are spending more time in their home repairs and maintenance because of that increased time in the home is there. That frustration looking at the same wall every single day when you're working from home, that is meaning that we're seeing customers doing more to existing properties. So we'd anticipate that, that would lift if the housing churn were to slow down because people would then want to do more in those home environments. So we certainly looked at what has happened in the past. And I think the resilience of the business model and the consumer side bears out for us in that space.

Right. So just following on from that. You talked about a SKU expansion from, I think it was, 34,000 to several hundred -- 110,000 SKUs. How much of that is -- and there's obviously a lot of category expansion you've done over the years. How much of that is the marketplace coming in versus, say, SKUs you'd see in a big store like Pymble or some of the other ones we're seeing at the moment? Have you materially increased your number of SKUs and range of categories there?

Yes. So marketplace, I think, is about 30,000 SKUs at the moment. So if you sort of back that out of the 110,000, it gets you back to 80,000. So we've sort of gone from 34,000 to 80,000 in the store and online, which I think is a fantastic work by our merchandising team. Some of that is growing within categories. If you think about the platform, so RYOBI, Makita, the battery and power garden -- tool and power garden platforms, you've seen this sort of exponential lift in range because you can take all these tools that were either manual or corded and convert them out. And it's the same in other areas like paint, where we've been able to introduce new categories, new ranges, move product further up the dome. And Porter's Paint is a good example of that where we've been able to bring a premium offering into the market through the warehouse format. So it's a little bit of both, but we're really committed to continuing to grow the categories in which we already participate with either brand or product innovation and obviously being very mindful to the value proposition, given the economic cycle we're going through as well as those new entrant categories, so some of the services businesses, the expansions in pet care, the house that moves, so the caravan and the RVs. So there's opportunities for us. And really, that's how we can use space much more efficiently in-store. And the investments in technology around space management, for example, they're really allowing us to improve our productivity sort of on a bay-by-bay basis.

So Ben Gilbert here from Jarden. Just on that chart that you put up around the EBIT and sales, it's obviously a great chart. And everything you're saying today suggests that we should keep thinking about that trajectory in terms of ability around new categories, et cetera, that sort of seems to be what your thinking is?

Yes. I'm very focused on that, yes.

Right. And then just a second one for me, just around the endless aisle on the ranging piece. I think you're in the North America recently as well, and so you've looked a lot at Home Depot, et cetera, in the past. They went from 75,000-odd SKUs to 1 million through the whole endless aisle piece. And what you guys are doing around the rapid fulfillment centers or whatever we're calling them is sort of very similar to that path that they've followed. But their strategy did become more capital intensive as I move through, input sheds down to facilitate that. Are you telling us with your comments before that that's not on the agenda in terms of how you're thinking about it?

Yes. We've certainly looked -- I mean, we've got a great relationship with Depot both in the U.S. and in Canada. I've actually spend a few days with the Canadian team just a couple of weeks ago, as you mentioned. We've looked at some of the broader logistics parks that the Depot works. And they certainly haven't done that everywhere. They've done it in markets where it's made sense. Acquisitions, I think, like Grainger for Depot were really useful to get SKU count up, and it came with its own supply chain, and therefore, a capital base that needed to be invested in. We've got tens of thousands more products at the moment. So if you shop in a Bunnings store today and you go to that big blue desk at the back of the store, which is we call special orders, they've got catalogs and brochures of thousands and thousands of more products. We're working to bring all those products online. But fulfillment for those are actually through our suppliers. So they will be direct from a supplier to a customer in the main, won't always be the case. There's enough volume for us to bring product through them, we may bring that product into a warehouse. But most of that would be fulfilled by a supplier. So we'll take a different strategy, and we certainly don't see that, as I said, in my comment to David earlier, I don't see that sort of Big Bang evolution to high-tech capital-intensive warehousing. We'll take logical steps that allow us to serve trade customers better within full long time, bulky orders which we're doing through the 30-odd trade centers we've got at the moment, and we'll expand that as we need to. Online fulfillment will be through things like the fulfillment center we've got in North Laverton and what we do with those across different markets in Australia and New Zealand. We'll sort of test and learn our way through over time. So they're the ways we're thinking about it. But we want -- we definitely want the SKU expansion, but we certainly don't want to bring the SKU expansion with a really high operating cost overhead or complexity. So we'll sort of balance that through.

Shaun Cousins, UBS. Just some questions on trade. Can you maybe just tell us what your share of trade is of your sales at the moment? Is it still 35% just in it's a little difficult to gauge? But -- and can you talk a bit about how successful you think you are at engaging with that trade customer and how much headroom there is in that business for you, please?

Yes. Well, our aspiration in time, Shaun, is to get the 2 businesses roughly 50-50, which it is in New Zealand and has been for a long time. But that's not at the expense of consumer growth. So commercial is slowly tracking towards 40 at the moment. But that's because consumer continues to grow well for us. So the commercial team have got a big job in front of them. But what's really been made very clear to us over the last couple of years by being open, by being in-stock, by doubling down the investments in the service experience for our trades, pivoting where we couldn't go out to site to better call center experiences in Melbourne and Sydney and in New Zealand, I think has meant that trades get the way really serious about this space. We're very credible in a lot of our product offerings now, in the quality of our account managers around on-site. They're fantastic at building relationships. Our in-store trade specialists doing a great job, creating great experiences and then leveraging into PowerPass. The ability for a trade customer to self-checkout on their mobile phone, which more and more are doing every day, is just saving them so much time and money. The trade customers were telling us that going to a Trade Desk was a pain because they have to deal with people like you and I, buying a lot of products and taking up their time. We sort of thought how do we make a Trade Desk more efficient, we need to take Trade Desk out of the equation by enabling it through technology. So I think those sorts of things are saying to the trade, Bunnings are really here for you and the way we're communicating and engaging is improving all the time. And even the investments we're making, Tool Kit Depot, Beaumont Tiles, we're putting our money where our mouth is in terms of helping customers with more of the sort of fit out of the home, but also equipping them from a tool point of view. And I think the investments we're making in frame and truss will help to just deepen that credibility. So its task is growing really hard, but it's got to grow hard in a very profitable way. So we're not taking our eye off the types of customers we're serving and chasing high volume, low margin. That's just got risk all over for everyone. So we're sticking with the sort of small to medium builders and trades and really deepening those relationships, which is setting us up really well.

Great. And can you maybe sort of quantify Tool Kit Depot, Beaumont Tiles, just some of these new businesses? Just where are they at a revenue? I mean are they collectively $500 million? I mean, you've obviously added a lot of stores. Just are they half that or I'm just curious.

They would be about half, it's pretty small.

Adrian Lemme from Citi. It's been very hard, I think, for most people in this room to get a trade in the last year or 2. They've been doing quite well, obviously. Just thinking, looking ahead, what you're seeing in the network, particularly prospects of potential future collapses of homebuilders, there's been a couple recently, I think. Just what you're seeing there? And if you could maybe just outline like the trade turns you give your trade customer, please?

I might -- we'll switch trades on terms, but just to sort of start that off and probably just to build on my answer to Shaun, that focus on the smaller builder. And certainly, there are some of the largest businesses we definitely deal with because we're certainly good on providing with commodity type products and that convenient offer of being local to where a job site might be. But we've generally steered away from the big end. And where we see some of the challenges is where sales were written 12, 18 months ago. And because of the delay in getting structural timber and other products into the build, that's now coming to the market at much higher costs and where homes were written on fixed-price contracts. That's, I think, where the compression is coming for some of the larger players at the moment. So the fact that we've generally steered away from them means that our credit risk is much lower. But certainly, you're right. It's certainly very hard to get trades. I'd anticipate even in the markets where some of those businesses have gone out of business that trades will get picked up very quickly by other builders, and hopefully, those jobs can be repriced and got moving. Because if you're having a home built and it stopped, it's probably a pretty traumatic experience, I'd imagine for the consumer customer. So we are focused on just being available for the trade wherever we can with high in-stock availability. Most of our terms are very micro, sort of $5,000 type limits, not in the millions. But I don't know if you want to expand on that, Rachael?

Yes. I think Mike covered it pretty well. We've got a pretty diversified portfolio and mainly focused on the small to mid-tier residential builders. So credit limits are quite small, and there's no single exposure to any one customer or portfolio of customers. So average size is less than 20,000 to give you an idea and average credit turns are 30 days. So we have a pretty good read pretty quickly when payment's not made, but really strong relationships with our customers. So we've also got really deep understanding of their credit profile as well. And we aren't seeing any major signs at the moment.

Mike, Rachael, I'll ask a question from Michael, and then we'll go Ross later and Craig and call it and move to Kmart. So Michael just asked on own brand penetration, whether you can give us a sense of what the penetration of owned brands at the moment and whether there's a significant expansion opportunity.

There's always going to be opportunities. If we think we've got a unique sourcing capability that our suppliers don't. But the thing we've always valued is that the deep partnership. It's not -- it's a little bit of a -- it's a hard number to call, it's sort of around the 30% mark. But there's some swings and roundabouts on that because we've got exclusive brands like [indiscernible] and Trojan that are actually provided to us through our supply network, but the brands exclusive to us or it's a brand that we own. So in the case of Trojan, it's owned by Bunnings, it's licensed out to a different organization and do an incredible job of innovating and doing all those sorts of things. So it's a little bit blurry at the margins, but no significant expansion, purely based on the fact that we don't think we've got the sourcing sort of capabilities that many of our suppliers do.

Lisa Deng from Goldman Sachs. Just a question on Flybuys. So we've been part of that program for 6 months now. Can you please illustrate some more material commercial and incremental opportunities that we've discovered through that partnership that we didn't previously have and how we've executed to commercialize it? And then with us joining OnePass at the end of the year, how will the 2 sort of -- what would -- like would we prioritize one over another? Like how would the 2 coexist?

Yes, great question. So it's still reasonably early days for us with Flybuys. It's been a great partnership to enter into because it's given us customer data that we didn't have. So despite -- on the commercial side of our business through PowerPass having great access to trade data, we were very light on the consumer side. We're a lot of consumer cycles because really until 2019, we didn't have an e-commerce offering. And then obviously hit the pandemic, the focus on is just getting the website working as efficiently as we can. So the data we're getting now, what we're seeing is that the customer who's shopping with us, who's a Flybuys customer is a more engaged customer. And we're sort of seeing that through transaction frequency and also average basket size, but also engagement in terms of the connection when we reach out and talk to those customers through things like EDMs. We're very much in our use case scenario. We're testing lots of different hypotheses around what ways we can talk to and connect and engage our customers, how we can bring them into digital ecosystems like our own online community workshop. So we'll continue to sort of iterate on that. We can see great commercial opportunities as we move forward, but at the moment, still very much test and learn phase. And on OnePass, we're really excited to be joining. I think what Nicole and the team have done so far has been absolutely incredible. So later this year, we'll bring an offer to market that will be first and foremost, probably around some things like delivery construct and then we'll sort of work into activities and things we can do in-store because we really want our customers coming and experiencing Bunnings in-store. We see the 2 as complementary, not competitive. And certainly from a technology road map point of view, we don't really need to prioritize one over the other. We've done most of the work now on Flybuys, and now we're deep into the work with OnePass. So really, that's going to be an opportunity to take probably some of Australia's best brands, bring them together in a way that connects and engages customers in a digital ecosystem. And then for the group to learn from that in terms of what customers are shopping, where, or how customers are shopping and what we can learn from that to make customer experiences better, not only in our individual brands, but then hopefully across the group in the fullness of time as well.

And then just a follow-up question on our cost base. Would you be able to sort of try and quantify to us what would be variable and what would be fixed?

In our cost base?

Yes, in the Bunnings cost base, what percentage roughly?

We tend to not go to that level of detail, but we've got a good level of flexibility within the P&L to be able to respond to both economic upside and downside. We've been able to demonstrate that over time.

It's Ross Curran from Macquarie. Again, just coming back to New Zealand, we've seen a very sharp increase in interest rates there in a very short period of time. Has there been any change in the underlying cancellation rates of jobs that you've seen there at this stage?

No, nothing.

Craig Woolford for MST. Just your network slide that you talked about growth of 15 to 20, but it was talking about, I guess, refurbishments, not necessarily all new stores. Can you give us a percentage base growth that we might want to factor into your outlook?

Yes, it's about 10% to 11% over the next 5 years. And the way we sort of think about that is using space more efficiently. So the example I used with Pymble and Gordon, we're still 1 store in the market, but 1 incredibly powerful store. The thing we recognize over time is that a number of our stores are over trade, which is actually not a good problem to have because it's a poor customer experience. So I think about that northern suburbs section of Sydney had Gordon and Thornlie. Gordon being an old small format store that was -- came to us in 2001 with BBC Hardware House as did Thornlie, which is a warehouse, but a small warehouse. So for that demographic, both of them massively over trading with diminished customer experience. Opening something like a Pymble with 15,500 square meters or thereabouts allows us to bring the full offer to life for that community, take pressure off Thornlie and create a better customer experience. And that's the way we're sort of thinking through the network. And as we make more investments into space management and planning and as our online offer gets stronger, we can actually scale up and down the sort of assortment that we would have in a store. So if I think about a small format store for a while there, we'd have patted ourselves on the back that we had a full Bunnings range, 95%, 96% of the full range crammed in a small store. With our online offering, we might scale that back to 70% of the range. But actually a wider availability of that product in-store so that the customer experience on the things that really matter are being serviced. And then we've got online in our largest stores to sort of fill out the rest of the range. So that guidance, I think we've probably given over time of that sort of 5 to 7 net new stores here. That's about right. And obviously, there's a couple of other things in there with frame and truss sites and fulfillment centers, but we think that's a really logical evolution of the range to showcase the offer and drive space productivity.

Right. And that figure is Tool Kit Depot and Beaumont be on top of that as well?

Bunnings only and Tool Kit Depot. Tool Kit Depot's aspiration is to get to sort of 70-odd stores over the next few years. Beaumont Tiles actually got a good network, I think, 110, 120 stores across Australia. Probably going to be some shifts between franchise and company-owned stores. Western Australia, we've got commercial relationships, but not a network. So we want to get some stores into WA then we'll look with both businesses and what that means for New Zealand in time, but we'll take our time with those. So yes, it's very much just the Bunnings network.

All right. Thanks very much. We hand over to Ian Bailey.

Wonderful. Good morning, everybody. My name is Ian Bailey. For those of you that haven't met me, I'm the Managing Director of Kmart Group. I'm joined by Richard Pearson, who leads our Target business; and Aleks Spaseska, the Kmart Group CFO, will also be joining us when we get to questions. During COVID, Kmart Group has consistently focused on 3 things: being there for our customers; keeping our customers and team members safe; and remaining focused on the long term. We've made substantial progress on our strategies during this time, repositioning Target, converting Target stores to Kmart and by building core technology and data platforms to enable future growth in Kmart. During COVID, our business has traded well when our stores have been open and customers feel safe to shop. When stores are closed as they were in the first half, results were materially impacted by the temporary government-mandated store closures. The environment in the second half of this financial year has seen customers progressively returning to more normal shopping patterns. Turning now to Slide 59. Kmart and Target have clearly differentiated customer propositions. As a leading product development company, Kmart provides the lowest prices on a broad range of everyday items. The offer has broad appeal and generates strong engagement across all customer segments, irrespective of income levels. Target today is a simpler and more focused business with a very clear view of its target customer. Apparel and in particular, womenswear as well as soft home are core to the offer. The way we run the group is to ensure we have clear accountabilities across operational leadership teams for each business. We collaborate on shared initiatives where it makes sense and make group decisions in a small number of areas, property being a key one where the focus is on achieving our best commercial outcome at a group level. We will increasingly be leveraging OneDigital capabilities to enhance our customer insights, access new channels to market and accelerate new capabilities such as centralized online fulfillment. Turning now to Slide 60. Kmart as a group -- sorry, Kmart Group is a leader in sustainability. As the largest retailer in our category, we are focused on finding scalable solutions. And when we do, we aim to be first to market on mass. This approach leads to more effective and affordable solutions to the sustainability issues faced by all retailers, and means we can help lead the way for Australian retail. We have demonstrated a strong track record and continue to progress on our existing commitments. For example, 100% renewable energy target in 2025 and Net Zero Scope 1 and 2 emissions by 2030. We are also increasingly focusing on opportunities to make our business more circular, supporting our customers in how they use and dispose of products, increasing recycled inputs and reducing operational waste and packaging. Turning now to Slide 62. Many of you would be familiar with our strategy slide by now. Our purpose of making everyday living brighter is anchored on saving customers' money on the everyday items they need and bringing products customers want to a price point they can afford. Families, everyday items and lowest price all drive volume, enabling substantial economies of scale. Our 2 strategies remain unchanged, providing a great place to shop that is simple to run and better products at even lower prices. Today, I'll cover the 5 strategic priorities that sit across these 2 strategies. 10 1 6 or $10 billion of revenue, $1 billion of EBIT or EBT and 6 stock turns has been our aspiration for some time, and we are making good progress towards this aspiration. Finally, our values are important to us and help us to operate effectively and attract and retain talent. Turning to 63. Lowest price leadership is fundamental to Kmart's historical and future success. Kmart has 2 distinct capabilities, which enable this market-leading position on price. The first is being the market a market-leading product brand with a significant product cost advantage. The Anko brand is now approaching $6 billion in revenue. Kmart is #1 or #2 in most categories with substantially lower average prices and a more focused assortment. The net result is the units of each item we buy is much greater than the rest of the market. This, combined with our world-class direct sourcing capability, unlocks lowest-cost sourcing and our ability to buy better than our competitors. The second is a CODB advantage through higher sales density and access to our customers with 21 million Australians living now within 10 kilometers of a Kmart. These 2 capabilities enable Kmart to offer lower prices every day whilst generating adequate returns for shareholders. Emerging capabilities in technology and data unlock the potential to further improve our business and connect with customers at an individual level whilst increasing overall business productivity. Kmart has invested in a number of technology platforms and data assets, which will enable ongoing operational improvements designed to grow revenue and reduce operational costs, further enhancing Kmart's scale and lowest price position. In an environment where inflation is present and value is going to become increasingly important, these capabilities provide the ability for Kmart to extend its leadership on those price. Turning to Slide 64. Kmart has always prided itself on thinking customer, but we are now at the right time to evolve to a customer orientation that is focused on growing share of wallet with customers today on average, only spending $450 per annum with us. Customers are increasingly shopping both in-store and online and our opportunity lies in increasing their engagement to drive growth in share of wallet through both channels. Kmart's strategic priorities over the medium to long term focus on leveraging our unique competitive advantages and emerge in digital capabilities to grow our share of wallet. These 5 strategic priorities sit across our 2 strategies where Kmart will leverage its product development capabilities and digitize its sourcing and supply chain to deliver better products at even lower prices. A great place to shop, the simple to run will be delivered by accelerating our online offer, personalizing the customer experience and digitizing the in-store operating model. The next few slides go into detail in each of these priorities. Turning to 65. Kmart operates in a large growing and yet highly fragmented market. We continue to review the addressable market and look for areas of potential expansion with home increasing from $26 billion to $32 billion, for example. With stores fully open, there is significant opportunity to grow share of wallet by expanding share in existing categories by range improvements and expansions and entering into new categories, both in-store and online. The store format is an asset built over the last decade. A single large format store is flexible and allows Kmart to introduce new categories and optimize space for existing categories to maintain higher sales densities as categories evolve. We have a strong track record of exiting declining categories and introducing our expanding growth categories. Online provides the ability to launch new categories as online exclusives. This enables access to product categories not compatible with our stores like furniture and white goods and also the ability to enter new categories without the investment risk of supplying all stores with untested ranges. Our design and sourcing capabilities, combined with our scale, enable us to enter new categories at price points that others can't match while offering the on-trend products that customers demand. As a result, we can -- if we decide to enter a category, we can go from 0 to being large very quickly. Turning now to Slide 66. Online has an increasingly important role to play as we grow the business. We know omnichannel customers shop with us more frequently and many customers start their journey with us online. We have just launched the Kmart app and see this as a new and important channel for our customers to engage with us more closely. Current levels of online penetration are low relative to industry benchmarks and ongoing improvements in the online offer will enable Kmart to access this growth. The online channel is profitable today, but there is significant opportunity to improve productivity through better stock integrity and improving our picking efficiency in stores. Last year, we talked about replatforming our website. This has been successfully executed, providing further capacity for growth and delivering material improvements in the customer experience. Our online business is also now at the scale where the economics of centralized fulfillment are becoming more attractive. As a result, we are building a hybrid fulfillment model that will enable low cost and fast deliveries to customers. The first step towards this will be to leverage Catch's new fulfillment facility in New South Wales to fulfill a portion of kmart.com.au orders. We expect to launch this in the first quarter of '20 -- sorry, of FY '23, so a bit later this year. Turning now to Slide 67. The long-term vision here is threefold. First, dramatically reduce lead times in product development and sourcing so that we have the most on-trend product ranges. Second, improve the ability to match supply and demand so that we have the right inventory in the right products in the right places at the right time. And third, reduce end-to-end costs to further reinforce our lowest price position. We are making good progress on digitizing our sourcing and supply chain with some very encouraging early proof points, and we expect to see significant benefits in this area over the next 2 to 3 years. Overall, we expect this suite of initiatives to drive higher sales through better availability and better products and higher gross margins through lower markdowns. Turning now to Slide 68. The use of data and technology will improve the in-store experience and make stores simpler to run. We have successfully completed the pilot of our RFID inventory tracking technology with promising indications that better inventory integrity and digitization of the backfill process will lead to higher sales. We expect to complete the rollout of this technology across all stores by the end of calendar 2022 and see material benefits in both sales and cost of doing business over the medium term, through the future applications highlighted on this slide. Turning to Slide 69. Over the last 3 years, we have built the Kmart Group data asset which is now being enriched through group assets leading to 5 million contactable customers. We know that increasing the level of personalization that customers experience, both in-stores and online will result in more engaged customers, higher sales and lower customer retention costs. Kmart has the advantage of building our personalization capabilities on top of an increasingly rich foundation of customer data built across our channels, including the newly launched mobile app and with the support of OneDigital. One of the great latent opportunities is letting customers know what we sell. Even our best customers don't know everything that we have on offer and there is a significant opportunity if we can surface the right products with the right messaging and the right channel when the customers are looking for those items. Turning now to Slide 70. In summary, Kmart wins through lowest prices and has a cost advantage through scale as a result of being #1 or #2 in most categories and capabilities, of course, which are hard to replicate. Despite this, Kmart has modest market share in most categories. And overall share of wallet where customers is low, there is a significant market to go after. During COVID, Kmart has built the foundations required to leverage technology and data to enhance our existing business model, and Kmart's future is to build on the existing capabilities by continuously improving day-to-day operations and making step improvements through the emerging capabilities, which are now coming online to drive profitable growth. Thank you. And I'll now hand over to Richard.

Thank you, Ian. Good morning, everyone. I'd like to start by thanking the Target team for their continued efforts and contribution during what has been a significant period of change and challenge. I feel very privileged and proud to be leading this business. Turning now to Slide 72. Our vision at Target is to deliver affordable quality for everyday life. We're on a relentless mission to make great quality products truly affordable for Australian families. That's Target. We're very clear on our customer and category proposition with our offer focused on our destination categories, which are apparel and soft home. Turning now to 73. As you're all aware, we've been focused on delivering a major business reset, and I'm pleased to say these changes are now successfully embedded in the business. Target is now a smaller, simpler business. And our absolute priority is on achieving consistent profitability. This starts with a commercial model which is built on a significantly reduced fixed cost base. This includes a 30% reduction in support office costs and a reduction in our lease liabilities to $0.7 billion as of December 2021. Importantly, our team's engagement scores have improved as we've embedded this new model. I think this speaks volumes about the simplicity of the model and our ability to drive change through the organization. While the business is simpler, we have returned material scale with 130 large format stores, which have further opportunity for sales density improvement. Now turning to Slide 74. We've defined a customer proposition that is supported by clear value, product and channel strategies. From a product perspective, we're a destination for apparel and soft home and continue to focus on delivering affordable quality as our key differentiator. We continue to see improvements on customer perception scores of quality, value and style but there is more work to do to really cement ourselves in customers' minds. From a customer perspective, we've identified mum as our core customer. We believe Target has the opportunity to bring together a unique proposition for mums that delivers a holistic online range proposition, unique omnichannel mum ecosystem and a connected customer relationship. From a channel perspective, we see Target balancing a strong online and digital offer with the advantages of a physical network that allows it to connect with customers in a way that pure-play retailers can't. And Target's brand remains a key asset in delivering these strategies. It's got very strong awareness and we've had a pleasing response to the recent That's Target campaign relaunch. As Ian has mentioned earlier, we're heavily leveraging Kmart Group and Wesfarmers capabilities, particularly with regards to sourcing, technology and data, advanced analytics, digital and sustainability. We see this also as a critical competitive advantage and a key enabler to delivering our strategies at pace. To Slide 75. We see our online business as the key driver of future growth. Our digital online platform is the front door to our brand, and we know that most of our customer journeys start on the site or via our app. Speaking of our app, we're really pleased with the response we've had from our customers. It's well rated, and we know it is being used by our higher value and more frequent shopper base. We continue to work closely with the Kmart and OneDigital ecosystem to acquire more new customers and accelerate our personalized communications. And finally, while we have an existing profitable base, we know we have clear opportunities to improve. We're seeking to drive higher apparel participation through a more aspirational user experience, and we'll also further optimize our fulfillment proposition by more heavily leveraging our distribution centers to increase productivity, shorten lead times and enhance the service options available to customers. I'll now hand back to Ian and turn to Slide 76. Thank you.

Thanks, Richard. Turning to Slide 77, where I'll take a moment to address our thoughts on the current inflationary environment. Kmart is uniquely positioned in an inflationary environment to continue to extend lowest price leadership. As cost of living pressures increase, low prices will become even more important to customers. With lowest price leadership and focus on everyday items, Kmart will play an increasingly important role in making great products affordable for all customers. Inflation naturally extends lowest price leadership. For example, a $5 item increasing by 10% goes to $5.50. With a $10 item increasing by 10% to $11, price leadership in that example increases from $5 to $5.50. And Kmart sourcing model means we have a complete view of all costs in the supply chain from raw materials, production facilities and international shipping. Our design process enables us to adjust ranges based upon changes to input prices to mitigate the magnitude of cost increases. Our close relationship with our factory partners enables Kmart to access advances in productivity through factory automation and more seamless operations. This control over the end-to-end supply chain means we have great flexibility to manage costs. And we will leverage our unique advantages to limit price increases below the cost of inflation while sustaining good financial performance. Ultimately, our prices will rise more slowly than the market whilst maintaining adequate returns to shareholders. Turning to Slide 78 in outlook. In FY '23, we will realize the full year benefit of this target store conversions, of course, subject to there being no more lockdowns. In Kmart, the focus is on driving share of wallet growth by extending lowest price leadership, ongoing improvements and expansion of the product offer and building closer personalized relationships with our customers. Target will be focused on maintaining a low-cost base, continuing to improve the product offer while delivering affordable quality and growing online. And finally, before I go, I would like to thank both the Kmart and the Target teams for their hard work and dedication for our customers over the last 12 months. It's been another incredible year. And with that, we'd be very happy to go to questions.

Ian, I'll go first with one from Michael Simotas at Jefferies. He asks, do you think you can leverage scale in supply chain to offset inflation sufficiently to offer the value you want while maintaining gross margin? Or is it worth sacrificing some short-term margin for long-term market share gain?

Yes. I think the way -- I don't think we would look at it through that lens of the binary one or the other. I think we're always looking to grow margin dollars in a way that's ultimately profitable. So we don't fixate on the margin percent, but we'll continue to make very commercial decisions to ensure that we grow the profitability of our products.

David Errington. Ian, this may appear a pretty dumb question, but I still got to get it out there. First one, I was really surprised that you put up there, the 10, 1 and 6 because really, given what Rob said, we're carrying billion bucks of extra inventory, the stock turns are going to go down in the next 2 years. But -- and that's not the question. The question is what really surprises me, and it's not to you, it's to all retailers, and it gets back to Rob. And every theme today has been about digitalization. It's been about e-commerce. It's been about growth. It's the thematic of today's presentations, in my view. But then you dropped the line you said, "Oh, an online sales are now profitable" as if to say, "Wow, that's fantastic, online is now profitable." Yet, in your 10, 1 and 6, that means in-stores, you've got a 10% margin in-store, yet after 3 years of online, it's now just profitable. So why should we get excited about this strategy towards digital when it barely washes its face? And it seems to me that big box retailers, online is a threat to margin, not an enhancement to profitability. That's probably my question. So it's a big broad question, but it's your line today that said "online now is profitable" as if we all should get excited by that.

Very good. Thanks, David. I might get Aleks to follow on after I've had a first crack at it.

I didn't mean to be rude by that. It's a question to all retailers. It's a question to all big box retailers, why should we as investors be excited by this system going on?

Yes. I guess maybe it was -- maybe my delivery didn't help them, by the way, that I called out that phrase. I guess the reason we called it out is we get a lot of questions around the profitability of online, which is sort of the underlying question of is online adequately profit generating to warrant the investment. And we believe it is. So the reason I called out it's profitable is we already make good margins from online. And we know there's so much opportunity for us to become more efficient in the way that we service it, which will further expand the margins that we generate from it. We are an omnichannel retailer. So there are so many shared costs we run as an organization. You've always got to look at it through a marginal contribution lens for both the stores as well as the online channel. And when we look at them together, if we can grow both, we can see that we can deliver on ongoing lowest price positioning. We can get greater leverage in total by combining those 2 elements so we can grow share of wallet. So it's an unlock for us. And as we've grown scale, we now -- we can now see a line of sight to centralized fulfillment as an example that gives us the ability to, again, lower cost further. I don't know, Aleks, if you wanted to add.

No, I think you've covered it, Ian.

So we should look at online as the big part of the picture, not as a separate. You look at it as part of the whole thing sort of thing?

Correct. So I mean one of the other comments I made in the note there is we want to grow both. This isn't about shifting revenue from in-store to online. We want to grow online as well as stores. And a lot of the initiatives we're talking about, about improving the products, the range expansion, the flexibility of the store space is all geared towards that.

So you probably shouldn't even call out online profitability, really, it's part of the big picture, isn't it really?

Correct.

So Ben here from Jarden. Just interested in, we've obviously seen that -- we saw the robots with the RFID thing on the tour last year if I can remember. But I haven't heard you call it out as material before to group in terms of -- you said it's going to be material to both sales and margin. Could you give us some examples of what you're seeing from the trial in terms of materiality? And does that mean the 10% sales uplift and 100 basis points of margin? Or how do we think about that conceptually? Because it sounded like a pretty confident statement as to what you say.

I'd might get Aleks to get a crack at this one.

Thanks, Ian. Ben, look, I think what we've seen to date is really strong confidence around the initial benefits that Ian called out on the slide, which is incremental sales as a result of digitizing the backfill process. So what does that mean? It means we can get much more precise around ensuring we've got full size ranges and full availability on the shop floor which leads to a sales benefit and consequently, a markdown benefit over time. We've had that in 11 stores to date. And as Ian mentioned, by the end of the year, we'll look to roll that technology and the applications out across the rest of the fleet. And we've got really good confidence from the early data that we've seen that those sales benefits will be replicated across our store network. I think the bigger picture there is what are the applications we build on top of the data platform and the in-store technology that we've built to date. And the materiality really comes around how quickly can we build those further use cases beyond the initial ones that we've been trialing to date. So in parallel, we'll be really looking to build out how do we optimize our in-store processes that will deliver significantly improved cost of doing business, whether it's around the in-store operations or things like online fulfillment and the productivity of picking that as well as the sales benefits for customers and the ones we'll look to develop over time.

That's really helpful. And given you've done 11 of them and it -- sort of it's quite immediate, do you see the benefits, those initial ones that you talked to starting to come through pretty much straight away?

Yes, absolutely. So when we talk to the benefits around the sales uplift to backfill, that's data we've observed and benefits we've realized. And therefore, are confident we'll realize as we roll out the technology across the rest of the fleet.

Just one little addition to that. The -- you get an immediate benefit, of course, because we -- basically, we pull from the back as soon as the size is missing, which we wouldn't have done when we don't have that data. Of course, that then gives us much better sales data which then means with the next season, we can allocate more accurately than we did the previous season. So there's an ongoing improvement cycle that we get from better data.

So sorry, I might follow up with one more follow-on then on that. So what would the out of stocks or -- because I think what supermarket general rule's is 3% out of stock as a percent to come. What sort of do you guys see as out of stock. I get a discussion, does it sit at 10% and it might cost you a couple of points of comp in that category?

I think the answer, Ben, is it depends. So within seasonal product, it becomes less of an issue and we'd look to sell through and that's good. It means less markdown at the end of the season. So pulling forward, the full size curve and the full range is initially is a benefit from that perspective. What Ian is talking about is really the replenishment opportunity through the carry-through ranges. It means that our replenishment models are more active and they're more accurate and we can replenish stock in line. What does that translate to in terms of the comp benefit? I think it would be difficult to quantify. But we see it as a really good opportunity to improve our sales.

It's Ross Curran from Macquarie. Can I just ask about the store conversions? When you've gone from a Target to Kmart, what you've learned through that process? And Rich, is there anything you can take away that you can apply more broadly to Target, store layout or product mix or colors or buying? What can you learn as a group from when you have changed from a Target to a Kmart?

I might take the first half of that question and then pass to Richard. So I think, overall, we've been really pleased with the store conversion program. And what we've consistently seen is a material sales density uplift when we've converted the store from a Target to a Kmart. That's really been driven by a significant uplift in unit volumes because as we know, the average selling prices in Kmart are lower than they are for Target. What's driving the unit uplift? It's being driven by, one, drawing from a much larger catchment to that store. So we're attracting new customers to the store. And we're also seeing the existing customers that shop the store previously spend more at the converted Kmart store. And all of that, of course, translates to incremental trading contribution for the stores that we've converted.

Just to come from a Target point of view. I think the real opportunity is it allows us to really focus on the customer and the simpler operating model now where the buying teams and the central teams don't have to think about how they apply their categories to a much, much wider range of store formats. And store sizes allows us to get much more granular on product performance, category performance and store performance so that we can really start to see improvements in sales density now in the simpler store format that we've got. So I would say the focus and the simplicity of the biggest wins that we've got from that so far.

But are these simple things like, say, moving the tills to the middle of the store like they did with Kmart that you can do or anything?

Yes, we're not looking at things like that. What I'm really talking about is optimizing the ranges within stores and allowing the product teams to focus really on improving the product and meeting our customer needs rather than having to spend the time that they used to do in terms of the complexity of the store estate and managing through that complexity.

Lisa Deng from Goldman Sachs. A question on the increasing sort of competition that we're seeing from other online marketplaces or online pure plays and typically general merchandise, apparel, home furnishings or one of the earlier categories that they tend to compete in. So what do you think we see around that? And what would be our key competitive strategy on that? And then a follow-up question is we do spend a lot of time product -- doing product development, right, which is our core advantage. But is there anything stopping the suppliers or the manufacturers that we work with, then switch it a little bit or change a little bit and then sell it through some of the increasing online marketplaces through maybe a distributor or something?

Yes. I'll -- maybe I'll have a go at both of those at a high level. And then if there's something specific, we can pick up on Target. I think the first thing is we've seen really strong growth in our online traffic across both Kmart and Target throughout this entire period. We're continuing to see growth in traffic through those 2 businesses. I think it really comes down to the core proposition and the strength of it. And so clearly, Kmart is focused on being the lowest price and it's the lowest price everywhere. It's not the lowest price in stores but not online. And so we're very focused on ensuring that we continue to deliver to that proposition. And so if you said, what's our defensive shield in Kmart? We're just going to be lower priced than everybody else and through the economies of scale that we called out as we went through the presentation. And in the case of Target, it's around how do we create better value. And obviously, it's a value equation built around quality and style with this very strong focus on the customer group that we're going after. And that enables us to be really precise around making sure we've got that product offer right, as Richard called out through his presentation as well. So I think this is, to a degree, our competitive market online is no different to a competitive market in stores. Your proposition has just got to be really powerful for the consumer that you're going after. And that's the ultimate defense. I think on the second question around can somebody knockoff our products. Well, if it's got a design element to it and a lot of our products do, then, of course, there's intellectual property around that. And of course, we can defend that if we need to. So if there is copying of our products, it's something that we can manage by directly -- by taking that on.

Yes. No, actually, what I was referring to is less about copying. It's more about your OEM manufacturers who's already been able to manufacture at very low cost because of the scale of your orders, then they will have certain leftover orders and volume and switch it slightly and then sell it through marketplaces and cut out that retail margin layer to also be able to compete with the lowest price offer that we also.

It's not really in there.

Do we see that?

Yes, not really in their interests, to be honest. Because, I mean, if we're a big part of their organization, and then they want to try and cut us out of the loop for a small margin, that's a big risk that they'll be taking.

They generally a very large part of your OEMs?

Yes. So if you think about a business like Kmart, we take baseload in a factory. So it's one of the reasons why we get lowest cost. We give them consistency of volumes, which means we can cover fixed costs. And then the factories generally have a margin mix through different levels of brands that they work with. And of course, they try and make more -- the most money on their last portion of their product -- or their production runs. So we're generally based production.

It's Bryan Raymond, JPMorgan. Just on the step-up in inventory that you guys have seen. It's obviously been quite a rocky road in terms of availability over the course of COVID for you guys. And your model, obviously, is great, even smooth times. But in these unpredictable times, makes it harder. How have you seen availability evolve in these categories now that you've got this pronounced step-up in investment in inventory? How much better is your availability? And how much of a translation into sales do you think that's giving you?

Yes. I think, first of all, we've taken now the decision to bring our inventory levels probably back to market is the simplest way of looking at it. So we ran stock turns faster to market. The stock turns we always talk about include the product on the water, so -- which a lot of other businesses wouldn't, of course, when we go through that piece. We've -- that gives us the ability to carry more inventory in the basic items, the 365 items, which is what Rob called out this morning. And we've seen, as we've gone through -- particularly we've gone through this half, we've seen availability levels getting right back to normal. And certainly, they're within a range of tolerance that we're pretty comfortable with on average across the states. Every state is a different story because of different environmental factors, whether it's been lockdown historically or when COVID goes through and availability of team members and even shipping and its inability to get ships to some ports, that will have different factors that have played out. But certainly carrying that additional inventory as we are now, it's giving us greater ability to react to the volatility both in demand and supply chain that we've seen. I think the last piece just on inventory across both Kmart and Target is at the half, we were carrying like double-up inventory. We had the additional inventory because of the buffer that we just talked about. But we also had the knock-on effect of the lockdowns in both New South Wales and Victoria. And of course, the absence of sales in that period. We've been very proactively working through that inventory as we've gone through this half. The vast majority of that has been 365. So that's just a question of adjusting our future orders so that we get down to the levels that we want to be at. And then if it's something that's got a shorter life to it, there we've been quite active particularly in Target on the promotional front to make sure we move through that inventory in a very profitable way.

Okay. Great. And then just a quick follow-up. Is the signs you're looking forward to get that inventory level back to normal over time? Is it the supply chain stuff sorting itself out globally? China getting back to normal? What's the key thing we should look for?

Yes, two things. Two things going on. One is we're carrying that buffer. There's a whole bunch we're doing on digital supply chain to improve the underlying speed of products from factories to our shelves without increasing cost or hasten to add. So this isn't about long-term buffers, this is about faster development cycles and bringing our products to a shelf faster. So that flexibility will help us reduce inventory over time anyway. The second piece is once we get more stability in both demand and supply, then of course, we'll remove the buffers. But until we get stability in both demand and supply, then we'll carry them.

Craig Woolford from MST. Just wanted to ask about your sourcing. I guess, diversity, both the short-term issue around how you're seeing product supply coming out of China. If you can give us a sense of what proportion of your product does come from China? And are you looking at diversifying that further?

Yes, it's -- so when you look at product diversity. We're probably more diversified than most Australian retailers already, so as a start point. So there are certain categories where we're a long way down the journey. And you know that we source a lot of products, particularly clothing out of Bangladesh, India, Indonesia, Vietnam, as well as China. When you're a smaller business, that those -- some of those countries are not that viable because they demand a certain order size. We're clearly with the size of business that can play in that space. So that gives us the ability to go to some of those countries. When you go to other product types, we've already been moving some of those products, as you would expect. So we've got a lot of stainless steel, sort of wicker type products being made out of India. And we were increasingly got products coming out of Bangladesh which would have been in traditionally general merchandise categories as new factories open. I think the challenge for all of us is there's still a lot of products which are only realistically available in one country, which is China, of course. And I think everyone around the world is trying to figure out, well, how do we balance that risk because having one -- only one product in one location is a challenge. Now when there's a ready-made alternative sort of factories, that's just a pricing choice. In many cases, those factories just don't exist. So what we're doing along with some of the other bigger global retailers is we're working with our better factories and our factory owners in China and seeking to support them in their move towards new countries so they can open new facilities. And we can support that by guaranteeing volumes as we work through that. I think if you look at it, there's also the long-term view of how do we get to a balanced view across all categories, you're talking multiyear and in fact many year because of that structural build that's got to occur to move factories out of China into other markets, but we're clearly very actively working towards that.

Shaun Cousins, UBS. Just a question, a little bit about Kmart. You highlight how you have -- you sold to most all Australians. Can you talk a bit about the, I guess, the mix of your sales? Are you selling equally to the less affluent and the more affluent? I'm just curious around how, when we're looking forward, how that consumer handles a higher inflation environment, the less affluents going to have a tougher time there. But can you maybe talk initially just about your mix of sales between the less and more affluent customers, please, in a dollar sense, please?

Yes, sure. Do you want to jump into that one?

I can start and you add. I think, Shaun, we see really strong levels of engagement with the Kmart brand across all income levels. And I think we had a chart in last year's Kmart Day, which really showed it's pretty consistent across the board. Where it's slightly under-indexed was in the very low income bracket and the extreme high income bracket. But across the majority, we've got really strong engagement. The other way that manifests is if you look at our store network and you look at [indiscernible] store, we have very strong sales density across the board. So I'd say whichever way you cut it, we've got very strong engagement across all of our income levels across the customer base.

If you do a broad like low, medium, high income split very crudely, it's almost exactly the same dollars. But of course, the share of wallet is different because, of course, the higher the income, you've got more disposable income that's available.

Great. And maybe, Richard, how do you think Target is set to deal with a consumer that's got a higher cost of living just in that there was a degree some years ago, it lost its way. It didn't have relevance and hence, the lousy performance that was reported. Do you think that you've actually got an offer in terms of the quality that you're delivering because it is a much higher price point relative to Kmart, it's lower than others. And what's the risk that your customer actually trades down to some really compelling value in Kmart, please?

Yes. I bring -- I'd just remind us of one of the slides in the presentation around what we really stand for and what we're communicating and looking to deliver is affordable quality for everyday life. So we stand first and foremost as a value retailer. We look to offer an enhancement quality proposition for that value. So yes, most of our items are at a slight premium price point to what you would see in a Kmart. But we would seek to offer. And where we do this, we win big where we offer the same or better quality than specialty retailer for around half the price. So we know that where we get that right in our categories and get that right through our good, better, best hierarchy that we stand to gain a lot of the share, as you've referenced that we've lost over the last several years. So we think that's a good platform for us. We stand for value, and we think that value position will be a strong one in -- if times do get tougher for our customers.

Adrian Lemme from Citi. Thanks for providing that ASP. Are you able to share, firstly, the average basket size, too, so we get a feel for the average shop spend? And then secondly, just in terms of the inventory, I understand that most of the increase is in the everyday 365 items. But I think Target a couple of weeks ago in the U.S. talked about how they've been the sharp shift between categories. So can you talk about how your inventory is positioned from that respect too, please?

Yes, maybe I can get a control for Kmart. And Richard, if there's anything to add, feel free. I think in terms of the comments from the U.S. and the shifting categories, we haven't seen a shift at this point. And our customer behavior, I think Rob called it out earlier, has been very consistent as we look through the data. And we look -- we've now got really good customer data to see what's going on by cohort to get a sense of what's happening, and we're not seeing that shift occur yet. The second piece is the nature of our offer is so everyday. So when you got an average sale that's in the $6 to $7 range, we're not selling widescreen TVs, we're not selling the higher-priced discretionary items that you might see in other department stores around the world. So we just don't carry those categories on the way through. When it comes to seasonal product, we're pretty careful around the volumes that we purchase and we don't purchase additional volumes. There's no buffers on those. And we are very focused on moving through that inventory at the right rate of sale so that we achieve the right outcomes for each season. So as we look at our inventory across both businesses, we feel like we're constantly managing it and we feel like we're well positioned in both organizations with the inventory that we're currently holding. I don't know, Richard, if there's anything else you want to add.

Just very briefly, I would say we're absolutely paranoid about it. And I would say with the enhanced customer data and analytics capability that you've heard is building across all our businesses, I think it puts us in a good position to be able to analyze lead indicators and really identify any change in behavior as and when it does happen. But just to reiterate, we looked really hard at that since we saw some of what you're referring to from the U.S. And at this point in time, we haven't seen that change. That's not to say we're complacent or thinking it won't happen. So we've got good data sets built, so that as and when we do see a change in customer behavior, we should be able to identify that quickly and respond accordingly.

Thanks, Ian, Aleks and Richard. For those in the room, we'll take 30 minutes for lunch. And for those online, we'll be back at 20 to 1. Thank you. [Break]

Okay. I think we might be good to go. Good afternoon, everyone, and welcome back for those I've not met before. I'm Sarah Hunter, the Managing Director of Officeworks, and I'll shortly be joined for Q&A by Brendan Hargreaves, the CFO of Officeworks. Officeworks' purpose to help make bigger things happen and our vision to inspire Australians to work, learn, create and connect remain unchanged, as do our 5 strategies that provide our delivery road map. Officeworks is well positioned to deliver long-term profitable growth and sustainable returns for shareholders through the investments we are making and the priorities we are focused on, growing our core and addressable market whilst accelerating our productivity and efficiency initiatives. Turning to the next slide. Officeworks' track record of delivering strong sales and earnings growth has not been immune to the recent challenges of COVID. However, we have a well-established every channel offer which we'll continue -- we will continue to invest in ensuring our customers have an easy and engaging shopping experience. We are focused on reducing our cost of doing business, enabling us to continue investing in low prices to help relieve the cost of living pressures facing Australians. By driving our investment in data and digital, we are enabling our team to solve diverse customer needs and create more personalized experiences for customers. And we will continue to deliver on our track record of expanding and evolving our range to meet the changing needs of customers by entering adjacent and new categories. So Officeworks remains well positioned to deliver profitable long-term growth. Turning to Slide 82. Officeworks is well known for expanding its addressable market. This has been achieved through both category range extension and by entering adjacent and new markets. Examples include the extension of our branded technology offer and entering adjacent new markets, such as art supplies, early learning products, and the technology services business with Geeks2U. As a result, our current addressable market is estimated to be worth $28 billion. The strength of our offer, our well-established every channel model and brand trust provide us with the opportunity to further grow into adjacent and new markets, taking our potential addressable market size to $56 billion. Our key growth areas here are consistent with those shared last year. Turning to the next slide. Officeworks has a broad customer base, including students, parents, teachers, micro, small and medium-sized businesses and households. Within increased data and analytics capability, our depth of customer understanding is rapidly developing, enabling us to better understand a more unique and nuanced customer journey. This provides us -- this provides opportunities as to how we respond to their needs and personalize communication and recommendations effectively. For example, remote and hybrid working requires new solutions both for employees and employers to ensure a safe and productive workplace. Or changing expectations around delivery experiences provide opportunities for us to reinforce our investment in our next-day delivery and our 2-hour click and collect offers, demonstrating convenience and reliability. And for many customers, sustainability is an important issue, which is increasingly translating into their purchasing decisions, as they reward brands like Officeworks that share their values. Turning to Slide 85. We remain focused on delivering an easy and engaging every channel experience. Providing a seamless experience across every channel remains a priority, including continuing to invest in improving 2-hour click and collect offer with Click & Collect currently representing approximately 1/3 of all online orders. For shopping experience to be both easy and engaging, customers expect it to be increasingly personalized. And since launching Flybuys in November last year, we have been able to accelerate customer identification in store significantly increasing our number of known customers, which we are now integrating into our marketing communications. Our new online recommendation engine has been implemented across the majority of products online, increasing cross-sell opportunities. And we also continue to progress opportunities with the Wesfarmers OneDigital division. And as we -- and, we will continue to transition our refresh brand -- through our refresh brand, which is more distinctive and dynamic across every channel. Following successful trials, we have begun the integration across our physical and digital channels. Turning to Slide 86. The rapid growth Officeworks has experienced in recent years has provided us with the opportunity to better leverage our scale, to fractionalize our costs and to review our operating model. By automating, digitizing and improving capacity and capability, we will reduce costs, improve the customer experience and continue to invest in price while building a sustainable operating model for the future. For example, we are investing in improving our end-to-end inventory planning and stock management processes and systems and enhancing our rostering processes to optimize team member availability and allocation. We will also increase automation and streamline processes to simplify ways of working in our support centers. As customers continue to embrace online shopping, we're modernizing our supply chain. The first investment was our new customer fulfillment center in Victoria, which was fully operational from October last year. Our new Victorian International DC is scheduled to open later this year and construction for our WA CFC is about to commence. We will implement process improvements to increase efficiency and reduce costs in our New South Wales and Queensland warehouses, as we review our future capacity requirements in these locations. This program will improve the overall capacity and productivity of our supply chain and ensure we can continue to serve our customers in the most efficient way. Here is a short video from Tom Weinmann, our Head of Supply Chain Transformation at Officeworks, sharing some of the benefits of our new Victorian CFC. [Presentation]

Turning to Slide 88. Our offer is underpinned by the credentials that our customers know and trust us for. Our everyday low prices supported by our price beat guarantee, our widest range and great service. With our continued price investment and expansion of our own brand product ranges, we are well placed to support Australian households and businesses, as they face into cost of living and inflationary pressures. Our stationary category includes products that we're known for, ranging from writing instruments, to paper products and filing solutions. Despite the maturity within some of these categories, we continue to innovate through product design and sourcing new and exclusive products. We've continued to invest in building our art business, which now includes almost 10,000 products. To support the evolution of stationary education and art ranges, we're in the process of reflowing and rightsizing this area of the store as part of our store renewal program. A total of 81 stores have been completed over the last 18 months with a further 69 stores to be completed this year. On average, 1,500 new lines have been introduced into each store, with a 56% increase in space dedicated to art and a 29% increase in space for education ranges. We are pleased with the returns the renewal program is delivering. As a leading retailer of technology, our focus is to continue on expanding our addressable market through extended ranges, such as the recent addition of Microsoft Surface and wide range of Apple products, and extended ranges of headphones, accessories and home networking products that support hybrid working. We are also focused on increasing the volume of connected devices we sell, and our recent partnership with Optus is a great example of this. Hybrid and flexible working continue to be embraced by both employees and employers. We've established ourselves as a leading retailer of ergonomic home office furniture, increased our stylish home office range and grown our online-only ranges with the introduction of brands such as Haworth. As part of our store renewal program, the installation of high bay furniture racking is enabling us to better display products and utilize store space. As customers' printing, copying and creating needs change, we have continued to evolve our offer. We've expanded our service offering into the B2C market through a wider range of custom-printed goods and innovative new products such as Tapt's digital business card. These new growth opportunities are offsetting declines in some traditional print categories. And in addition, the investments in new equipment such as the replacement of self-serve printing machines is materially improving the productivity of this business and enhancing the customer experience. And we've continued to invest in building the Geeks2U offer into Officeworks. This includes refreshing the Geeks2U brand and launching the Geeks2U services available for purchase in our stores as well as on our website and also on the Flexiworks platform. Turning to Slide 89. We will leverage the value proposition and brand equity across our own brands, which now include over 9,000 products with 80 million units sold in the last 12 months. We'll further expand these ranges while sourcing quality products at the lowest cost without compromising our responsible sourcing standards. Our Keji and J Burrows brands catered to the needs of the price and quality conscious customer with representation across most product categories. Our Studymate products are increasingly the preferred book list brand for parents, teachers and schools. And we continue to expand our Kadink range of early learning and kids craft items to provide greater value to early learning centers and parents. Launched in 2020, our Born range consists of 500 art and craft products, offering our enthusiasts quality, affordable products. And most of our furniture range continues to be own brand product. Our scale, coupled with our global sourcing capabilities, enables us to reinforce our everyday low price and quality credentials. Officeworks has a well-established presence in the B2B education market, serving around 1.7 million parents, students and teachers each year. The majority of whom shop in store or online for their book list items or for their child learning device known as BYOD during the back-to-school period, during which our everyday low prices are further guaranteed through our parents' price promise. The B2B education sector has an estimated addressable market of $2.5 billion. and is a significant growth opportunity for Officeworks. Over the last 2 years, we've invested in building our classroom essential service, a bulk classroom ordering platform to set classrooms up with the supplies needed for the year ahead. This has been well received by the nearly 200 primary schools that are now choosing Officeworks, as their preferred supplier. And we look forward to working with more of the 9,000 schools across Australia as we scale our offer to better meet their end-to-end needs. With 40% of Australians regularly spending time working from home, there is an opportunity for us to help Australian businesses support their employees working from home in a safe and productive way. Over the last couple of years, representatives from a number of large and midsized businesses contacted us to ask if Officeworks could help them solve the challenge of equipping their employees with the tools and supplies they needed to work remotely. So in response to this, we've developed the Flexiworks platform, which launched into market in March this year. The platform is easy to use and self-managed by employers, reducing time employees spend on logistical and administrative work to set their employees up to work safely, remotely. It has the flexibility to meet more complex needs across range curation, reporting and invoicing while giving customers access to Officeworks' everyday low prices and convenient shopping and delivery options. Turning to Slide 90. We continue to invest in the safety, health and well-being of our more than 9,500 team members. This remains an important priority. We're focused on developing our team, investing in them to ensure they are great retailers with the skills they need to operate in an every channel retail business, both for today and for tomorrow. We continue to build our employee value proposition to ensure we're an employer of choice, and we retain and attract talented team members to Officeworks. We have a mature and integrated approach to sustainability, which includes building stakeholder trust by further embedding people and the planet into our decision-making. This is underpinned by our People and Planet Positive 2025 commitments. Earlier this year, our efforts were recognized by the Banksia Foundation, being awarded the 2022 Banksia Foundation sustainability transformation award, recognizing Officeworks' efforts to create positive change by reducing carbon emissions and waste generation across its entire supply chain, promoting and supporting equal opportunities and accelerating its own business and the broader retail industry towards Net Zero and a more secular economy. We will continue to transition to 100% renewable energy by 2025 by installing on-site solar power and procuring the balance from large-scale solar and wind farms, such as our recent agreement announced in Queensland. And our partnership with Brisbane-based social enterprise, the world's biggest garage sale will enable us to accelerate our repair capability as consumers embrace the secular economy. Turning to my final slide. Officeworks is well positioned to leverage our established credentials of everyday low prices, widest range and great service across a very well-established every channel customer experience. We have a track record of expanding our addressable market and responding to changing customer needs. We will continue to do this by evolving our offer and rightsizing categories for future growth across every channel, by continuing to invest in our own brand range to deliver innovation and value, by growing our share in the B2B education sector and attracting new customers with Flexiworks. Our growth will be enhanced by utilizing our data and digital capabilities to provide a more personalized customer experience. We are accelerating our productivity and efficiency initiatives with a focus on store and support center operations as well as modernizing our supply chain in order to deliver efficient capacity for online growth. We will continue to invest in and support our team to deliver on our people and to deliver on our People and Planet Positive commitments. The team and I are confident that Officeworks will continue to deliver long-term profitable growth for shareholders for many years to come. Thank you. I'll now invite Brendan up for Q&A.

Okay. It's Bryan Raymond, JPMorgan. I'm interested in the percentage of sales? Or the really just how much of your business is linked to some of these service offerings that you have. You talked about Geeks2U, Flexiworks, classroom essentials, there's probably some others I'm missing. But these would be stickier sales rather than transactional sort of relationships with the customers. It's an ongoing relationship. Is that a meaningful part of your sales mix already? Or is that an opportunity ahead?

It's a significant opportunity ahead. And you missed one, the connected devices with Optus. So, absolutely, look, it's early stages. We've had Geeks2U for a couple of years. It's obviously been slightly disrupted through COVID. People didn't necessarily want technicians in their home. But the remote service that we put into market in response to that has certainly developed stickiness. And we've seen our subscriber numbers to Geeks2U more than double in the last 12 months. So it's absolutely a focus for us, is to really grow that stickiness around services, and it's pretty small for us at the moment. So we see it as a significant opportunity.

Okay. Great. And then just one more, if I can sneak it in. Just on work from home. What categories do you think are kind of back to normal or pre-COVID levels in terms of sales that you're generating in say, the last few months? And what is still elevated? Is this sort of upgrade cycle, replacement cycle starting to kick in? Yes, if you just help us understand that.

Yes. Look, I think probably 3 factors. I think there was obviously the initial setup, and we're definitely starting to see upgrade and replacement. Particularly, we've seen that through the process with consumables. And we've also seen -- we know early on, there were some availability constraints. So we saw, particularly in technology, people waiting until the right device or the device that suited them ergonomically or their needs from a work perspective were available in the market. So we've seen that continued renewal of the home office setup and devices. I think the real opportunity now that we're seeing is, as well, given the fact that people are now moving roles and we are seeing that. We know through COVID, there was a depression in terms of turnover. People stayed in their employment for longer periods of time than would be average. We're now seeing employers embrace the opportunity as part of flexible working to really differentiate themselves through their employment proposition to people. So we're now seeing people join a new employer. And that new employer sponsor that employee to set up from home. So it's -- there are 2 drivers. There's the ongoing consumables and the ongoing maintenance now of the home -- work from home setup. And then more broadly, the embracement of hybrid and flexible working and employers embracing that in how they set up their employment proposition.

Sarah, just following on from Bryan's question. I mean, I think at the first half result, I think I was questioning about -- it was a really tough period that you faced. And there was a couple of key markets there to Bryan's point. I think the B2B market had been significantly impacted. But I think you also called out back to school. I think because of Omicron, kids weren't going back to school or absenteeism was very, very high. So just to follow on from what Bryan's question was, how you've navigated through that period since then? I know it's not -- it's a Strategy Day and you don't want it, but it was such an important call out. So where would your Officeworks business be relative to where you were tracking in that first, as you -- I think, you said there was conditions you've never seen before. So where are you at from a business perspective in terms of relative stability, if you can never call out in this world? And the second part of the question is you've called out again, your addressable market, you're looking to double. And in this world where things are changing so much, people look 40% working from home. How are you looking at expanding that addressable market? Are they new areas to what you were thinking of even up to 12 months ago? What would be the big areas that you see as the big opportunities that you could leverage into? What sort of capital commitments or what opportunities, what sort of things that you would need to do to capture that? There's a lot in that, I know, but if you could have a go, that would be great.

I'll have a go, I have to start somewhere. So I think in terms of trade, look, I think and particularly in the education market, what I would say and as a mom of 3 kids, it's great to have kids back at school, right? I think, let's just start there. So it's great to have kids back at school. It's great to have children back in the classroom or in their early learning environment or even back at university. So for us, that stability is what we were looking for to -- and in the states where we had that stability, we saw reasonable performance. So I think to your point around education and back-to-school, we feel very confident about our position. And particularly in this market with value being so critical for parents. Our parent's price promise we think will -- coupled with our price guarantee and our everyday low prices, will really resonate. In terms of B2B, I think it's very varied depending on the state. We still -- we've seen a continuation of what we saw earlier in the year. And we hope now with some stability in the economic environment, and we hope to see a strong end of financial year coming up. Right now if you want to add anything?

No.

Okay. In terms of addressable market, I think where to start. Look, I think let's start with we've talked about B2B. So a follow-on from there, David, Flexiworks. We have low single-digit market share in large and midsized corporates. Flexiworks is targeted at large and midsized corporates, albeit it's a great tool that will be available to all of our small business customers if they're embracing hybrid working. Most of our small business customers already do hybrid working pretty well. So we feel that that's a big opportunity for us on our own terms with our everyday low price credentials, really making hybrid working work for Australian corporates. More broadly than that, education. I highlighted education B2B market is a $2.5 billion market. We've got about this much, 200 primary schools. But we've learned a lot. We've invested over the last few years to build the classroom essential service, and that's been very deliberate with slow and steady, measured entry into the market to understand it and understand how to scale it profitably. And so we're looking forward to scaling that business in the years ahead. And so the capital investment and the investment we're making is included within the results that you're seeing. And we feel very confident there's a lot of opportunity for our brands to extend into both of those markets.

Shaun Cousins, UBS. I just got questions in regards to your other retailers owned by Wesfarmers, have made the comments they're looking to hold back price increases in terms of investing value for customers. Bunnings and Kmart was sort of quite clear on that. I may have missed it, but I didn't quite get that in the Officeworks presentation. Should we anticipate that there would be a degree to which you will look to hold back cost increases to deliver value to customers to drive volume share gains?

Yes.

And on that, just one of the themes that's come out of your results over recent sort of years has been fairly strong growth, but margins have been somewhat underwhelming at times. And that you've had channel -- or pardon me, product mix shift, sort of tech has sort of played a role there. You just discussed the broader competitive environment and the extent to which that sales growth that you're generating has to sort of come somewhat at a lower margin and that you want to maintain your price position and hence, you just get -- our earnings growth trajectory should really be driven by sales without really margin expansion.

Look, I think what I'd start with by saying is that the last 2.5 years are anything but normal. So what we've seen in the everyone moving in an accelerated way to work and learn from home in that set up and what that drove in terms of tech demand was unprecedented globally. Australia is no exception to that. So I think the other, coupled with that as well, as I mentioned at the half year results, our print and create business and our stationary business are very dependent -- or not dependent, but strongly linked to stores being opened. So we definitely saw a mix shift that was unusual given what had happened in the market. I am -- echo Ian's point, I look forward to stores remaining open, touch wood, for a solid -- for the foreseeable future. And that will certainly mean that we don't see that level of distortion and acceleration going forward. More broadly than that, I think I was reasonably clear in my presentation around the productivity acceleration opportunities we now have given the scale of our business. So that goes from buying all the way through to how we leverage our cost base in our supply chain. The fact we're in at scale every channel retailer, which means we have scale in our supply chain, and we can leverage that through investing in technology. So I feel very confident that the sales growth that we will continue to see in the future will translate into profit growth.

Sarah, it's Ben here from Jarden. Just a question around the category evolution. You always talked a lot about work from home, but still called Officeworks. I think you guys must be the third or fourth biggest seller of IT in Australia in terms of group or the fourth in terms of...

I'm not flinching.

Yes. So in terms of natural progression, and you talked about commercial selling to turn on primary schools, how do you think about electronics as a category? Because you've obviously done a great job then around stationary and all the add-ons, which is nice margin [indiscernible] similar if you push more into CAE on the accessory side. How do you think about that from both a retail and commercial more so schools perspective?

Yes. Look, it's a great question, and it's one we've been asking ourselves. And David asked what are we looking at in terms of market adjacencies. We obviously got Geeks2U. We obviously are interested in trying to understand that side of the market as well. But in reality, we see our heartland as being supporting the parents with value at back-to-school in the first instance. And so we launched our BYOD selection tool, which we launched out to market, which was very successful. We leveraged all the data that we've developed through our school is service over the last couple of years to build that so that we have coverage across over 85% of schools in Australia, and we know what devices parents need for their children to help them select it, but at our everyday low prices, also underpinned by a price beat guarantee. So first and foremost, that's where we see the opportunity. Beyond that, as we develop relationships with schools, we'll see where that takes us. But we're not racing into that market. I think we have huge opportunities with Geeks2U and within the parents B2C market as well.

And on the consumer-facing side to see it?

Look, I think, our ranging lens and position in the market are reasonably well understood in technology. We've got a very good strong position in that market. It was really important that we introduced Surface into that market. And now in collaboration with our technology suppliers, we're keen to explore how we can further extend that range, particularly in the commercial side. That's our absolute focus. But we'll always look -- we review our business plans every year. We'll always look at opportunities in the market, and the market is pretty dynamic. A great example of that is I'm still a standard at the volume of gaming chairs and gaming accessories we sell. That's absolutely blown us away in the last 3 years, and it's a far bigger part of our business than it was 3 years ago. So I think that agility in merchandising is something we're famous for, and it's something we'll continue to do, is to look at what customers need and then make sure that we can pivot our range to deliver.

It's Ross Curran from Macquarie. Sorry to call a specific competitor, but Amazon has added quite a bit of capacity in the last 12 months. Have you seen any impact from that at this stage?

Okay. Look, I think, to be honest, we continue to see customers who love shopping with office workshop with Officeworks. We don't comment on competitors. But what we focus on is making sure that our service is easy and engaging, that our price is lowest in the market against our main competitors and that we are really focused on retaining those customers and every dollar in their basket. So it's easy, I think, to get distracted by competitors. And the most important thing is we focus on our strategy and delivering our strategy.

Sarah, Mark Wade, CLSA. I think Officeworks is under your leadership, has really been known for, I think, the flexible workplace you've had for your staff and particularly with women returning back to the work, after Matt left. Can you talk about how that's helped specifically on the return of staff back to -- as they come back to the workplace, also attracting new staff and that retention levels, how that stood you through over this last difficult couple of years with absenteeism and so forth?

I think if I could answer that one. We're trying to make flexible working a competitive advantage for us when it comes to our employee value proposition. The focus that we've got on flexibility is around moments that matter. So how do you get the team back into the office for things that are really important, as opposed to having a mandate that says you need to be in the office on particular days or for a certain number of days of the week. And so things like, for instance, a performance appraisal conversation, you wouldn't do that over Teams, you would that face-to-face. So how do you create those moments that matter. And we think going forward that -- actually that could be a little competitive advantage for us when we attract -- try to attract wonderful people to come and join our organization.

And I'll just add to that. I mean, I think it's -- it is more challenging from a leadership perspective because you're learning new skills as a leader as to how you engage a broader workforce. But leveraging what we've learned in the last 2.5 years and acknowledging that it's a journey. And it's our understanding of how we work best together and productively is evolving, also opens doors for us in terms of talent. So our new Head of Customer Insights, Data and Analytics is based in Brisbane, not in Melbourne. So if we can -- our Geeks2U business is based in Sydney. So if we can really leverage that, it also opens significant talent pools for us.

Okay. And lastly, the -- I think last year, it came up a little bit around the opportunities in big corporate. Has a thinking evolved there?

Yes, it's called Flexiworks. Essentially, the Flexiworks platform is targeted at large corporates and mid-sized corporates to enable them to set up their teams in a sustainable way and an ongoing way to work in a hybrid fashion. So businesses and companies that approached us early on in COVID were law firms, accounting firms, banks, large people-based organizations that were really struggling with the admin associated with and actually the safety component because we have an ergonomic assessment that we worked with WorkSafe Australia to discharge safety obligations in the home as well. So for us, it was really important that when we looked at the big corporate market, we did it on our terms, and we underpinned our everyday low price credentials with that our B2C offer. So the way we think about Flexiworks is it's B2B2C. All right. Thank you. I'll hand over to Nicole.

Good afternoon, everyone. For those of you and many of you I don't know, my name is Nicole Sheffield, I'm the Managing Director of Wesfarmers OneDigital. I joined Wesfarmers in November of last year, and I'm very pleased to be with you here today to actually share the OneDigital strategy. So as explained by Rob this morning, just this will help, won't it? There we go. As explained by Rob this morning, Wesfarmers OneDigital brings together the group's digitally native businesses, which includes our membership program, data platform and our marketplace. Importantly, it will provide incremental benefits to the existing divisions and their customers through rich useful data in the shared data asset and by leveraging the benefits of the membership program, which will improve lifetime value overall. And we know we can do this because Wesfarmers has a unique advantage. We reach over 90% of households each year. We have a really great opportunity to truly provide a reason for that household to shop with us more by offering them better value and convenience through a deeper understanding of their wants and needs. Wesfarmers retail businesses formed 6 of Australia's largest and most iconic retail brands with over 150 million digital interactions, 40 million transactions each month, as well as a network of over 1,500 retail stores. So what does this ecosystem look like? As you can see from the flywheel, the household is at the center of everything we do. The customer has a relationship with our trusted brands. We provide them with greater scale and benefits through our OnePass membership program and partnerships like Flybuys. This supports and builds out our shared data asset. And through OneData, we have a better understanding of our customers. This understanding turns -- creates better value and convenience for them, which leads to more visits and deeper engagement and so the flywheel continues. Turning to Slide 95. OneDigital will power the group's data and digital growth ambitions, increasing customer lifetime value and accelerating growth. And OneDigital will provide capabilities, enablers and insights that the divisions will not have on a stand-alone basis. These include: Delivering additional customer benefits at scale through OnePass; providing access to the marketplace and importantly scaled fulfillment through Catch; leveraging deeper customer insights from OneData to accelerate personalization and efficiencies; and with all of this guided by leading privacy and security systems around our customer data. Recognizing the important alignment and collaboration OneDigital and the divisions need to have, we have established a OneDigital Board with the retail Managing Directors sitting on it. For customers, we will deliver significant value through compelling offers, services and rewards with a more seamless and engaging experience across the group's retail businesses. And for the divisions, the broad reach and scale of the ecosystem will allow them to leverage a single view of the customer to drive stronger relationships with greater loyalty and frequency. Also, as many of you know, recruiting for tech roles is difficult and OneDigital will play an important role in accessing leading digital talent for the group and its divisions. Over time, we expect that OneDigital will be profitable stand-alone asset and will provide the group with access to new earnings streams. Turning to Slide 96. Wesfarmers began building what is now referred to as the digital ecosystem years ago, with investment beginning in 2017 with the establishment of the Advanced Analytics Centre. In 2019, Catch was acquired and Kmart and Target began selling their products on the platform. In 2021, the investment in our digital and data ecosystem was announced, and this really supercharged our work in this space. So much so, we now have significant momentum as we head into FY '23 and beyond. Other key milestones include rebranding Club Catch's OnePass in February '22. And 2 weeks ago, we announced Kmart and Target joined OnePass and launched a free delivery proposition with no minimum threshold on thousands and thousands of products across Kmart and Target. Whilst we think this is a strong launch offer, it is only the beginning. We have an extensive road map of features, benefits and partnerships that we will roll out in FY '23 and beyond to bolster the customer proposition. Bunnings and Officeworks will join -- both be joining this financial year. We see the group's retail store network as a strong asset and competitive differentiator. And we'll also be extending the program to an omnichannel offer this year. And soon, we'll be launching OnePass mobile app, which we see as core to a convenient and accessible customer experience. Turning to the OnePass proposition on Slide 97. And OnePass is the ultimate membership for customers, and it's the cornerstone of OneDigital. Our goal is to harness the strong relationships our brands have with Australian households and provide them with what Wesfarmers is known for, better value and more convenience. It also allows for a seamless experience across Australia's most loved brands and personalized data lead offers and interactions that increase frequency of shop. OnePass will provide value to the group's retail businesses by driving increased customer lifetime value through customer frequency, penetration, retention and cross shopping. And we feel confident in this model. When we look at Club Catch, now OnePass, as an example, our OnePass members spend 3x more annually than a non-OnePass member. We also know the value of customer cross-shopping and stickiness in the group, with those customers that shop at all 5 of the group's retail brands spending 3x more than 5 different customers, who only shop at a single brand. This demonstrates that the strength of our customer relationships can be amplified collectively, and we have an unrivaled opportunity for our brands to connect at the fingertips of every Australian household. Turning to Slide 98. We have made significant progress to re-platform and launch this product in market, including building a secure, highly automated cloud-native technology to enable agility and speed to market. This platform was purpose-built to support OnePass and our planned growth. In mid-May, we extended OnePass to Kmart and Target in addition to Catch, with these 3 brands now available to all members. This was an incredibly collaborative effort across all divisions. And the learnings from this will hold us in good stead as we continue our engagement with Bunnings, Officeworks and Priceline. We have an ongoing research program to ensure we are consistently benchmarking against competitors and testing new offers. To date, we've spoken to over 50,000 Australian consumers, who have helped us shape OnePass membership program. Importantly, One of the competitive advantages of this program, we believe, is its low price point. For just $4 per month or $40 per year, customers can access free delivery on eligible items and many additional offers, which over time will include personalized rewards, both in-store and online, faster click and collect and digital receipts to name a few. Underpinning OnePass in future development is our shared data platform, OneData. Turning to Slide 99. The establishment of OneDigital creates an opportunity to take the data analytics capability we've been building through the Advanced Analytics Centre to the next level. Initially, the AAC was developed to provide divisional support and use cases to expedite the analytic and data capabilities within the divisions. And it has been instrumental in supporting them uplift their capabilities and driving commercial value. During this time, divisional capability has matured considerably, and it is now important that we continue to sharpen the focus of the central team on to areas of value creation that are uniquely cross-divisional and while becoming increasingly focused on commercial outcomes. One such area of cross-divisional focus is harnessing the truly unique view we have as Wesfarmers of the Australian consumer across all of our brands in combination with the depth of customer data in Flybuys. The value of customer data insight comes from the breadth and depth, and this is why the aggregation of transaction data and customer behaviors across all retail brands is accretive. This presents an opportunity to apply this asset to drive customer lifetime value in each of the divisions in a way that has not been possible before. Our plan is to unlock the latent value embedded in OneData so the group will be able to step charge our growth profile as offers, services and products will be most relevant to each customer's life and household. So turning to Slide 100. In conclusion, OneDigital is uniquely placed to leverage the group's trusted retail brands. OneDigital has been established to deliver incremental value to customers. We'll provide households with a more seamless, rewarding and valuable experience across our businesses. Whilst we will generate stand-alone revenue, we'll predominantly create value for the divisions through access to a broader and deeper understanding of customers that could be achieved stand-alone and driving increased frequency and retention. Our priority in the near term is to deliver OnePass customer proposition road map and scale the membership base. I'd like to thank the OneDigital team, who have worked hard to launch OnePass and the AAC, who have built the shared data assets so well. Now turning to Slide 101. As we continue our digital and data journey, we are bringing together all digital pure plays under one digital division. As part of that, from July 1, it will be my privilege to take over the stewardship of Catch. and I'd like to thank Ian Bailey and the Kmart Group for the significant progress that has been made since acquisition and also thank the team at Catch, who have worked hard to grow and transform the company. Catch's strategy revolves around the customer. Catch will be the place where customers can find the leading brands they know and love at competitive prices. Customers will continue to enjoy using Catch's multiple shopping platforms, website and apps which are easy to use, and as we continue to re-platform, we'll feature a range of tools and functions that help customers find products quickly and easily. Innovation and continued investment in fulfillment will see customers consistently experience faster delivery speeds. If we now move to Slide 102, Catch's legacy is deal of the day model, which was primarily a first-party retail offer, leveraging parallel import pricing to create a proposition around screaming good deals. Under Wesfarmers, Catch is transitioning the business to a broad Australian marketplace offering focused on customers -- brands customers know and love. While deals will always be an element of Catch's proposition, the model we have moved to is scalable and can leverage the favorable outlook for online retail. We have made solid progress since acquisition with gross transaction value, subscriber numbers and active customers more than doubling. However, it is a multiyear investment program. Catch is still in the building phase and there is much to do. Within Wesfarmers, Catch is considered a group asset to be leveraged, and we are pleased to have been able to leverage Catch's subscription program, Club Catch in launching OnePass. It has provided an initial base of subscribers on which to build from and the team have provided insights on how to go to market, the value proposition and operational efficiencies. Turning to Slide 103. Catch is focusing on 6 strategic priorities that are centered on the customer value proposition. Catch will continue the foundational investment within the marketplace to accelerate the rate of growth of sellers and products. Catch is on track to onboard more than [ 2,000 ] sellers in FY '22 and with a view to substantially increasing the onboarding rate through investment in automation. Furthermore, by focusing on leading brands, we will range the most known and loved products at great prices. And leveraging Wesfarmers' portfolio of retail brands, we will create a differentiated offer relative to competitors. This has already commenced with Target and Kmart, which on a per SKU basis, these products represent some of the highest selling ranges. We know our customers want fast delivery and our new catch fulfillment center in New South Wales has been designed just for that. Opening in April '22, the automated facility provides substantial capacity and capability to improve delivery speeds to New South Wales and Queensland-based customers. This facility is also a great example of our investment in Fulfilled by Catch. Now moving to Slide 104. Fulfilled by Catch is an investment in state-of-the-art automated fulfillment centers supporting growth of Catch and Wesfarmers retail online fulfillment capabilities. We know Catch must have a strong delivery proposition to be successful. We also know that other Wesfarmers businesses and Catch's marketplace sellers are also looking at how they solve for fast delivery. Consistent with that theme that Catch is a group asset to be leveraged, we are positioning Catch to become a specialist in centralized fulfillment for online orders, which can service Catch's 1P business, marketplace sellers and other Wesfarmers businesses. Fulfilled by Catch will deliver a number of benefits. It improves Catch's 1P and 3P proposition through a faster and more consistent delivery promise, which will attract more brands and more sellers. It will provide additional cost-effective online fulfillment capabilities for Wesfarmers' retail divisions to complement existing store fulfillment. It fractionalizes investment and costs across the entire group. And facilitates scale of fulfillment capability more quickly than any business will be able to do so independently. It is a cost-effective fulfillment and delivery solution for marketplace suppliers. The new fulfillment center in New South Wales, which has been cutting-edge -- has cutting-edge autonomous mobile robot technology like as you saw with Officeworks' video, will be used as a trial where Catch will be fulfilling Kmart online orders. We have aspirations to expand internationally and broaden the offer out to other marketplace sellers and other Wesfarmers businesses. Turning to Slide 105. To summarize, Catch is transitioning to a broad-based marketplace focused on leading brands that customers know and love at competitive prices. The key focus areas are enhancing the value proposition through improving range, including leveraging the other Wesfarmers retail brands, creating a personalized experience and fast delivery. Key areas of investment will be in technology infrastructure, personalized marketing capability and fulfillment services. This is a multiyear journey to deliver a business that can scale and can take advantage of the very favorable growth outlook for online retail in Australia. That includes -- concludes today's deck. Thank you all. I'll now open for Q&A. And for today's Q&A session. I'll be joined by Ian Bailey, recognizing the Catch business has transitioned from the Wesfarmers Group to OneDigital. Thank you.

Better jump in before Aero takes the floor. Just trying to understand why someone would sign on to OnePass. At Kmart, I spent $65 to get free delivery. For OnePass, I could sign on and I could order a pair of socks for $2 and have them delivered for free, which wouldn't be very profitable for Kmart. It doesn't have the Amazon kind of, I guess, next-day delivery capability. It doesn't have the VO content. I'm just trying to understand exactly why people would sign on and then the economics of it behind that?

Yes. Look, I think for what -- we've just begun with OnePass, but we've seen that with Club Catch that literally have over 270,000 subscribers. And the value that members have is significant because it's actually -- they just don't have to think about it. So free delivery is just the beginning. We've got a strong product road map with a lot of new features that are coming. And I think the ease of buying, you don't want to think too much about the socks. It's quick. You don't have to think about, do I have to get to $65. It's just part of the promise. And I think from an economics point of view, I'll let Ian talk because the divisions have worked closely in building this product, CVP. It hasn't just been the OneDigital team, but the value that is that is being driven to the divisions is significant over time.

Yes. Yes, just to add on that first piece. We opened stores for very long hours and part of that, so customers don't have to think whether we're open or not, and it's just easy. And I think about the sort of free delivery offer is the same. It just makes it easy. It's just now the thought process customers don't need to do. In terms of the economics, we've done a lot of modeling of what the implications are. Clearly, there's a whole range of basket sizes which come through. And we're not anticipating that the majority of those baskets are $2 pairs of socks. Of course, we're anticipating that the value is higher. And then it's a question of the volume increase that we get through subscription, which is clearly what we're anticipating. That then offsets a lower basket size on the way through. We've modeled that out, and we think it's going to be positive for us in the calculations we've undertaken. The early reads are that's playing out as we thought.

And Catch Club, what's the -- like the average ticket of that? I mean, I guess, we asked the question because Catch Group isn't profitable at the moment. And so it's just, I guess, a bit of a struggle to understand exactly how OnePass will be in time.

Well, Club Catch members spend like 9x a year, whereas a nonmember is spending 3x a year. So the frequency of shop is significant and the basket size is over $100. So that's for Catch. So -- I think it is about loyalty and it's actually about that connection they have with the brand and ease of use. And over time, when you look at customer lifetime value, that's really what this business is predicated on. So I think from a customer's point of view, it's convenience. There'll also be member offers, there'll be benefits that we'll be bringing in. I think as well when we move into omnichannel, there will be a lot of benefits that customers will have in terms of rewards that I think will make OnePass very attractive.

David Errington. Just one very quick question. I just wanted to gain, what do you mean by free delivery? And what I mean by that, you pay your subscription, is free delivery next day or is it in 3 days, what is it? And can you ever envisage in Australia where you get quick delivery, like what Amazon does in next 4 hours or something that's free? How do you envisage that? Because my understanding is that you just can't make it work. Free delivery has to be like through Australia Post. It can't be through your own. It can't be through your own transportation fleets because you'll just go broke doing it. So what's your views? What's going to look -- what's free delivery actually going to look like? And is it going to dazzle consumers?

Yes, thank you. So I think free delivery is what it is, it's free delivery to the customer. They're paying a subscription fee of $4 a month, and there will be a number of benefits that they'll realize and free delivery is just one of those things. I don't have to think about when I get to check out, I don't pay the $9.95 or the $10, it's just part of -- you're a OnePass member, it's just part of the offer. In terms of the second part of the question, look, we're looking at ways to speed up all of our deliveries. And the reality is we're working hard with Australia Post, with different carriers that our divisions are working with. We're looking at Fulfilled by Catch. The quicker we can actually deliver orders directly from DC, the faster -- the pick and pack, the faster the customer receive those orders. The fact is that's the expectation of customers. So we're not putting a time guarantee on it, but we're working closely with divisions to make sure that we getting faster and faster delivery services. And to Sarah's point, earlier, 30% of Officeworks is actually click and collect. And so we should be looking at ways to push people back into stores for omnichannel offers. And that's really what we're working towards. So it isn't just about the speed of the delivery, it's the convenience. And when that customer wants it, we need to get it to them as quickly as that we can.

Yes. Just to add very quickly. Our focus is on improving speed versus ultrafast, if I can put it that way. So we know that the speed of delivery, if I look at Kmart at the moment, it's in the 3 to 4 days territory, on average. It's too slow. And so a lot of the things that we're working on, particularly the Fulfilled by Catch model will enable a faster delivery speed. So things we can do within Catch is pre-sold our orders into post codes and then we can effectively eject those orders further into the Australian Post processes, which reduces lead times. It's harder for us to do from store picks when we're consolidating across a large number of stores on the way through. So there's a lot of things that we can do to accelerate speed without increasing costs. In fact, we can improve efficiency and speed at the same time. The ultrafast is a different question, which at the moment, we're not tackling that, we're tackling the core speed.

It's Ben Gilbert from Jarden. Just in terms of the guidance that you guys have put out for the $70 million loss for this year and then $100 million for next year, ex-Catch. Are you -- when do you assume you actually start to get some revenue into this part of the business? And I'm just -- and the reason I asked that is I see the strategic piece, I think at 100% makes sense. But how is it going to be through media or is it going to be through Catch? Because presumably, you're not going to get Bunnings or Kmart allocating their revenue into the OneDigital business.

So directly into the OneDigital business at the moment is the subscription revenue. I think that over time, building out OneData, we will have new revenue streams, and we're working on that at the moment. And I think it's early days, but when you've got 13 million customers and you've got a very valuable source of data, what those new revenue streams might be, I think we're working through. The business case is also based on the fact that we're driving growth for the division. So we're really building out their customer lifetime value and growing their basket size or frequency of shop. So it is not just a OneDigital business case. In fact, it should be value accretive for all of Wesfarmers.

So how does that get measured. So if you go to Ian or to Mike or Sarah and say, look, I want you to come and open Officeworks store on the Catch platform and become part of this. How do you then say, look, I've -- I know it's Wesfarmers as a group business, we've also talked a lot about autonomy for the group today. How do you get rewarded or your team actually sit there and say, look at what we've done, look at what we've built and actually think about the allocation of that?

Well, if we look at Fulfilled by Catch with Kmart, actually, it's got to be a win-win. It's got to commercially be valuable for both, both for Catch and for Kmart. And if Kmart is looking -- it is -- no one's doing anyone favors here. We're here to actually improve both businesses and grow. So from our perspective, I look at it as understanding their digital strategies, understanding their fulfillment strategies and looking at ways that OneDigital can be an enabler of that and supporter of that. I think that everyone is building their own ecosystem. They're servicing the Australian household. What we know about those customers, we actually believe we're going to be better together. So it's really not about supplementing what's being done. It's additive.

Sorry, final one for me. So then if we look at a 3- to 5-year view for this business, is success seeing those losses start to come down, subscriber numbers growing, probably some alternative businesses like media, these sorts of things? And that's how we measure it and then we'll hear from Ian or the other divisional MDs around, look, this is what the benefit we think we've got for the OneDigital platform and then we can start thinking in aggregate. Is that conceptual to success on how we should think about it?

Yes.

It's Bryan Raymond, JPMorgan. Just following on from Tom's question earlier, just around the frequency of shop. I think, for the average household, you guys have obviously got a great data capability now that stretches across the brands. You mentioned 9x per annum frequency of shopping on the Club Catch membership base. When you're adding Kmart and Target to that, how much does the average household frequency increase in this membership base that you can possibly have? And then how does that change again when you add in Bunnings and Officeworks? I'm just thinking about the value proposition to the household, it's all about frequency and fractionalizing that membership cost across as many deliveries as you can get. So do you have that data available at this point?

I don't have that data. We've done a lot of work though to understand frequency of shopping. Look, it's early days. It's only been 2 weeks that Kmart and Target have joined OnePass. But the interesting numbers are already showing that we're doubling the number of subscribers that we're seeing with Club Catch. But also, we're seeing that its actually order value has stayed stable. It's growing the number of customers that is attracted to the divisions. So I think early signs are showing that if the OnePass members are engaged, they will shop. Now the actual numbers of that, each division has its own model on -- based on what they have currently and what their goals are. And we're just supporting, delivering that for them.

Okay. And then just -- you mentioned on one of the slides, new partners. I was just wondering if there's an appetite for external retailers and maybe noncompeting retailers coming on to the OnePass platform over time? Or is that looking at new -- more internal opportunities for new partners?

Look, at the moment, we focus very much on Bunnings and Officeworks and eventually Priceline. There's a lot of work to do to get those up. We're open to partnerships. And I think that's one of the things is understanding what we've got, but we want to really grow -- for us, the focus is on growing subscriber numbers and growing customer value proposition and really becoming something that becomes a household helper in a way. And so that's really the focus. But we are definitely open to partnerships.

Okay. Bryan, I might just add a couple of things just to the first question on transactions. This is why for a division, OneDigital is really helpful for us. We just don't get enough transactions ourselves to build an adequate picture of a customer as an individual business. And so -- but when you look at us across Wesfarmers, we do. And so why am I interested as part of Kmart and Target, because I can build a richer picture of the customer set, which enables me to do a better job of offering the right products through personalization. So that's what's attractive about the program. How do we manage the economic risk around the small basket size question that came up earlier is we've constructed the free delivery at an item level. So if we find the $2 socks become ridiculously successful as a stand-alone basket, we can choose to drop them off that free delivery piece. Not something that we would want to do, but we do have mechanisms to effectively adjust the economics without fundamentally changing the proposition. But as we say, it's early days, but we haven't seen that play out at this point.

Nicole, it's Lisa Deng from Goldman Sachs. I just wanted to talk a little bit about the one household because obviously, that was the first type you put up and it was all about the one household. And we've got multiple pools of data now that's enriching that data profile around that one household. Can you please maybe illustrate to us for your most data mapped household today, what sort of data would you have on that household? And then looking forward, say, 12 months, 24 months, what would you hope to have to be able to map around that household?

Well, at the moment, we have obviously the transaction data from the divisions. We also have Flybuys data. We've gone and modeled a number of lifestyle attributes, affluence attributes. So we are really at the moment, sitting on that data. What OnePass offers is a much broader consent framework, and we have more -- we will have more data from those members and more participation. So I think it's really not a question of what the data will have. It's how we use it and what use cases that we're building to actually get that flywheel going. So what we're learning, how do we build more value and convenience, how do we make that as part of the product offer, how do we share that with divisions so that they can be stickier and that is actually kind of the flywheel that makes the household want to spend more time across our divisions.

Do you have a target sort of penetration or number of sign-ups for OnePass that you're looking for?

Yes. But...

Will you share that?

No, not yet.

Just a question just with regards to sort of who has control of the data. And I'm particularly curious around what happens if one of the businesses exit Wesfarmers? Just in that, let's say, Bunnings is spun off on its own, so Bunnings are giving you access to their customer data. And then does that stay with you once -- if that were to be separated out? And then maybe if you could just sort of remind us who has control of the data, particularly in terms of that transaction data. Does that always sit with Bunnings or is it being transferred to you? And then what happens, particularly upon a change of control, please?

So each of the divisions has their own data teams and advanced -- you've seen that in the presentations today, they have their own data sets. They have -- they've got their own governance. We have very tight governance at OneData and the Advanced Analytics Centre and the group shared data asset was set up with that in mind. We have participation agreements with the divisions, which actually outline a lot of the detail of the process, how it's governed. Privacy is something we take very seriously. So that's also something that we need to ensure is looked after. So I can't really talk to what could happen in a transaction, but I'm sure those participation agreements would cover that and Wesfarmers would work that out from a governance point of view.

Maybe sorry, going to Flybuys. So Coles tell us that they can't see Bunnings data, they can only see their own data, but they can get broader sort of aggregate data from Bunnings, Officeworks, et cetera. Is that kind of the way it flows so that you can you only see grouping, so to speak?

Yes, that's right. Yes.

And where are you at in terms of actually being able to see data from someone at Kmart is buying baby clothes, they're buying baby hardgoods, et cetera, there. And then you can say, by the way, Priceline, we think customer X could very well be -- have a child on the way, they might be interested in infant formula or other sort of product there? I mean, are you actually at that stage yet where you can provide leads and particularly, I guess, much of it really comes from sort of Kmart to the other parts of the business be it Priceline or be Bunnings from a playground equipment there. Are you doing that yet at the moment? And when could that happen if it's not, please?

So look, I think that's -- the short answer to that is the Advanced Analytics Centre was set up to support the divisions in doing that, and we're helping them build up their own data capabilities. Now a lot of that was based around use cases depending on what that division wanted and then we'd actually provide them with the data. Where OneData is going, I think, is going to actually be looking at creating data products, which are recommenders and items like that, which will drive the use of the divisions. How they choose to use that will depend on their own needs. So we're not going to proactively say, "Oh, hey, look at this, you should do this." But the data that they'll have access to should, hopefully, if they're looking for particular use cases or segments or categories, then I think that data is very useful.

Yes. Maybe if I could just add a little clarification. So there's 2 elements, really. There's analysis. And of course, we've got ability to contact our customers across the organization to analyze generic behaviors. And then there's our ability to contact a customer based upon that data that needs specific consent on the way through. So this is where on one way OnePass really helps because it provides consent for us to use the data across the businesses for personalization. So it's one of the -- it's an additional benefit from that platform.

On the exact same theme, actually, specifically around [indiscernible] because that does have some sense of data in it. How does that play in? And can you share that across the group?

It's very early days. So we haven't -- we've obviously met with the Health group and with Emily, but we haven't actually worked out how that will work. But we're looking forward to working it out. It is very valuable yet. Thank you.

Thanks very much.

Thanks, Nicole. Thanks, Ian. We did have a break in the agenda. But in the interest of time and recognizing we've got to get to Bunnings for the tour, I'll invite Tim Bult to do the WIS presentation.

Thanks, Simon. Good afternoon, everyone, and sorry to be the denier of you having a break, but I am delighted to be able to take you through Wesfarmers Industrial and Safety business unit, or WIS, as we call it. Before I do get started though, I'd really like to call out and thank all of the teams in the WIS business unit for their resilience and commitment over the past couple of years as we have dealt with lockdowns and global supply chain interruptions. Whilst at times, there have been difficulties keeping our customers fully supplied, I think we have done better than many of our competitors, and this positions us well for the future. Moving to Slide 108. WIS is made up of 4 distinct businesses operating in the industrial B2B segments. The largest in terms of revenue and growth potential is Blackwoods, which is a distributor of over 300,000 SKUs essential to the supply chain of Australia and New Zealand's largest corporate and government entities. It supplies all of the items, bits and pieces required for businesses to conduct maintenance, repairs and operations, together with safety equipment for their people. Blackwoods has an established #1 position in a fragmented market in both Australia and New Zealand in industrial. Coregas is a producer and distributor of industrial gases in a relatively stable market, but with increasing competition. Coregas holds the #3 position and has been growing as the challenger brand in the market given its reputation for expertise and innovation. Workwear Group operates in a mature albeit evolving market and has operations across Australia and New Zealand. Key uniform customers include the likes of Qantas, Ambulance Victoria, the Australian Defence Force and major banks. Its portfolio of iconic brands includes KingGee, Hard Yakka and NNT. Greencap is a risk management services business and a market-leading contractor management digital platform called Cm3. Common across all WIS businesses is the competitive advantage we enjoy by giving our customers confidence in the products and services we deliver. This is through anticipating our customers' needs, acting with integrity and honesty, being fair to our suppliers and sourcing ethically, providing a safe work environment and developing our team members in an inclusive culture, supporting the communities we operate in, and enhancing our environmental performance. Each of our businesses have strong market positions, and each offer a strong point of differentiation in their offer, supported and enabled by our sustainability credentials. This underpins the WIS businesses providing valuable solutions to our customers. Moving to Slide 109. Turning to recent performance. We have clearly had a disappointing performance in recent years and particularly in the financial year 2020 when returns bottomed out. While early days, since then, we have been building some momentum. After some improvement in FY '21, we saw profit improvement in the first half of the current financial year, primarily driven by higher sales in all of our businesses and through the achievements that I'll talk through in the next slide. Safety is a key priority for us. We are pleased that the TRIFR shown on the slide continues to show long-term declines as a result of the actions and initiatives across all our teams. Our focus is much broader than TRIFR and includes injury severity, learnings from high-potential near misses and lead indicators as supporters of a strong safety-based culture. Moving to Slide 110 and Blackwoods. Since the last Strategy Day, there has been good progress in the turnaround. The business continues to focus on building a market-leading product and supply offer to businesses across target industry segments. The business has made key achievements in the past 12 months that have successfully improved performance to date. These include continuing to strengthen relationships with strategic customers to drive profitable sales growth and market share. We are pleased to see sales growth over the past 12 months. Executing our integrated supply program we called link. This supply program is about delivering an end-to-end procurement solution and reduction in the total cost of ownership for our customers in their nonstrategic procurement. Increasing the digital penetration by customers, which improves their experience and promote self-service. We have implemented the ERP in the east and southern states, being Queensland, New South Wales, ACT, Victoria and Tasmania and financially nationally. Since our last update, we have reprioritized our deployment strategy for the remaining states, being Western Australia, South Australia and Northern Territory, with our strategy in those states being focused on our customer value proposition and minimizing the impact of supply chain disruptions. Experience gained from running the new system in Queensland, which is dominated by resource customers, has identified specific system requirements that are specific to that customer group, which we wish to develop and embed further before we complete the remaining deployment. And that is now expected in the second quarter of the next financial year. Looking forward, the current priorities to drive growth are to continue to build a market-leading customer value proposition focused on target industry segments, being resources, manufacturing, construction and government. The CVP is focused on 4 value killer -- 4 value pillars, I should say: unbeatable range, reliability, expertise, and ease to do business. And we have found that if you don't get them right, they can be killers as well. Continue to strengthen relationship through the closer-to-customer initiatives; strengthen our authority in the safety category; continue to transform the business model with data and digital playing a critical role in this, key priorities are customer and supplier digitization; and continue to improve operating efficiencies, building on our supply chain investments in recent years and looking at continued warehouse process automation and optimizing business workflows; finally, investment in our trade center refresh program in New Zealand. Moving to Slide 111 on Coregas. Coregas has gained market share with major customers by developing tailored solutions to meet their needs. The business is growing share of wallet in the large mining sector, which also saw the business extend into new geographies. Coregas successfully launched into health care back in 2017/'18. It continues to grow this segment with opportunities in the pipeline, geographic expansion, and private and public sector wins. Looking forward, Coregas has made a small acquisition, which supports its launch into new areas of health care, being health centers, dentists, vets and aged care facilities. The Trade N Go Gas is an innovative disruptor offer of never pay rent again, targeting mobile tradies who pay a refundable deposit for cylinders and refills when needed but no monthly rent. A large part of the program is offered through Bunnings, providing a geographic spread and extended trading hours. We see more growth in this segment. Coregas' expertise in hydrogen led it to being heavily involved in the Hydrogen Energy Supply Chain project, the world's first liquid hydrogen ship launched from Victoria to Japan in January this year. While Coregas' role in this project is concluding, the business made a great contribution towards exploring ways in these pilot projects on how we will be decarbonizing the economy. Coregas is developing a hydrogen refueling station at its existing Port Kembla hydrogen production facility so that it can introduce hydrogen fuel distribution assets into its supply chain. It is expected to be operational later this calendar year. Coregas is active in several opportunities in this growing sector, and we'll continue to leverage its expertise and capability, particularly in handling storage and distribution of hydrogen. Moving to Slide 112 and starting with Workwear Group. Workwear Group's key industrial brands of Hard Yakka and KingGee have now delivered around 10% growth per annum for the fifth year running. We will continue to invest in brand desirability initiatives aimed at driving customer desire and choice. This includes workwear with a more fashion orientation and product innovation, including offering garments made from fully recyclable fibers. We are also further strengthening our distribution channels, including the opening up of international distribution capability during the year. In uniforms, we are targeting growth in sectors that have growing essential uniform needs. This includes health care, emergency services, defense and government. The business is continuing to invest in technology to improve the customer offer and supply chain efficiency. On Greencap, Greencap faced challenging market conditions as a result of localized lockdowns in the first half of the current financial year in particular. Pleasingly, underlying demand has remained strong, and the pipeline of tender activity is encouraging. I'll move now to Slide 113, key themes and outlook. While we are building momentum in the businesses, we recognize that performance must continue to improve. Our teams are aligned on the task ahead of us. We are focused on continuing to improve the customer value proposition, enhance operational capabilities and execute new growth opportunities. This is to be achieved by providing the confidence in the products and services we deliver by offering the right product with reliable supply particularly in a supply-constrained market, investing in our data and digital to improve the efficiency and value of our offer. Market conditions are expected to remain uncertain and challenging. Notwithstanding that, they are difficult to predict, and we are focused in our businesses on building market share and integrating sustainable practices to ensure long-term profitability. With that coverage of those slides, I'll now open it up to Q&A and invite Dan McArtney to join me on the stage.

It's Tom from Barrenjoey. Just interested in your comments on hydrogen and what you're doing there. Just be interested in, yes -- like is that a big area of focus? It's obviously quite disruptive if that's another, yes, way to distribute energy. I know it's only pretty early days, but can you maybe just expand on what you've done there and the future for that?

Yes, certainly. So I think Coregas has played an important but not sort of leading role from an equity point of view in a number of projects, particularly that Hydrogen Energy Supply Chain project I mentioned, where we built the plant and provided a lot of the gas and provided operations for the plant. So the approach in -- there's a lot happening in hydrogen around the world and in Australia. And there are some exciting opportunities. Having said that, the hard part is to know where to fish because there's a lot of talk and a lot of projects that probably will never get up. Some parts of the world, particularly in Europe, where there are other mandates or requirements, it's clearer there that projects will go ahead. In Australia, there's a lot of good initiatives but somewhat fragmented funding, particularly for green hydrogen projects. So we're -- we can't play in all of those projects. I think our approach in Coregas is to stick very much to what we're good at, and that's storage, distribution and transportation. So we're not, at this stage, looking at taking some wholesale, multi-hundreds of million dollar type project and being the lead sponsor, but more where we've got an advantage in Port Kembla supply is one case, we will incrementally develop our business. We'll always -- we'll also act as an enabler, if you like, with that capability for other project sponsors to develop their hydrogen projects.

Tim, Dan, Shaun Cousins, UBS. Just a question on Blackwoods, just a few. Maybe if you could talk a bit about what you believe your market share is of that broader industrial distribution space. I understand it's quite fragmented. And I think during some of the ERP programs and maybe transitions with Protector also, if you may have lost some share. Just where do you see your market share now, please.

Yes. Shaun, I guess it depends how you define the market. We're the largest player, as I mentioned, but it is a very fragmented market. We'd see ourselves at around about the 5% market share.

Great. And if we think about just the benefit of the ERP, which I think has been going since 2018, it's taken some time. I'm just curious around when we consider how you can actually grow. If you can get revenue growth, is it fair to say that there's not a lot of sort of cost growth and/or incremental working capital, unless it's been an underperforming division for a period of time, but I assume there's a very attractive return on capital or higher margin available to you. Is that what we should be hoping could come out if you can grow your market share in that Blackwoods business, please?

Yes, certainly, Shaun. I mean I think we see some of the leading global peers with a market share double what we've got, for example. And that seems eminently achievable if we can get our systems and processes and offer right. I think a key enabler to that -- and it's not the whole story, is the complete rollout of the ERP. And in our case, the ERP is a very complicated and broad ERP because it covers all aspects of the business, and I can elaborate on that. But that is one step. There are many other steps that are already underway, including the ERP around digitization and around reducing, I guess, net inefficient processes that will enable us to scale the business. So leveraging more of the fixed cost base such that when we win new business, and we're pretty positive about that, that we're proportionately not increasing the costs and we can really drive an improvement in the overall returns over time. Digitization is a key part of that. I mean we focus a lot on customer digitization but -- and even by value, we're approaching half of our trend -- half of the value of our transaction being digital. But our supplier number in Blackwoods digitization is a lot lower than that. So that's, in some ways, an even bigger opportunity.

Maybe I can add to that, Shaun, in that -- just to give you an example. The ERP, where it does allow us, do give us a bit more national visibility of where our inventory sits so that when we are supplying to our customers, we can actually optimize exactly where that inventory is and make sure we actually optimize how we deliver to them in the most cost-effective way.

Tim, David Errington. Just following a bit on from that. I mean 2019 was a year that really shook us all up as investors. It would probably be fair to say we all lost a bit of confidence in WIS as a business. And I suppose the question I've got for you is -- the last 2 years have been back to where it used to be and it looks to be very good, stable, solid performance. Can you share with us -- I know Wesfarmers do 5-year plans. Can you share with us what would be in your 5-year plan, where WIS is likely to stand in 5 years' time? Obviously, I don't want you to share the -- obviously the commercialities of it. But where does WIS stand in 5 years in terms of what -- when you discuss it with Rob, what is he requiring from you, as the business head, to deliver so then we can have reasonable expectations as to what to expect from WIS going forward?

Well, look, I mean you can pick up with Rob what he requires. I'll tell you what I discussed with him and offer -- and Anthony, for that matter. I mean at a very high level, WIS itself is a portfolio of businesses, as you're aware, David. So look, primarily, from my point of view, where we want to take the division is to provide -- get to the stage we're providing satisfactory -- supporting Wesfarmers in its objective of providing a satisfactory return to shareholders and doing that in a way where we're actually contributing to enhancing group reputation through all the sort of things we talked about. But without giving away any of the numbers, we've got strategies in place that see a very significant increase in the size of the division in terms of revenue and profit but also importantly, an improvement in the return on capital. So I think we've moved up from what was 2.8% back in -- bottomed out in FY '20. And we've seen a couple of years of that improving, and we are projecting for the further improvement with that throughout the 5-year plan.

Are you beyond -- you passed all those troubles that you went through? Like with -- now the ERP and stuff, are you beyond it all or...

Well, we're still -- we've changed our deployment strategy with ERP, in some aspects have proved to be more difficult than we thought. And as I say, it covers all aspects of our business from planning and forecasting, which drives what we order, through to the usual core elements that most ERP covers. And then it also covers our warehouse management system. The positive of that is if we can get it all really working well, it's going to be a very efficient and a great system for us to be able to develop on our plans, but there is still more development work, particularly for resource customers, which is why we've changed our deployment strategy to make sure that we're really getting it operating well for those customers. And we're going to make sure we're doing that before we do the final deployment. So we've not completed the ERP project yet. There's a team working on it. We've had great support from our implementation partner, and we're committed to getting that sorted. We still see it as one of the key priorities to deliver the scalability we talked about. It's just taking us a little longer and being a little more complex than we thought, but we're still positive about the ultimate solution.

Just finishing up. On the supply chain, you didn't really touch on difficulties getting products through your supply chain. Are you finding that some products, because there's cost inflation, price inflation -- worried that -- in the past, Blackwoods margin would have been compressed because you wouldn't be able to pass that on to the big customers. What's the status with that at the moment?

So look, we obviously want to provide our customers with a total cost of ownership that's lower. Now that's not just products in commoditized situation because we are trying to provide solutions to customers where we reduce their internal procurement cost, where we look at providing alternatives to customers, whether they're using a particular brand. We've got some of our own brands. We've got alternatives but -- so we try and find solutions with customers to give them -- to mitigate the impact of rising costs. But we're in a world where there is recognition that costs are rising. And because we're in a B2B environment, whilst it's not at all easy, we do have a customer base that, through their own operations, recognize that there is a degree of escalation of costs. And we try and work very constructively with our customers. And often, we provide validation. And if we can credibly do that, we work towards commercial outcomes that see us pass on those costs for our own viability and also to make sure we can get them supply and prioritize getting them supply. All good? Thanks. We'll invite Emily up to do the health division segment.

Well, good afternoon, everyone. I'm delighted to be here and introduce you to Wesfarmers Health. I'm joined today by our CFO, Ed Bostock, who will assist with answering your questions at the end of the presentation. So at the start, it's really worth highlighting that it's very early days for Wesfarmers Health. I've been in the role just over a month, and Wesfarmers has owned API for about 8 weeks. So as you can appreciate at this stage of the journey, our primary focus is on integration and listening to and learning from the API team. As Health is a new division for the group, I'm going to provide a high-level overview of API and where we initially see opportunities for growth. We're very excited for what lies ahead. And in terms of the Wesfarmers' objective, we are looking forward to delivering satisfactory return to our shareholders over the long time -- over the long term. Just moving to 117. So to help set the scene, we want to recap on the strong industry fundamentals that underpin this sector. Health care is an important, large sector with favorable demographic tailwinds. Health spending in Australia is around $200 billion a year or 10% of GDP. Our population is aging, with the number of people aged over 65 expected to double to about 8.9 million by 2060. Health care spending per person is expected to increase 2.5x by 2060 in real terms. And we are seeing a rising incidence in chronic disease, with 47%, nearly half of all Australians reporting chronic diseases in 2018. We're also seeing a clear shift in customer behavior with increased demand for health, beauty and wellness products and services. There is and has been a rising consumerization in health, with customers today more willing to pay for health and wellness. There are exciting opportunities in health care for data and digital, which can transform customer journeys and improve health outcomes. This big-picture dynamics support long-term growth in the industry. And at Wesfarmers, we are well positioned to take advantage of these trends. We see health care as having the potential to deliver satisfactory returns to shareholders. And we believe we have the capabilities that will assist our entry in this sector, namely the ability to allocate capital where it's needed, our focus on investing for the long term, our deep understanding of the Australian consumer, and our data, retail and digital expertise. Wesfarmers Health will use these capabilities to pursue more opportunities to improve health outcomes for all Australians and reduce the cost of health care through improved access to services. Just turning to 118. We wanted to take some time today to walk you through our foundational health business, API. API has a leading portfolio of complementary wholesale and retail businesses. The businesses operate in 3 key segments with each offering its own unique point of competitive advantage. The wholesale distribution business provides pharmacies with the medicines and products that Australians need and is 1 of only 4 national full-line pharmaceutical wholesalers. Full-line wholesalers must provide the full range of PBS medicines to any pharmacy in Australia, regardless of location, usually within 24 hours. To support this requirement, API has a national distribution infrastructure network and is the trusted supplier to over 2,500 pharmacies out of approximately 6,000 community pharmacies across Australia. Many of you know Priceline, one of Australia's largest pharmacy networks and providers of health, beauty and well-being products. Our partner pharmacists are a key source of health advice and provide highly accessible health destinations in the local community. Priceline also owns and operates the Sister Club loyalty program, which has over 7.5 million members and is one of Australia's largest consumer loyalty programs. Also in the portfolio is Clear Skincare, which offers a wide range of skincare treatments, cosmetic injectables and laser hair removal services as well as own brand skincare products. This business has an expanding footprint in the high-growth nonsurgical aesthetics market and has a high level of customer overlap with Priceline and Sister Club. We see opportunities for further growth in investment across each of these businesses. Moving to 119. To provide you just with some context to the size and scale of API, you can see that each of the businesses are represented nationally, giving API scale and reach across Australia through its national distribution network, retail footprint of Priceline stores and Clear Skincare clinics. The next 3 slides goes into a bit much -- a little bit more detail on each of the businesses, and I'll just make a few key callouts. For pharmacy distribution, this business represents critical infrastructure in the health care industry. The distribution business generated over $3 billion of revenue in FY '21. It's API's largest division by revenue. And while it's a lower-margin business, we see opportunities to invest, to deliver increased efficiency and fractionalize the fixed cost base. The distribution business has good momentum, and we look forward to opening our new automated distribution center in Marsden Park in the second half of this year, which will provide productivity benefits. For Priceline, our franchisee partners -- our franchise partners are key to the success, and we see exciting opportunities to work with them on improving the competitiveness of the offer. Our relationships with our franchise partners are strong, and our recent survey has indicated high and improving levels of franchisee satisfaction. The Sister Club is a great asset, and we have opportunity to use the program to support further growth in the business. Turning to 122. Clear Skincare clinics was acquired by API in 2018, and it operates in an industry where customers are really increasingly focused on health and beauty. We have opportunities to improve customer engagement by using our loyalty program and delivering operational improvements as the business emerges from the disruption of COVID. Turning to 123, the acquisition of API completed on the 31st of March this year. And while it's early in the investment, we are making progress. Right now, integration is our key focus, with our priority being listening to and learning from the API team while at the same time undertaking an operational and strategic review of the business over the first few months. So our ambition is to become a leader in health, beauty and well-being, and we see several areas for growth and investment. Now more details of our strategy will be provided over time. However, at the outset, we've identified 3 initial areas of focus to deliver on our ambition. Firstly, we want to strengthen the core. We believe that API has been underinvested, and we see opportunities to invest across each of the businesses. And this strengthening -- the strengthening includes -- this includes strengthening the competitiveness of our pharmacist partners by investing in product innovation, in our supply chain, and developing an improved online offering. Secondly, prioritizing digital and data investment. We see the potential to leverage the group's capabilities and expertise to develop a compelling omnichannel proposition and leverage the Sister Club loyalty program. And thirdly, we will continue to explore new growth opportunities. This may include developing new and innovative products and services within the business, including, for example, digital health initiatives, exploring adjacent or complementary businesses. And we'll also consider inorganic opportunities, noting that all opportunities will be subject to Wesfarmers' usual investment criteria. Just turning to 124. Before we conclude today, I also wanted to highlight the important role that pharmacies play in the community. As outlined here, we do see opportunities for our pharmacist partners to play a growing role in preventative health and wellness to improve health outcomes for Australians. Pharmacies play a critical and trusted role in the community, and our pharmacies are a key source of health advice and a safe and highly accessible health destination. As an example, we're very proud that our pharmacy partners have delivered over 750,000 COVID vaccinations during the pandemic and are again supporting the whole country in the current flu vaccination programs. Key to reducing the overall cost of health care is improving preventative health and wellness, and we believe pharmacies are well placed to do this. Just turning to 125. So in summary, we're very excited about the potential for Wesfarmers Health, and we believe we do have a significant opportunity in front of us. We are operating in a sector with long-term growth tailwinds and attractive fundamentals. We think that Wesfarmers Health can play an important role in improving health outcomes in the community, and we see many opportunities to improve API's performance through operational excellence and investment. From a financial perspective, near-term earnings for the first 3 months of contribution for FY '22 and for FY '23 will be impacted by integration costs and investment in capabilities. Earnings will also be impacted by purchase price allocations, the process for which is currently being finalized, and we will provide an update at full year results. Thank you. We look forward to providing you with more detail in due course. And I'd now like to invite Ed to help answer questions. Thanks very much.

It's Craig Woolford from MST. Just wanted to understand where you draw the boundaries on what is contestable health opportunities over the medium term, and that part of the industry is regulated. Would you consider that part of the market? And what did you mean by digital health opportunities? Can you give us an example?

Sure. I think in terms -- we're looking at health broadly. We define the market -- the health market as about $200 billion. We are basically working through that at the moment. We're very focused on improving the business that we've got in front of us, and we will continue to look at both organic and inorganic opportunities. But they really do need to come back and be driven by what makes sense and where we can feel like we can add value and leverage our capabilities. And sorry, what was your second?

What is the digital health opportunity, an example?

So I think digital health and technology has the ability to really transform customer experiences in health. So there's all sorts of ways that -- we're currently doing that through the integration of e-scripts right through looking at further opportunities for digital health platforms really.

Bryan Raymond, JPMorgan. So just on the Priceline business, what's the opportunity to improve retail execution in there? There's -- obviously Chemist Warehouse is a pretty big competitor and has pretty strong execution. I'd be interested in how you gauge the quality of the retail experience in a Priceline store. I know there are some differences between the two but -- and where the opportunities are. And then maybe a follow-on from that is the reaction of your franchise partners to Wesfarmers' ownership and whether there's been any turnover or any impact from that.

I might start with the second part first. So I think both the business and our franchise partners, we've got a good working relationship. The existing API business does have a great relationship with the franchise partners. So far, the reaction has been positive. And our view is we're just really looking forward to working with them. We do see opportunities to continue to enhance the Priceline value proposition, which will lead to hopefully better execution. But I think what we see is the ability to improve product ranges, reduce the cost to make the supply chain and availability better as well as improving online. As we do those things, we think they're great for the business. If they're great for the business, they'll be great for our franchise partners. And so it should be a win-win. So that's probably how we're seeing it at the moment.

Excellent. And then final one from me just on -- I think, Rob, this morning mentioned that you've got a significant distribution network in the regulated part of your -- part the business and there's opportunities to leverage that into higher returning business models. Can you expand on that at all? Is that something that you can share with us? What sort of opportunities might be there?

Yes, I'd say it's probably early days at the moment. We're really focusing on making the existing supply chain more efficient. It is a regulated part of the industry, as you say. And so with the launch of Marsden Park in the second half of the year, that will actually be a much more efficient operation. So we're looking at how we can continue to really drive efficiencies through that. And as we do that, we're confident that there will be other opportunities, but it's really focused on strengthening the core business at the moment.

It's Lisa from Goldman. I just wanted to understand the extent of like integration. So is it like mainly just the back systems and then some part of supply chain? Or is it potential sourcing out of China as well with Kmart. Is it product development? What is the extent of the integration that we can look for? And then secondly, I think with a fresh set of eyes, what's been sort of the most surprising aspect, good or not, good or challenging, coming into the business?

Sure.

Why don't I take the integration question? Obviously, Wesfarmers does run a divisional autonomous model, and that will remain for API. But there are systems integrations. There are, I guess, best practice from across the group on the ESG front, and we're collaborating with our divisional partners to see what else we can leverage into what was previously a stand-alone business, so to get the best of Wesfarmers into a stand-alone business of API.

I think in terms of surprises, I think the business is exactly consistent with what we thought it would be. So I wouldn't -- I don't think there are any particular surprises. I think the only thing I would say is that the business is really supportive of Wesfarmers' ownership and really can see the opportunities that some disciplined access to capital can bring to drive further growth.

Shaun Cousins, UBS. Just a question regarding API highlighted a path to over $90 million of EBIT in their scheme booklet. And some of those things are quite on track in terms of -- you spoke about Marsden Park, some underperforming stores have closed, Pfizer is coming in or -- pardon me, going back into the pharmacy distribution business. Is there anything that -- and that's $90 million probably more on a fiscal '24 to fully sort of annualized basis. Is there anything that would preclude that not being a sensible basis for us to consider a 12-month view of your earnings in the medium term?

Yes, I'm happy to answer that. I mean I think a lot's happened since the last -- since the public company gave guidance. Obviously, we're in a -- still in a COVID environment. I mean those guidance were given with a view at that point in time to what would happen. So we've had impacts from COVID playing out. We'll also have -- as Emily mentioned in her presentation, we'll have some integration costs. There are some purchase price accounting, which would not have been around in the previous. We're also making a number of investments in digital, which, as you would know, flows through the P&L much more than traditional capital investment. So there's a bit of noise in those numbers, but we won't be giving anything today. But in terms of the full year, we'll start to give you those building blocks for how the business is based for -- going forward.

Got you. Okay. And I guess maybe just how you're thinking about the opportunity from a proper flu season in that the pharmacy distribution and Priceline both benefit dramatically from a flu season that is in full swing. And moreover, hasn't been there in the last few years? How do you think about that as actually -- if anything, it possibly providing upside to that sort of $90 million that you've had there prior to all the allocation of the other costs you've identified, please?

I'll start. And Ed, you can add. I think the business has definitely brought up on -- it was prepared this year for a flu season. I think the flu season, while it is an opportunity, also now the -- with the New South Wales and Queensland, and I think most of the state governments introducing sort of free flu vaccine, a lot of that's coming from sort of existing kind of government stockpiles. So absolutely, it's an opportunity, but it won't all flow directly through the sort of existing pharmacy business, if you know what I mean.

Understood.

Yes. I think I'd just add to that, that whilst we haven't had really any traditional flu season for the last 2 years, the impact of COVID is very much like the flu. And so through the winters and actually even through the most recent summer, we had a significant impact of people buying up cold and flu style pharmaceuticals. So I wouldn't say there'd be a return from -- or a onetime bump, if you will, from a return to flu season.

It's Ben here from Jarden. What are purchase price allocations? What does that mean? Because I would have thought there's going to be some synergies around listing events, et cetera, that sat there before. I appreciate it's pretty slow compared to -- it's allocated but is that contract amortization? Or what is it?

Yes. When acquiring a business, the accounting standards require you to allocate purchase price to various aspects of the business. And then the remainder of the purchase price, which, as we said, was just over $1 billion is allocated to goodwill. There's then an amortization schedule that flows through from that purchase price allocation in the future, which, for a business that has traded for a long time as a public company, wouldn't have the same level of rewrite of value or reattribution of value, if you will.

Okay. And just final one from me. So just around the scale of the business. You obviously talked a lot about M&A and talked about the $200 billion mark, which obviously would be -- do you think the business is at scale for what you need today? And do you get scale by spending CapEx? You said you're underinvested or is -- M&A sounds like it's probably embedded in the business for the next 6, 12, 18 months when you think about it. But it sort of feels like there's a lot of money that you put in to drive to a point of scale and efficiency where you want it to be.

Well, I'd say the wholesale and distribution business is at scale. I think that's more about investing capital to drive efficiencies and lower the cost base. I think some of the smaller businesses like Clear Skincare are not yet at scale. And so there are opportunities depending on which part of the business you're looking at to invest and get different outcomes. But certainly, the wholesale distribution business is a scale business.

It's Ross Curran from Macquarie. Just a couple of questions. Firstly, Sigma's had some pretty high-profile disruptions with its ERP system over the last 6 to 9 months. I realize you guys have been in a bit of flux over that period, but have you been able to capitalize any of that?

Look, we're clearly servicing every pharmacy in Australia. And if any of them are our first-line Sigma customers, we'd obviously service them as well. It's difficult to unpick what is market and what's just the general robust trading that's been seen through all pharmacies in Australia. And so we're just focused on providing the best service we can to all pharmacies in Australia where we have a requirement to deliver to them.

And then secondly, historically, there's a quite a discrepancy in performance between franchise-owned stores and corporate-owned stores within API. Do you have any views on why there was such a massive gap? And can Wesfarmers bring anything to potentially corporate-owned pharmacy stores that might fix those historic issues?

Well, I think as we've said all along, we -- there are opportunities right across the value proposition for customers that we think we can bring some of our expertise, whether it's retail, whether it's supply chain, whether it's product innovation. So I think the answer is it's a combination of all those things.

Yes. The other point I'd add is they're not necessarily like-for-like. A big component of pharmacy is obviously the ethical products, which aren't sold in our company stores. And so when you're comparing a company store performance to a franchisee performance, you're only comparing the front of shop with the company store.

Let me add a final question from Michael, and then we'll invite Rob to do the wrap. Michael at Jefferies asks, Wesfarmers has had good success improving returns from other retail formats by investing heavily in customer value to drive volumes and operating leverage. Is this a significant opportunity for Priceline? And where do you see Priceline sitting on value relative to competitors?

We think there is opportunity for Priceline to absolutely redefine and improve its value proposition. But value isn't just about price, especially in pharmacy. It's also about service. So in reality, we do -- we compete with everybody. We compete with other pharmacists. We compete with online players. We compete with grocers. And so we have to find the right customer proposition for the Priceline shopper, and that's what we'll be focused on.

Thank you both. I'll invite Rob to do the wrap.

Thanks.

Well, thanks, Emily and Ed. And Emily and Ed, one of the advantages of the Wesfarmers Group structure is that API and Wesfarmers Health is no longer a separately listed company. So other than days like this, you can now go back and focus on doing what you need to do in the business for long-term value creation, but thanks for spending the time with us today. I also wanted to thank everyone who has been through this marathon presentation today and also for all of our teams from Wesfarmers that have been a part of it. Now today was obviously a Strategy Day. It was deliberately designed to give you a bit of a flavor of how we're thinking about the long term. And when we think about the long term, I think our businesses are really well positioned to withstand a range of economic circumstances. But also, hopefully, you've seen that there are a number of new growth platforms around the group that I think set us up really well for the years ahead. Quite understandably, today, we had a number of more short-term questions and more tactical questions about how we see short-term trading and some of the risks and uncertainty in the economy that we face. And I think they are very valid questions. We are -- although, as I said, the Australian consumer is in pretty good shape at the moment and the Australian economy is in not too bad shape, there are risks around inflation, interest rates, the tight labor market that we do reflect on. And I hope we've given you some confidence that our divisional teams are very well prepared in terms of their planning around various productivity initiatives, also planning for a range of scenarios. And in the event that things were to be a bit tougher in the economy than we expect, then I think our businesses with their value orientation are incredibly well positioned. The other theme from today, as was called out, we spent a lot more time than usual talking about the various data and digital initiatives across the group and also showcasing some of the work we're doing in OneDigital. A couple of things I just wanted to reflect on around that. First of all, the way that we're running our businesses nowadays, data and digital really doesn't happen in a silo. It is deeply integrated across our business. And if I think about the retail side of our business, online or e-commerce is not viewed as a separate business or a separate channel. Most of our best online customers are also our best in-store customers. And I'd like to emphasize to all of you that each of our retail businesses are absolutely taking a customer-centric approach to what they're doing to ensure that we have the best offer, whether it's the best in-store offer or the best online offer. And there is obviously a blurring of the boundaries around that given that most of our in-store customers engage deeply with us digitally as part of that in-store shopping experience. I hope we've also demonstrated the focus that we have on productivity and efficiency across our retail businesses, across both channels, and that's obviously very important. On the OneDigital side and the OnePass side, we've given you a bit of a taste for what's ahead. But as I said, we're deliberately not going to unveil all the features and benefits that we are thinking of there. But I would like to emphasize that this isn't just a digital program. This will very much be integrated with our in-store offer. And once again, that is what makes the OnePass program quite unique. The benefits of OneDigital and OnePass will be somewhat different across our businesses. As Ian Bailey said, obviously, Bunnings and Kmart have very high levels of customer engagement and traffic. So the opportunity from the first-party data is very much around driving frequency and improving frequency of spend. And that's particularly important for those businesses as they continue to expand their range and their addressable market. Some of our smaller businesses don't have the same customer reach of a Bunnings and a Kmart. So they will clearly benefit from the value in our first-party data in terms of customer acquisition. Finally, in a world where privacy regulators and consent frameworks are becoming much more important issues for companies to navigate, we see that having a very clear and transparent consent framework and controlling our own first-party data will, over time, be a point of competitive advantage. But I would like to think that over time, we will not need to talk about data and digital so much as a separate area other than recognizing that our digitally native businesses will have ways of working and cultures that are really designed to attract some of the best talent that is out there in the market, and that is important for the time being. But our broader strategies are very deeply integrated into 2 things: delivering fantastic outcomes for our customers; and importantly, delivering long-term value creation for our shareholders. So with that, thank you very much for spending the day with us. Could I ask you, those that are going on the Bunnings tour, please just go out the front? We've got just a pack of food for you to take with you, and Simon will explain what the program is for the rest of the day. So for those of you going to Bunnings, I hope you enjoy the tour, and thanks again for spending the day with us.