Wesfarmers Limited (WES) Earnings Call Transcript & Summary

Well, thanks very much, Simon, and good afternoon, everyone, and welcome. Today, a great day, strategy briefing day. Thanks for coming along, and hopefully, you'll enjoy the day. And before I kick off, I wanted to acknowledge that we're meeting on the lands of the Gadigal people of the Eora Nation, and I'd like to pay respect to elders, past and present. I'm very conscious that we have a broad range of investors and analysts in the room and on the call today. And some of you are incredibly familiar with our group and our businesses while there are many new investors, including some from offshore that use today as a way of learning more about the Wesfarmers Group. So we'll try and meet the needs of all of the people that are dialing in and here in the room today. And hopefully, you'll find it a useful day and we really look forward to answering your questions and also catching up during the breaks for the more informal discussions. We will focus very much on providing an update on recent strategies. And we'll also try and share a bit more context with the new and emerging areas of the group. However, I don't apologize for the fact that most of what you're going to hear today is consistent with our previously communicated strategies, which is what you should expect. We have no shortage of opportunities across the portfolio, and we have a clarity of focus about the things that are going to create shareholder value. And what really matters, to us, is the quality and pace of execution. And hopefully, you'll hear some good examples of that today. In recent years, we've talked a lot about the resilience of our portfolio. And I'd like to think that the performance of our divisions through more challenging economic times has demonstrated this resilience. And if there was a theme I wanted to emphasize more today, it is the pipeline of growth opportunities we have across our businesses. And most of these growth opportunities exist within our larger businesses, Bunnings, Kmart and WesCEF. And our operating model enables us to unlock these opportunities to deliver superior returns. But I'm also conscious that we have some emerging platforms for growth, notably Covalent Lithium, our health division and OneDigital. To provide the update on each of their businesses, I'm pleased to be joined today by our divisional managing directors as well as other leaders from around the group. Now to start today, I'll make some opening comments on our group strategy before handing over to Nicole Sheffield for an update of OneDigital. And then our CFO, Anthony Gianotti; and our EGM of Corporate Affairs, Naomi Flutter, will join Nicole and I to take questions before we move on with the rest of the day. So starting where we always start, which is a slide that will be familiar to many of you. So since the listing of Wesfarmers in 1984, we have been guided by a consistent objective to provide a satisfactory return to shareholders. And we define satisfactory as top quartile total shareholder returns over the long term. And we believe 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, contributing positively to the communities in which we operate, taking care of the environment and acting with integrity. Our focus in these areas is integrated into our strategies and how we manage our businesses, and hopefully, this will come through in our divisional presentations today. But I first wanted to share some of the high-level proof points that demonstrate the group's progress in these areas. So on Slide 5, in relation to climate and environment, our divisions have made -- have a range of interim and long-term decarbonization targets and are making good progress. The retail businesses are largely focused on reducing electricity usage and securing more renewable energy, both through our own solar generation and power purchase agreements. And in the industrial businesses, progress continues on 2 fronts: investment to abate our Scope 1 emissions; and partnering drive research and innovation to commercialize lower carbon processes. For our team members, the priorities remain safety, diversity and advancing reconciliation. And this slide shows some recent progress on each of these. And in the communities where we operate, our divisions engage very deeply to continually strengthen ethical sourcing practices, to build long-term trusted partnerships with suppliers that offer commercial benefits as our businesses grow, providing direct and indirect financial support to important community partners in the arts, medical research and reconciliation. And just in the first half, the level of this commitment, both direct and indirect, totaled $46 million. Now right now, there's a lot of focus on cost of living as households are doing it tough. And the focus of our retail businesses on everyday low prices is certainly trying to help with this. Now many of you will recall a little over 2 years ago when signs of inflation started to emerge and interest rates started to go up. We talked about how we were going to double down to keep our prices as low as practical and work even harder to take costs out of our businesses so we could help our customers. Now I remember this really well, because when we made these comments and our divisional managing directors reinforced this, our share price fell about 7% that week. As some market commentators were concerned that this signal that we wouldn't take advantage of a short-term margin opportunity that may exist or maybe even our margins would fall. Now I'd like to think that this is a demonstration of the difference between being short-term focused versus managing businesses for the long term. Businesses like Bunnings, Kmart, Officeworks have built a reputation for lowest prices and great value over decades, and these were the moments of truth. So as we look back on the last few years, we have delivered on our commitment to value to customers. And in the process, I believe we have built stronger and more valuable businesses. Turning to Slide 6, which shows Wesfarmers to return to shareholders over the long term. Now ultimately, it's these results are the best way to judge our success against our objective and to demonstrate the value of our operating model. And in line with our objective, Wesfarmers TSR performance has been top quartile for the ASX 100 on a 5- and a 10-year basis. And since we listed in '84, Wesfarmers has delivered total shareholder returns of nearly 20% per annum. Now the importance of this focus on the long term cannot be underestimated. And today, you'll hear from our divisional managing directors about opportunities that have resulted from investments and developments in recent years, together with investments we're making that hopefully will deliver new revenue streams in the future. Now you would have also seen an announcement today about Ian Hansen's retirement later this year when Aaron Hood will take over as the new MD of WesCEF. And there will be time for me to better acknowledge Ian's fantastic career at Wesfarmers. But as we look at this chart, it's interesting to reflect that Ian joined Wesfarmers before the start of this chart in 1983, when we were still a cooperative. I'm grateful that Ian has agreed to stay on with Wesfarmers as an adviser to support Covalent Lithium and some major developments at WesCEF. Aaron has been working with Ian for a number of years, most recently as the Chief Operating Officer and previously as CFO of the division. Aaron is well regarded across Wesfarmers and has been instrumental in many of WesCEF's major projects in recent years. Turning to Slide 7. Once again, a slide that should be familiar to you, which really sets out our operating model and provides a framework of how we manage the group to generate superior returns over the long term. Driving the delivery of our corporate objective, we have 4 overarching strategies that inform our focus at a group and a divisional level. We seek to strengthen our businesses through operating excellence and a focus on customer needs, securing growth opportunities through entrepreneurial initiative, renewing the portfolio through value-added transactions and ensuring sustainability through responsible long-term management. And it's these strategies that, not only guide our focus in the divisions and at the corporate center, but they also shape the capabilities that we look to develop across the group. They also represent the areas of focus for our annual corporate planning process and portfolio reviews. And finally, at the bottom of the slide are our core values that guide our culture across the group. Now I will talk to our approach with some of these strategies at a high level and provide some examples. But at the end of the day, the real value of today will come from the discussion from our divisional managing directors. So turning to Slide 8, I'd just like to focus on the next few slides on a few things. First of all, talking about how our portfolio has evolved in recent years, talk about the quality and the shape of our current portfolio and explain how I believe we're well-positioned to deliver growth and returns over the long term. So to start, this slide summarizes how we have renewed and evolved the portfolio in recent years to support shareholder returns. We've established significant new platforms for growth in Covalent Lithium and Wesfarmers Health, both of which provide exposure to industries with attractive long-term potential. We have made incremental logical acquisitions in businesses that support our divisional growth ambitions. And we've also made changes to the portfolio where they supported our longer-term TSR objective. We exited businesses that were lower growth, face structural or sustainability issues or where we had an opportunity to realize the price that we considered in the best interest of shareholders. Through the Target store network restructure and conversion program in Kmart Group, we were able to address some of the structural challenges in Target at the time and reallocate capital towards higher-returning opportunities in Kmart. And this has materially reduced our lease obligations and strengthened both businesses. Our long-term perspective, strong financial discipline and active portfolio management allow us to deploy capital to businesses that can drive better returns in the future. And I see this as a source of competitive advantage for Wesfarmers. And one of the reasons why our model is so fit-for-purpose in the current market, where investment prospects of businesses and industries are changing rapidly. And for this reason, I believe that Wesfarmers has one of the most resilient and adaptive operating models in the ASX. Now of course, we don't get it right all the time. And the acquisition of Catch was one part of a very substantial investment we have made over a number of years to transform and accelerate our digital and e-commerce capabilities. And while I'm incredibly pleased with the progress we've made in this transformation and the quality of our omnichannel and digital capabilities, it's clear that Catch, as an investment, has underperformed. Now clearly, we've learned a lot from Catch and we are benefiting from the assets and capabilities that we've acquired. And Nicole -- but I don't want to shy away from the fact that we don't get it right all the time. Now Nicole will talk to the progress we've made with the business and how we're repositioning it to improve financial returns and support growth. Turning to Slide 9. Now this slide highlights what I think really goes to the quality of our current portfolio and the ways in which it offers a strong platform for shareholder value creation. And to summarize, we have a portfolio of market-leading retail businesses with strong value-based offers, broad customer appeal and growing addressable markets. Our globally competitive industrial businesses offer products and services that support some of our most critical industries in Australia. The health division provides the group with exposure to the attractive and growing health and well-being sector. And the ongoing development of the lithium -- the Covalent Lithium project is one of the ways our businesses are supporting global carbonization, with these all underpinned by the group's strong balance sheet, which enable us to make disciplined investments with a long-term focus. So turning then to Slide 10. Today, you'll hear many examples of growth-focused initiatives from our divisional MDs. And ahead of that, I wanted to make some overarching comments. Firstly, we have a strong set of businesses with good growth opportunities and very broad customer appeal. And I think that point of broad customer appeal across our retail businesses is probably not as well understood as it could be. The divisions continue to expand their addressable markets and to develop new products and service offerings. Population growth and demographic changes also provide opportunities to grow our retail networks and to expand our offer. And there are many opportunities for continuous improvement in delivering productivity and efficiency gains. Now specifically as it relates to demographic changes, our divisions are developing offerings, our retail divisions, in particular, to capture a greater share of spend from the younger generation, notably Gen Zs, and while continuing to meet the needs of the growing base of retirees, which is also a very important base of our customers. Now it's estimated by the end of this decade, Millennials and Gen Zs will, combined, represent about 50% of total retail spend. And we have made some great progress across our retail divisions through investment in data and digital and through new category and product developments to take advantage of this trend. Now we know this demographic like to engage with brands digitally and across multiple challenge -- multiple channels. And our investments at OneDigital and the development of digital capabilities in the divisions having a positive impact. And meanwhile, the continued extension of products, notably the Anko ranges that Ian will talk about in youth fashion, health and beauty, just to name a few, the continued expansion of Bunnings range in more consumables, products for renters and so forth, and Officeworks' very deep engagement and expansion of their offer to students are all examples of this. Now second, we have established new platforms, which will also provide incremental earnings beyond what is in our current P&L. So for example, we will see the growth from our lithium earnings as Covalent Lithium progresses through to the production of the sale of lithium hydroxide. And the Health division is progressing plans to significantly increase earnings in the coming years. And the digital capabilities and scale of our businesses also provide us with opportunities to unlock new retail, new earnings streams, for example, through retail media. Now finally, the flexibility of our model enables us to deploy and reallocate capital within and outside the portfolio to support shareholder returns. And we recognize that often, the most attractive opportunities to invest capital are within our existing businesses. And for this financial year that we're currently in, we would expect to invest net capital expenditure of $1 billion to $1.2 billion. Now turning to Slide 11, which provides examples of what we're doing under that strategy of strengthening our existing businesses. Strengthening our businesses start with a relentless focus on customers. And our retail businesses are hardwired to continually look at ways to improve their range, value, customer experience, both in-store and online. And through this approach, they've built reputations as trusted brands with value-based omnichannel offers that enjoy broad customer appeal. And this focus on value is enabled by a similarly relentless focus on operating excellence. In fact, you can't have one without the other. Our retail businesses have developed low-cost scalable business models, often supported by investments in direct sourcing and own brand capabilities. And their focus on reducing costs and improving productivity and efficiency over time has enabled this reinvestment into price, range and customer experience. And I wanted to provide some examples of this as we turn to the next slide. So on Slide 12, this hopefully brings to life some of the examples of our businesses' consistent focus on productivity and efficiency. And while this slide has the details, I wanted to call out some of the general areas of focus. So investment in technology and digitization is a consistent theme across all of our businesses. Some of the examples that you'll hear from today, from our MDs, will be ways in which we're using technology to improve store operations, supply chain and our digital offerings; investments to improve team member workforce planning and productivity; and the way we forecast demand and associated inventory management processes. These technology-related investments are continuously improving our product and service offerings to meet the needs of customers while increasing sales and driving efficiency. Further, across the group, divisions are also investing in modernizing and simplifying their supply chains, including a new automated frame and truss plant for Bunnings; new customer fulfillment centers in Victoria and WA at Officeworks; and at Wesfarmers Health, the construction of a fully automated new distribution center in Brisbane. And finally, at WesCEF, the disciplined investment in plant maintenance and asset management has contributed to delivering sustained levels of operating availability above industry averages. Now on Slide 13, I mentioned earlier, Wesfarmers value-creating strategies and how these are embedded within our businesses and how they operate. And our ability to continually develop new growth opportunities is one strategy that I am most excited about across the group. And at the end of the day, this is about the value we create when we combine great talent with exceptional businesses and empower them to invest and innovate for the long term. And I'd also like to say that from a corporate office point of view, a lot of this is about staying out of the way and getting our divisional teams, letting our divisional teams get on with the job. Now our approach to corporate planning and management incentives is aligned with long-term value creation and encourages entrepreneurial behavior. While our executive remuneration is heavily weighted towards equity and also creates an owner mindset within our leadership team. Now as I said earlier, we don't get things right all the time. And being entrepreneurial means accepting that not everything works all the time. However, the value we're able to deliver across the group from encouraging an entrepreneurial mindset is significant. And today, you'll hear more about these growth opportunities from each of our divisional MDs. But I wanted to highlight a few themes. Now these include the expansion of our addressable markets through entry into new categories, ranges and end markets. Often in retail businesses, you get so caught -- you can get so caught up with the tactical day-to-day trading that you don't invest in those longer-term opportunities. Our investment in digital offerings across our businesses and our range of loyalty and reward programs really do support growth. It drives deeper customer connections, improve personalizations, more targeted offers and a stronger omnichannel customer experience. It's also important to note that these examples represent just the latest vintage of growth opportunities across the group. Over time, our businesses will continue to evolve and secure new opportunities, and we expect that the examples on this slide should look very different in 1-, 3- and 5-years' time. Now while there are many case studies we could talk to, a fantastic example of this is Kmart's evolution of the Anko model. Now Ian Bailey and the Kmart team have had a consistent focus, over many years, to develop the strategy and invest in end-to-end sourcing capabilities to deliver a market-leading own brand product offering. Now they have made some very bold and difficult calls over the years, such as the dramatic network change I talked about earlier to Target and Kmart, also investing in some new technologies and fundamentally changing business processes. And some of you will remember the trial that they undertook opening a few test stores, really testing new technologies in Seattle. Now all of these ingredients have enabled Kmart to deliver a step change in performance and providing new growth opportunities for the future. And this would have been very difficult to achieve with a short-term focus or without the capacity, capability and mindset to support the execution of long-term strategic plans. Now this is just one demonstration of how the Wesfarmers model works at its best. Businesses are less distracted by short-term variability and noise, and instead can be laser-focused on the things that matter for the future. So turning to Slide 14. In summary, our current portfolio consists of high-quality businesses that provide multiple avenues for growth. Our operating model and value-creating strategies have become embedded into how we manage our businesses, and we have a relentless focus on customers' operating excellence and securing growth within our existing businesses. This is all supported by a strong financial discipline, active portfolio management and a focus on managing our businesses for the long term. And finally, our strong and flexible balance sheet provides the capacity to support continued investment in our businesses and the ability to take advantage of opportunities that arise from time to time. Now with that, I'll hand over to Nicole Sheffield, and then we look forward to answering your questions shortly. Nicole, over to you.

Thanks, Rob, and good afternoon, everyone. Last year, I shared our plan to continue building the group's omnichannel ecosystem. And over the past 12 months, we have made great progress in building out OnePass and the OneData shared data asset. And we've executed real actions at Catch that are enabling us to scale our marketplace. I'd like to start by looking at where we are today. So turning to Slide 16. OneDigital has solidified its foundations with all the group's trusted large-scale retailers, including Bunnings, Kmart, Target, Officeworks, Priceline and Catch now part of OnePass. The investments to improve our digital customer experience are paying off. In FY '23, the group surpassed $33 billion in retail sales, with 40% growth in online sales since FY '20. Every month, we handled 210 million digital interactions. And every week, we processed over 10 million transactions across all channels. Our strength lies, not only in our digital presence, but in our physical network, where we have over 1,900 stores and over 100,000 highly engaged team members supported by 29 delivery centers and CFCs. While having a broad omnichannel reach is a core pillar of our success, knowing our customers is key to unlocking value as it enables deeper connections, improved personalization and a better experience. Complementing our network of great retailers are the group's loyalty programs: Flybuys, Sister Club and PowerPass with their large-and-engaged membership bases. As you know, Flybuys is a free program where members earn and redeem points, and it gives us the ability to engage with over 9.4 million active members. OnePass, on the other hand, is a paid membership program with a scaling and highly valuable base. Members get meaningful benefits immediately upon joining, like free delivery, Express Click & Collect, 365-day returns. These programs link our retailers, drive divisional earnings and provide members with great value. They also enable deeper customer insights through data, which is supported by OneData, our shared data asset. Turning to Slide 17. Now you're may be familiar with our omnichannel ecosystem. OnePass underpins the ecosystem by providing compelling benefits to members across a uniquely broad range of omnichannel retailers and our Catch market base, particularly as we extend the OnePass benefits across more of Catch's 3P range. The benefits help attract and retain scaled and engaged membership base and deliver a bigger share of wallet through incremental sales and frequency of shop. This means increased customer lifetime value, reduced customer acquisition and retention costs, cross-selling opportunities and the potential to develop new revenue streams like a retail media offering. Underpinning this is the privacy and security compliant shared data asset built by OneData, which allows us to use our collective data to better understand and provide benefits to customers. As this flywheel accelerates, it unlocks more value that each division can achieve alone by creating scale, traffic, spend and audiences that are valuable and hard to replicate. Turning to Slide 18. I will talk to the OnePass benefits. As outlined earlier, all our major retailers are now part of OnePass. And with the launch last September of our enhanced omnichannel CVP, OnePass now delivers even more value for our members through a truly differentiated set of omnichannel benefits across a unique broad range of partners. The enhanced CVP offers free delivery for online shoppers, in-store benefits like 5x Flybuys points at Kmart, Targets, Bunnings and Officeworks, and 2x Sister Club points at Priceline as well as other omnichannel benefits like Express Click & Collect and 365-day returns, plus discounts at InstantScripts and Catch member pricing. The offer is resonating, and the membership and platform are scaling. Throughout the year, OnePass will become more deeply embedded across the divisions. We'll be demonstrating more value to members as OnePass is included in more customer missions. This includes a better app, richer in-store experiences and continuous improvement of the member experience across OnePass and individual checkouts to drive membership and sales. You'll see more co-branding and bigger and better events that leverage learnings from our successful early access events. Given the strong brand awareness, there will be more focus on personalized marketing and offers, more exclusive benefits and will extend OnePass across more of the Catch range. We're excited about the year ahead as we continue scaling the platform for our members. Now turning to Slide 19, where I'll highlight the value of a OnePass member to the group and the value they get from being a member. So while we continue to build out OnePass, it's worth noting OnePass members are already more valuable than nonmembers. Members shop 2.7x more frequently across our brands. They spend more with our brands, so 3x more in the case of Catch and 2.7x more across the group. They cross-shop 1.4x more across the group, and they are much more likely to be omnichannel shoppers, in fact, 3x more likely. Importantly, members are benefiting from their membership, and so they are changing how they shop. After members -- after joining, members increase their spend with us by more than 25%. This demonstrates that, not only are we getting incremental benefits from the program, but that members are seeing value and choosing to shop with us more. We're also seeing more members take up an annual membership with about 50% of our members now on an annual plan. This means churn is decreasing, and we have more opportunities to demonstrate value throughout the year. OnePass is also introducing new and valuable customers to our brands. For example, since the launch of Priceline partnership in March, nearly 20% of members linked to Priceline via OnePass were new to Sister Club. In terms of engagement, we're seeing some experiences really resonate, like the Black Friday early access events that all brands participated in. During November, member acquisition was nearly 5x higher than the prior 3-month average. And member -- and order value increased by 11% across Kmart, Target and Catch. The Officeworks' back-to-school event generated 35% of members to date from Officeworks, while the average order value is over 70% higher for members than nonmembers. Not only have these events introduced new customers to our brands, they've driven increased OnePass membership and spend. We'll continue with these marquee events this year. Turning to Slide 20. I will talk about how OneData is using data as a key enabler to improve customer experience across the group. Shared data asset developed by OneData is foundational for the group's omnichannel ambitions. The asset includes 12.2 million customer records. For nearly 2/3 of them, the asset holds more data than any one division. This allows us to understand customers better, improve their experience and unlock growth. Critically, underpinning this is the continued investment in strong privacy, security and data governance to drive the responsible and consented use of data. By using this data responsibly, OneData empowers our businesses to better understand customers through broader data sets and deeper profiles with the right customer consent. These provide richer, actionable insights that no single division could develop themselves. This data has helped with targeted audiences. For example, to promote key OnePass events that I spoke about earlier, plus Catch After Pay Day and Officeworks using it to increase their back-to-school database by 5x. The shared data asset also enables more data-centric strategies and initiatives from personalization to range planning or retail media offering. Finally, OneData will support the measurement of commercial outcomes through integrated data feeds, closed-loop analytics and real-time reporting across the ecosystem. This is something that no individual division can do on its own, demonstrating the value of the OneDigital ecosystem. Now turning to Catch on Slide 21. As outlined in our half year presentation, Catch has made significant progress. It has seen a material reduction in losses, and has established the foundations to support growth and scale its third-party marketplace. This has been underpinned by 3 items. Firstly, the significant rationalization and curations of first-party range with a 70% reduction in SKUs, a focus on profitable in-demand categories and stock clearance. This has seen contribution bought per order more than double. The second is a sustainable and material reset of the cost base. This includes a halving of head count and other productivity initiatives. The final item is the execution of efficiency initiatives. These have seen a circa 30% reduction in cost to peak in the first half through core system improvements and an optimized labor model. Catch has also developed a low-cost, last-mile network with reduced freight costs and faster delivery across more post codes. Catch is now more efficient with paid marketing and is increasing free traffic through Flybuys and OnePass. These actions have delivered a material reduction in losses of over 50% in the first half. Importantly, both 1P and 3P products are delivering positive unit economics, which establishes the foundation to scale the marketplace, which is what I will talk to next on Slide 22. As you know, Catch has always been about great promotions and great deals across its 1P range. The significant actions we've undertaken provide the foundation to reset and refocus by shifting Catch from a 1P-led business to a 3P-led business with a scaled marketplace which is asset light. As we scale, we will reinvigorate Catch's customer proposition as we reinforce its heritage as a trusted Australian marketplace, focused on expanded deals and promotions, fast delivery across its entire range. Catch will materially broaden its marketplace range to improve customer choice and introduce seller competition. This, in turn, drives competitive intensity with better value for customers. Catch will provide new tools to help sellers grow, get better served by the Catch team, and in turn, provide better service to their customers. OnePass members make up nearly 50% of Catch's 1P transactions and spend 3x more at Catch than nonmembers, showing that the Catch element of the OnePass offer is resonating. Catch will, therefore, focus on utilizing OnePass and Flybuys as well as the actionable insights it gets from OneData to accelerate growth and scale by driving more free traffic, broadening OnePass benefits to millions of items across the 3P range and using OnePass recruitment and the growing number of Flybuys members shopping on Catch to grow GTV. Finally, Catch will scale new higher-margin revenue streams like Fulfilled by Catch, leverage its last-mile solutions and will expand its retail media offering. Fulfilled by Catch, sellers benefit from increased availability in sales and cost effective fulfillment, making Catch a more attractive place to sell. Customers get faster and more reliable delivery across a broader range. This drives stronger GTV while reducing costs through consolidated orders and fixed cost fractionalization. And for retail media, sellers get better visibility, improved insights, increased GTV while customers see more relevant ads and just get a better experience. Turning to Slide 23 to summarize. The OneDigital ecosystem creates network effects by leveraging data to increase customer lifetime value across the group. This will, in turn, enable new revenue streams like a retail media offering. OnePass members are more valuable and spend more after joining. Importantly, we're also seeing that members are getting compelling value from the omnichannel benefits that OnePass delivers across its broad and unique range of partners. And Catch's focus is to scale its marketplace which is an asset-light strategy. Catch will also continue to develop new or higher-margin revenue streams like Fulfilled by Catch and retail media. Thank you, and I'd now like to invite Rob, Anthony and Naomi to the stage to take questions.

Rob, David Errington, BofA. Can I just -- 2 quick questions. The first one, if you go to Slide 8, I don't know if you can bring Slide 8 up on the screen. It's with regards to your shareholder value creation, I suppose, through acquisitions and incremental investments. Without being too critical, I'd say that the majority of the value being created by Wesfarmers is in that bottom category, history of portfolio renewal and capital reallocation. That's where the value has been created. But the top 2 buckets, Wesfarmers Health and the other buckets, the incremental investments, I'd say that there have been drags on value. I mean, the return on capital on -- leave Covalent out of it for the moment. I mean, that's going to be heavily commodity price driven, if we could leave that out. But the other ones, I'd say are probably drags, some of them pretty material drags. So my question to you is your point is when you look at the demographics and you look at -- for a good business, then you make an investment. Now the problem with that is, I remember Michael Chaney saying, a good business can be a bad investment if you pay too much. So how do you get that tactical part right with effectively wanting to be in the right logistical business. Because at the moment, where those incremental side, I'd say health and the bottom 6, they're just not getting the job done for you. In fact, they're heavy drags. So that's the first question. The second question. I was listening to Nicole, and I just don't understand why you're keeping OneDigital separate. I mean, I listen to -- and I just want to hold you guys to account with how your investment in OneDigital is actually leading to a business in dollars and cents. And I say the only way you can do that is to allocate the cost of OneDigital to each individual business. It's the only way you can do it because at the end of the day, we're never going to hold you to account as to how this investment is actually increasing your value to your business. So there are 2 questions there, but if you can answer them, that would be great.

Sure. Look, on the acquisitions, I'd say the one that I was pretty open with that hasn't delivered value today in terms of return on capital and value to shareholders is Catch and very transparent with that. But if I think about the other acquisitions we've made, I'd say the first thing is that we have -- I believe we've shown a lot of discipline. We haven't allocated an enormous amount of capital to M&A despite many opportunities that have been out there. And if I think about InstantScripts, Beaumont Tiles, to put TKD into perspective, we're talking about circa $10 million, so it wasn't a lot, right? It was a rounding in error in the scheme of things, [ good ] to you. All of those acquisitions are looking quite encouraging, quite promising.

Health for 3.5%, [ rock ]?

Yes. Yes, that's right. Well, look, time will tell with health. We bought -- I think we were very transparent when we bought API that we said a few things. We said we felt, it was a really interesting platform to create long-term value. It was a business that had been materially underinvested, and we have made a fairly big investment, both in terms of capital, technology and talent. And it was going to be a long-term project. So we talked about this being a 3- to 5-year-type horizon. And at the end of the day, time will tell. Time will tell on that. So I think the jury's out. We're happy to be held to account on whether we generate an acceptable return there. Covalent Lithium, I think, has the potential to be a very good contributor. I'd say, though, David, one of the features of these, and the point I was trying to make is that it's not that hard -- well, you can find acquisitions that deliver a reasonable return on capital in the short term, but they tend to be declining businesses. There are -- the businesses that we like are the ones where we feel there's an ability to invest in over time. And as I said, we won't get it right all the time, but we're still quite confident in these. The final point is I wouldn't underestimate -- and as you rightly pointed out, some of the bigger portfolio moves. And I would put the Target network rationalization into that. Leases are a form of capital, and we faced into that very aggressively and have delivered good value for the group. Similarly -- and it is going back quite a while now, but I'm trying to give a broader context of how we think about the portfolio over the longer term. The moves to exit coal mining and the demerger of Coles, I think, were good deals.

And the OneDigital investment?

Yes, the OneDigital investment, well, it's...

How do we hold you -- how do we hold you to account that this money is being well spent, because I'm none the wiser today on that.

Yes. Sure. We look I think it's -- it's interesting that I think Nicole share -- well, she shared a lot more information than we've ever shared before on the data points that do flow through to the benefits that will be attributed to our retail divisions. Something that Wesfarmers has done over the years that I think has been a very positive aspect to the Wesfarmers model is that we haven't sought to allocate corporate costs back to our divisions. That has been a very common and deliberate feature of the group over many, many years. A lot of the investment we're making in OneDigital is quite -- there's a high risk associated with it. It is deliberately focused on a long-term investment. I think you can look at case studies of many retail businesses that have avoided making some of these transformational investments if they cause earnings to go backwards in a year. So we did debate the pros and cons of do we allocate those costs back to each of our divisions, but we think it's far better to actually -- we're being very transparent with what those costs are. We're not hiding them. And in fact, some people might say we would have been better off just to keep them in a broader corporate cost bucket, but we are being transparent about it. We're also being transparent about the data points that give us confidence that they are adding value. And once again, time will tell. We will continue to monitor the amount we're spending, the benefit realization. Also, if you look around the world at other groups that have gone down this path, there are benefits in not burdening an operating division with the upfront cost of some of these investments. But time will tell.

It's Bryan Raymond, JPMorgan. First one, just to follow on from that actually. Just thinking about where the benefits might be flowing earlier. So we've seen a tremendous profitability improvement in Kmart. Obviously, there's a lot of moving parts in that, but I was just wondering, is there a bit of an outsized impact early on in something like Kmart/Target from the OneDigital investments you've made? And obviously, the costs are sitting in OneDigital, but are some of the benefits flowing through a bit unevenly at this early stage into some of your divisions?

Well, the first point I'd make is although we're very encouraged by a lot of these data points showing really good customer metrics and incremental spend as a result of OnePass, that's not the only reason why our division -- our retail divisions are moving forward well. So I wouldn't want to overstate the benefit of OnePass. I'd say with Kmart, that Kmart has been one of the strong -- it's probably fair to say, Nicole, one of the strongest adopters of OnePass.

Yes.

So we probably have more data. And Nicole can talk more to that. Do you want to add to...

Yes. I mean, Kmart definitely joined the program at the very beginning and have absolutely, from a marketing perspective, been key. I think what's really interesting in the Kmart story when we look at it, about 20% of their online customers now are OnePass members. But actually, those OnePass members are driving a lot of value in store, and it's the omnichannel element where we -- I mentioned the 2.7x where, we're really seeing that omnichannel growth. Once a member joins OnePass, they're really driving a lot of those benefits in store as well.

Great. And just a follow-up on that is -- I may have missed it, but I couldn't see any sort of active member numbers in OnePass. Is...

We're not disclosing those yet.

So we're a couple of years in, is that because they're not particularly large numbers? You're happy to give, obviously, lots of others...

I'm very happy to tell you why. Years ago, when I was talking to Doug McMillon at Walmart, he gave very strong advice, don't get into the trap of giving a running commentary on subscriber numbers. So we took that advice. And look, over time, we may. But I don't see any real -- like at the end of the day, I don't see benefit in leading our competitors know what the numbers are. And at the end of the day, we're happy to be judged by are we continuing to grow the earnings collectively of our retail businesses in our group.

Okay. But you're comfortable with the pace of customer acquisition and member numbers? It's going to plan basically?

We are. And look, I think the final point I'd say is that we're still learning a lot, right? Last year was the first time. We haven't even had the new CVP for OnePass in market for a year.

No.

We relaunched that in September. We learned a lot through the Black Friday campaigns, that all of our businesses participated in but not all to the same extent. So the program will continue to evolve. I suspect the program will look very different in a year's time, 2 years' time than it looks today.

It's Lisa from Goldman. It's a question also on OneDigital. How -- just out of interest, how do you actually attribute incremental benefits that's been driven by OneDigital versus just good execution? For example, the Black Friday event, what would it have been if we didn't have it? And then therefore, looking 2, 3 years out, like, what do we think the incremental benefits of OneDigital should be?

So we actually -- the benefit of having OneData is they've actually created an attribution model and understand what is incremental and work with the divisions to actually assign that. So for example, the early access to Black Friday, Kmart, for example, was a significant beneficiary because it was early access. We could actually see which OnePass members went online, actually bought those products before it was available to all customers. So we've got targets that we've set. We've worked with each division, because every division has different strategies and has different omnichannel goals that they're setting. And so we'd set out -- we work together to actually set that up each year in our budgeting process.

And so you have a plan and you may not tell us, but, like, on annually, biannually what your incremental uplift to the business needs to be and you have clear measurements against that?

Absolutely.

One follow-on question then. This new discussion of retail media. Is that a group retail media network that you guys will run? Or is it going to be run independently in each of the divisions?

So we're still working through that at the moment. I think Retail Media is not new to Wesfarmers. Many of our divisions have a very successful retail media programs. So if -- Priceline, Officeworks, Bunnings have just launched screens in stores and have got a very successful program. This is actually looking at how do we actually build out a network, a retail media network and leverage the data that we've got. And so that's kind of that broader spend that we're looking at and how we kind of deliver that, not just for our brands and our divisions, but actually in terms of audiences that are already interacting with us, and we have a lot of data on them.

But more to come on the details?

Yes. More to come.

Shaun Cousins, UBS. Just a question on OneDigital. I think at the first half result, you indicated you'd lose $70 million in the full year '24. Can you reiterate that? And then if we think about the progress of losses, when things get better, does that loss make -- stay $70 million and the benefit goes up in the division? Or does success look like that $70 million loss dropping down? I was curious how that -- the '24 and then what the future looks like.

Shaun, I'm happy to take that. I think obviously, we're 2 months out, so I can't give you a precise number, but we should land pretty much in line with that $70 million estimate that we gave. In terms of your second question, I think it's a combination of both. So we'll see -- what we should see is obviously incremental, as Nicole talked about, sales and margin growth across the businesses, which we will track internally to make sure that the economic model of what we're doing in OnePass is paying off. What we'll see in terms of the OneDigital P&L specifically, obviously, we've got to continue to make investments. We're quite transparent around what we're spending in marketing through that. Of course, the subscription income that comes in will offset the costs. So as the program grows, I would expect that the losses will come down, but where most of the benefit will actually sit is with the divisions. So that's something that we are watching very closely to make sure that as we continue to invest in OneDigital and OnePass program, that the economic model for Wesfarmers as a group is actually paying off. And as we've talked about, we've seen greater benefit as we relaunched the CVP in September last year. We learn more as we do more events. We understand the incrementality better. We know what drives incrementality. And so as that -- and Nicole talked about some of the targets that we've got internally for what we do from that perspective. That will obviously grow and that increases the value. So it will be a combination of both.

Great. And then just secondly, on Catch, Wesfarmers is quite concerned about its reputation. If I'm running a marketplace that might not be congruent with that, in that I might be more willing to bring product on that's gray market that I want to move in and out quickly, why is Wesfarmers given it sort of quite -- you're quite slow to bring product onto Catch. We've had feedback from suppliers that are selling on Catch. They can get their product on to other marketplaces quicker. Given that sort of very noble sort of approach that Wesfarmers takes, why is Wesfarmers the right company to own Catch then?

Yes. Thank you. So I think we're very committed to ensuring that -- we're going to provide a lot of seller tools. We're providing a lot of governance in terms of actually how we grow that marketplace. It's going to be very considered and we've got support in global experts that know how to do this. So to your point, it's not -- we are very considered in how we're adding to that marketplace. The reality is what the marketplace offers. At the moment, we have 11 million SKUs. As we grow those SKUs, we grow categories, we grow categories and SKUs that are available, which is valuable for our customers. And if you think about the digital ecosystem that we're building, they're actually products that the broader products they can buy, and there's more that they can do. So from our perspective, I think that it is the right strategy. We just need to be quite considered in the way we bring those marketplace sellers and then we onboard them.

But you'll be less nimble than your peers. And so you'll be sort of somewhat disadvantaged in the way you want to go better. I'm just curious, is this not a business that's actually better in the hands of someone else? Sorry, that one, I'm not sure that was -- I might not have been clear in my question.

We feel that there's plenty of opportunity to build a really competitive and broad marketplace offer. In fact, I'd say, in some ways, I suspect that the regulators may well become more focused on other market-based providers and asking questions, are they managing appropriate expectations around not just ethical sourcing, but the way that the marketing occurs. So we feel that we have more than enough opportunity to build a really competitive marketplace in line with our ethical sourcing standards.

It's Ross Curran from Macquarie. Can I come back to David's question and might I ask it a slightly different way? Are you able to refresh us on the metrics a business needs to have to end up as part of the Wesfarmers portfolio? But then more importantly, what are the minimum metrics a business needs to be able to demonstrate to stay in the Wesfarmers portfolio? At what point do you say this doesn't fit what Wesfarmers look -- wants or looks like?

So internally, we have return on capital measures, as you know, and that's one of the key drivers that we use to gauge our performance of existing businesses that we've got. We don't necessarily use a return on capital when we're looking at new acquisitions because, obviously, that's a difficult measure to see at the start. And what we're focused on, even with acquisitions, is obviously how fast we can grow return on capital over time. Internally, we have a minimum target of return on capital of 10% across our businesses. We have an 18% target, which we deem to be what we call satisfactory. And then above that, really, the focus is about how do we actually reinvest capital to drive growth in the business. And of course, as you know, over time, you can grow -- you don't want to continue to grow return on capital endlessly, because, really, the only way to do that is shrink. What we want to do is then invest that back into driving performance. If you look at across our businesses, generally, when you're buying a new business, it's going to be on quite a low return on capital. I can take you all the way back to Coles. When we bought that business a long time ago, it was a low return on capital. What our focus is on new businesses and a good example, of course, is Health. We have plans to significantly grow the return on capital in our Health business towards the minimum of 10%, but hopefully then to the 18% satisfactory return. The time frame around that will depend on the size of the investment we're making and, of course, the starting point. But the focus is very much about driving improvements on return on capital, and particularly for those businesses that are sitting below that minimum and below the 18% target. And that's the focus that we use internally. It's a focus that we have when we look at our corporate plans. So we look at our 5-year plans across our businesses in terms of strategic planning, and we look at how that return on capital is changing over that period to warrant the investment that we're making in driving that return. And then, of course, we assess the risk associated with doing that.

It's Ben here from Jarden. You talk about sort of the different generations coming through, and we look at Amazon is putting another $0.5 billion in New South Wales at the moment, $0.5 billion down in Vic and probably got over 200 million SKUs on their site now. Wessie's have done a great job around leveraging scale and sourcing, obviously, what's happening with OneDigital, but supply chain, to me, just seems the area where you're a bit, I don't want to say absent, but you just haven't put the investment. I appreciate what you're saying on Officeworks and those sorts of things. But if you want to do Fulfillment by Catch, you want to push range and compete on that and you want to break down same-day delivery, like Amazon's got 85% coverage now, when do you guys take the decision to do a bigger, fully automated shared endless aisles, being able to have that investment from a national basis? It feels like the longer you wait, the harder it's going to be or the more money you have to put down.

Ben, I think it's important to remember, it's not like a like-for-like comparison. We have an enormous benefit of well over 1,000 stores that can act as fulfillment centers in their own right and can often get product to customers either through click and collect or home delivery faster than others with dedicated centralized fulfillment solutions. We also have a very wide range of distribution centers with fulfillment solutions there that we're continuing to invest in an upgrade. As it relates to the marketplace fulfillment capabilities that Nicole talked to, we have a fair bit of excess capacity in our Moorebank facility. We also have a site in Melbourne with excess capacity. Whilst there's a good and a bad with that, the good is that we've got a fair bit of capacity to leverage. The bad thing is that it's flowing through in cost to the Catch P&L at the moment. So we feel that we can better leverage our store network and our distribution center capabilities to be very effective in the omnichannel space.

So do you have any sort of concern or thoughts around younger generations typically going to one site to begin their search now. And OneDigital is obviously a great platform, but you're then going to go through and click into all the individual banners to go through to the sites. How do you sort of leverage it? It just feels like there's an opportunity to leverage scale, and I appreciate you want to run it as silos, but do you ever have to think about breaking that down for a single platform?

No, I don't think so. And in fact, I'll let the -- Mike and Ian and Sarah talk to this later, but many customers, including younger customers, have a very deep connection with our core retail brands. And take Kmart as an example. Kmart is certainly getting more than their fair share of spend from younger customers, both in-store and online. And they're going to Kmart because they love the Anko product. They have a deep connection with the range. We have -- they have very sophisticated social media engagement that they leverage. So if I had a choice between having just a very vanilla marketplace with lots of products on or having the brands, the very unique brands that we have within our portfolio, I know what I'd rather be leveraging.

And just final one for me. Just maybe just 30 seconds on how you're seeing a consumer at the moment. We've had Bapcor and Big W today both sort of talk down the consumer. Admittedly, I think they're probably both losing share, one of which to you guys, but general lens or view on the consumer, as you see it today?

Well, for some time now, we've been noting that a number of households, particularly younger families, are under a bit of financial pressure with cost of living pressures, higher interest rates. And we've also been consistent in the last 6 months that we thought that those inflationary cost of living pressures were going to be more enduring. And that does seem to be playing out. And I think with some of the media of late, that maybe it will take longer for interest rates to come down, maybe inflation is a bit stickier. That obviously weighs on consumer, weighs on household. So it is -- value is still incredibly important. So it hasn't really changed the way that we think about our businesses or our strategy. It just means that we need to keep doubling down on the really strong value credentials, making sure that we have an offer that is going to resonate with more value-focused customers.

Michael Simotas from Jefferies. I've got a couple of questions. The first one is on the productivity and efficiency initiatives that you've spoken about. I'm sure we can talk at a divisional level later, but I think it's worth just talking broadly from a top down. Where you see Wesfarmers as a group and a collection of businesses in terms of the evolution of the investments that you've already made and the benefits that they're delivering and the investment opportunities that you see ahead of you to deliver similar productivity benefits.

I'm not sure if this properly answers your question, but a lot of the real productivity benefits are best delivered at a divisional level, would be the point I'd make. And of course, there are always some theoretical cost savings you can drive by integrating certain back-office functions. But the small cost benefit you gain, you lose the accountability the focus and the agility and the portfolio management capacity that you have -- by having that stronger divisional focus. What we are doing is we have been very clear about where are the areas where you can collaborate, you can leverage scale and capability and procurement. And that largely is around data, the digital platforms, some technology choices that we're making. Some of the work that's going on across the group around generative AI, sharing insights and ideas and group procurement approaches. There's a bit in that. But I'd say and I'll let the divisions talk to this as well. I'd say the vast majority of the opportunities around productivity and efficiency very much driven at the divisional level.

Yes. That makes a lot of sense. I guess what I'm asking is if we look backwards at what you've invested already, how much of the benefits have you got from those investments. And look, we can talk about divisions but just as a group. And then how much more opportunity do you see to invest in productivity and efficiencies when you're weighing up whether to put capital into new business, expand markets or drive productivity and efficiency, what you've already got.

Well, look, it's hard to put a specific number on it. I'd say a lot of the productivity benefits certainly around workforce optimization and so forth. I think fair to say and MDs could add to this, we get pretty good payback over a pretty short period of time. Some of the longer-term investments. So the investment that Ian and the team have made around the use of RFIDs, they were multiyear programs. So some of these investments do take time to deliver the results probably 3 to 5 years. And really, what we're trying to do is you can't afford to do everything at the one time. So you want to have a portfolio of options in the pipeline, some of which are going to deliver the gains faster, some will take a bit of time. Like if you go back to the broader investment we're making in data and digital through OneDigital just to put that into perspective, the $70 million accounts for about 2% of retail earnings. Now we could allocate that back to our retail. And we are very optimistic that, that is going to flow through to be accretive at a group level in terms of earnings and returns. Some of that is flowing through now. Some of it will take time to realize the benefits of...

Yes. So you've led into my second question actually. It's good to hear that you've got a sophisticated way of measuring the benefits you get from the centralized OneDigital spend. How far off recovering the OpEx that you're spending on a run rate basis are you? And then I guess the next stage is recovering the OpEx that you've sunk in previous years as well.

Yes. Look, I think it's -- I'd say, over the next couple of years. And clearly, what we haven't done as yet and it's been quite a deliberate choice. There are many retailers that have gone quite hard at clipping the ticket, so to speak, or try to aggressively and rapidly commercialize the data. We haven't gone there and if we were to do that, we'd do so in a more measured way as Nicole was talking about with the retail media strategy. Once you start to extract some of those benefits, obviously, that materially improves the P&L outcome. But just to put it into perspective, we're being very transparent with the investment that we're making. We shared today some very positive customer and sales and metrics that are flowing through the investment we're making in this space is about 2% of retail earnings. And we've got strong mechanisms in place to monitor that, and we'll scale it up and down depending on where we see the value.

Rob, Phil Kimber from Evans and Partners. Question, just traditionally, Wesfarmers has run its business standalone. It's been very agnostic about what it owns and what it doesn't. Does this start to change with this OneDigital strategy, at least within the retail businesses. They're starting to become more integrated and therefore, the ability to maybe move on from one is more limited going forward?

No, not at all. And as I think we might have touched on this year ago or so, we have set the OneDigital, the shared data asset, OnePass program up in a way that is highly modular. So it doesn't for any -- in any way restrict our ability around portfolio management. A lot of the technology you can use now around ingesting data and leveraging the data assets don't require to all be integrated. So we still retain all that flexibility. Now there are, obviously, as we touched on, there are other use cases and other revenue streams that we do hope that we can develop and extract that are not part of the group at the moment. Hopefully, over time, some of those might start to become more meaningful contributors. But once again, it wouldn't restrict our capacity to manage the portfolio.

Craig Woolford from MST Marquee. I've got two quick questions. One, first one might not be so quick. But what do you see is the boundaries on this health division over the next 5 to 10 years? What would you consider that business to be? What does it look like? What type of businesses would you hold within the Health division. Health is a pretty broad terms. So I'd be interested in your perspective.

Look, Craig, I'll let Emily talk more to that. We're pretty pleased with the platform we have at the moment. There are obviously ways in which we can keep growing each of these pillars. But our focus, I describe our focus has been very much around consumer health and areas where we could -- ways in which we can leverage our platforms, our data, the community pharmacy networks to deliver more accessible and affordable health care. That's what's most interesting. The areas where we are less interested is areas that have a high degree of regulation, regulatory control around pricing, areas that are very capital intensive or areas that are very much more in the biotech pharmaceutical side, where it's a bit of hit and miss, big, risky calls around investment, that's not really for us.

Got it. Next question may involve Naomi. So just we're moving towards a world of Scope 3 emissions. And what some has disclosed so far, puts an emphasis on Bunnings and Kmart with more Scope 3 for obvious -- fairly obvious reasons. Do you think that has any tension over the medium term about the kind of businesses they are? You offer great value, but some of that value is about how frequently people purchase products and their low-priced items that may not have long lives. Do you think -- how do you see that into play? And what should we expect on Scope 3 emission reporting going forward?

You'll see a lot of change on Scope 3 emissions reporting in the years ahead and the legislation that's been introduced into Parliament, which we'll expect pass in the next couple of months will mandate far more reporting and assurance of reporting, and I think we welcome that. As regards our Scope 3 categories, you're absolutely right, Bunnings and Kmart are the largest contributors to Scope 3 emissions. And for us, probably two major Scope 3 categories stand out. One relates to our supply chain emissions associated with the production of goods that we in turn sell. And the other then relates to the use in the disposal of products at the end of life, I think the way we would look at them is, there are partners who can work with us to really address those Scope 3 emissions categories, both upstream and downstream. Upstream, a lot of it comes through things that we've been working on for a very long period of time, like product design, renewable or sustainable raw materials. It's no accident that Kmart uses BCI cotton for everything. Packaging, packaging materials. So you don't see many laminated white boxes in Kmart anymore. It's a recycled and recyclable off white, sort of, light brown cart, which brings with it both some efficiencies. I think the product actually looks better in the store, but it's also lower Scope 3 from an emission standpoint. And I think increasingly, you'll see us measuring that. So upstream, I think we're very optimistic that we'll be able to have some meaningful impact on Scope 3. And then downstream, if you -- the benefit of a business like Kmart, but also I think a lot of our other retail businesses those deep and long-standing relationships with suppliers mean you can help design either yourself through design functions or partner with suppliers to design products, which have greater kind of Scope 3 benefits at end-of-life treatment. So can the resource, the embedded resource be recovered and reuse, can the product even perhaps be repaired. All of those kinds of measures. And I think all of the customer engagements that we have, sort of 10 million a week customer engagements, they provide opportunities to help educate and drive behavioral change around end of use, end-of-life treatment. So I think we're welcoming of the change and the reporting and the clarity that people will increasingly see and focus on. And I think also very optimistic about the capacity to really make a meaningful dent on upstream and downstream, which are our two biggest Scope 3 categories.

Rob, you got Richard over here from CLSA. Another question on OneDigital. I think in the past, you have talked to the -- we suggested that OneDigital would get to a point where it's profitable in its own right. And we've sort of talked around that concept a little bit now and certainly heading from the negative $70 million closer to 0. So can you just clarify exactly what the intention is there. So even if it's on a not tightly defined time frame, is that the objective? You want OneDigital to be profitable in its own right? Or would you be satisfied with an outcome where the benefits of accruing into the individual retail businesses and you're running a close enough to break even?

Look, just to be crystal clear, we are really focused around value creation at a group level. So what matters more than anything is, are we getting more benefit out of the investment that we're investing as simple as that. And now I have a very high degree of confidence that, that will occur in terms of the benefit that will flow through at a divisional level. There are other ways, as we've talked about with retail media and other areas where we think there's a good pathway to develop incremental earnings, some of which may sit within OneDigital. But to be honest, that's not how -- we're not hung up about where the profit is. We're more hung up about how we're creating the value. So time will tell. But I think there's every capacity for OneDigital to be a profitable -- profit center in its own right, but to simply look at that, we'd be missing the bigger picture about the opportunity.

Okay. I understand that. It just makes it a lot more difficult for us if we're thinking about the retail businesses and what component of those retail earnings come from OneDigital, one do not -- which ones do not. So...

Yes. That's right. Well, look, I think at the end of the day, like I said earlier, the investment we're making in OneDigital at the moment accounts for about 2% of retail and health earnings. If you look around the world at what other large retail groups are investing around data and digital capabilities in an effort to fast track their omnichannel development and so forth. I think that's a fairly modest cost in the scheme of things. We could reallocate that $70 million to our retail divisions, and you wouldn't really notice a difference. I just have a big argument to have with all of my divisional managing directors, which is not really the biggest thing to focus on at the moment.

Johannes here from Morningstar. I think question relating to the number of customers you have in your database, I think it's over 12 million. How big is the overlap there between individual retailing groups? So what I'm coming from is, if OneDigital is now spread across all retailing segments or retailing brands, what's the opportunity there to activate customers that have been inactive or having new customers, a customer of Bunnings trying Kmart for the first time.

Well, that's actually the opportunity for OneData. So the 12.2 million that we have in our database, are a combination of the transactional data that comes from each division as well as some of the Flybuys data, the OnePass data, and we haven't ingested price line as yet. And the opportunity is to have a de-identified understanding of those customers so that we can actually use them for personalization, for insights for planning, whichever the division wants to use. And so depending on the use case and how they engage with that will depend on the outcome that they get. So the example that I gave was Officeworks and back-to-school used it, and was able to get 5x better. I mean the personalization for their back-to-school campaign. So I think we're -- different divisions have different use cases. And they as well are building out their own very data asset, but it is basically their customers that they know what the shared data asset delivers is a much broader understanding of a broader customer set.

Okay. Great. And on the overlap? Is there any ballpark number? Is it the majority of Bunnings customers or also Kmart customers? Or is there a lot of opportunity there?

No. Look, I think that from our perspective, we don't really have a number on the overlap, but what we know is that, for example, the OnePass example that if we can get them cross shopping and we can find ways for them to actually identify when they're in store or when they're online and understand them, we'll get a much better picture of who they are.

Okay. Thanks, everyone. We're going to take a 10-minute break. There are some tea and coffee outside for those... [Break]

Good afternoon, everyone, and thanks for the opportunity of speaking with you today. 2024, I should say, marks a special anniversary for us as we celebrate 30 years of running our iconic warehouse format. And over those 3 decades, we've been through various economic cycles, changes in the market and ever evolving customer needs and preferences. But a lot of things have stayed the same and really core to who we are. We have a relentless focus on our customers, a strong growth mindset and expanding the addressable market. And of course, our disciplined focus on executing our strategies to deliver returns over the long term. And this has stood us in good stead to deliver on year-on-year sales growth as well as earnings growth and to do so on the back of the significant growth we delivered through the COVID period is an incredible credit to our team. This growth has been consistent through economic cycles, reflecting our resilient business model and a product offer that is a mix of necessity and discretionary spending. So today, our addressable market size is around $110 billion, and the market has grown through new and expanded product ranges, categories and services as well as new formats and channels to market across online, on site, in home and of course, in store. And it's earned us the right to be chosen by customers more often and attract new customers, both in the consumer and commercial segments. The way we see it, competition has never been stronger. The playing field spans geography, product assortment, formats, channels, including traditional hardware, big box and specialty retailers, and of course, it's pure play online, which continues to grow strongly, led by the international market. We take a category-by-category approach, keeping our customer offer differentiated and compelling and it's centered around three value pillars: lowest prices, widest range and of course, the best experience. Our offer is resilient with demand influenced by a number of drivers. These are often countercyclical with broad customer bases shopping across projects like new homes, renovations, repairs and maintenance. With cost of living front of mind, consumers are more looking for ways to stretch their budgets than ever before. That might be the bulk packs and entry product lines we have DIY projects to maintain or improve their homes or setting up a space to entertain or work-from-home to save on discretionary spending. Looking ahead, we see population growth, housing age and supply as well as lifestyle trends all contributing to demand. Our customers are staying in their homes for longer, driving renovation activity, accessible fit-outs and assisted living. Technology continues to bring new products to market like smart home lighting, security, household solar and automation. Our strategic agenda has four key themes: care, grow, simplify and evolve. Care is at the heart of everything we do. Our philosophy is that our team, suppliers and the communities are successful, then we too are successful. We genuinely care for the environment and take our responsibility to make a positive contribution seriously. Growth is about driving product range innovation and expansion to deliver the widest range and lowest prices. It's also about building new B2B capabilities to better serve our commercial customers. We know there's opportunities to simplify and our focus here is on reducing tasks through our team, and leveraging our technology to the lower cost to reinvest in price and service make stock available for customers when and where they need it. And lastly, we need to evolve to strengthen the customer offer and our business model. And here, we're focused on deepening our space management and supply chain capabilities and continuing to unlock the benefits of data and digital for our customers and team. We couldn't be more proud of our team and our culture. It's one of the important ingredients of our success, and it's enabled us to grow and change over time. Whether it's large-scale tech transformation, range innovation, fresh formats or a step change in our commercial service offer. And these things don't happen by chance. We work hard every day to maintain and foster a high-performing team. Ensuring our team stays safe and well in the workplace continues to be a very high priority. We continue to look for ways to improve how we handle stock in our stores and see results from our safety programs to reduce injury. Our new EBA for our store team was implemented this financial year and provides industry-leading benefits and combined with new rostering systems, means we can much better match team hours to the demand of our customers. We invest in training and development and product knowledge, commercial acumen and leadership skills, all is ways of investing in our talent and providing incredible career pathways. We're focused on building an inclusive and diverse workplace reflecting the communities where we live and we work. These elements all come together to support our strong team culture, high retention rates helping us build a knowledgeable and engaged team which also gives us a cost of doing business advantage. Our sustainability agenda is integral to keeping our business relevant and profitable, and we're on track to deliver on our commitment to achieve 100% renewable electricity in 2025 with around 80% renewable electricity powering our Australian network now and 100% in New Zealand. We're well advanced on our journey to achieve net-zero Scope 1 and 2 emissions by 2030 and continue to deepen our Scope 3 reporting. Our power tool and household battery recycling program has been embraced by our customers and over 370 tonnes of batteries have already been recycled. We love bringing the community into our stores and having our team go out into the community, community barbecues, hands on local projects, product contributions and free in-store family events are managed by our local store teams. Strengthening local community connection and team engagement. And collectively, we've supported over $47 million in direct and indirect community donations in the last financial year alone. Our customers are seeking more value than ever, and we're relentlessly focused on sustainably delivering lowest prices. Our team is inspired by delivering affordability to our customers and making DIY more accessible. We've been offering specialty products at lower price points for many years. A great example of this is our DIY glass pool fencing. Historically, products like these were high cost and needed expert installation. Today, we have fantastic DIY offerings across areas like smart home and home storage, where our new Lugna cabinetry range combines trade quality finished with DIY modular ease and value. Our business model leverages our scale and find cost savings through operational efficiency from the unique design and layout of our stores to our service model, so we can invest in price and service. We partner with our suppliers to offer even quality and greater value to our customers. Import cost inflation is moderating, which supports our quality and pricing offer across a range of categories. One example is more bulk size packs in categories like fixings and likewise, which are strongly resonating with our customers and differentiating our warehouse offer. We're always looking for new ways to innovate, expand and launch new product ranges, and we're constantly learning from local and global partners, and that's complemented by detailed market and customer research to ensure we continue bringing our customers a winning offer. It's incredibly rewarding when our teams see customers respond to a new or refreshed offer at market-leading low prices. One example, of course, was the new pets range, which we're strengthening with new accessories and an expanded pet food offer. With many of our stores in regional locations, there's a great opportunity to make our offer even more relevant to our regional and rural customers and product development in the rural category is very much top of mind. We're also broadening our automotive offer, building on the range of car accessories we already have like servicing inspection tools and car jacks. Interest in our smart home category is going from strength to strength, and we continue to offer and improved and refreshed offer for customers with a focus on smart security and smart door locks anchored by improvements in technology and our customers are embracing this. And in commercial, we're working on quality, supply and installation packages that save our builders and trades time, along with a broad offering in cutting, joinery and windows. Helping consumers and trades access quality household renewables offers at great value is an emerging opportunity and is something we are actively exploring. We know customers value a mix of brands they know and love. We have a long-established strategy of delivering widest choice through our house of brand strategy, which includes providing customers with world-leading brands like RYOBI, Dulux and Hill's, complemented by our own brands. We continue to strengthen our direct sourcing capabilities and customers are responding really well to some of our own brand offerings. One example is the Matador Barbecue, which we've been offering to our customers for 16 years. In that time, we've improved features and on-trend design and now that range is going digital with new models that seen cooking notifications to smartphones and enhanced LED controls, keeping this trusted Matador brand as popular and relevant as ever. Another example is our Citeco safety ladder brand, which has been really well received by the trades, and we're now expanding this brand into our PPE range. I would now like to talk about a really important opportunity that we see at Bunnings, space optimization, which we see as a driver of future growth. It's how we better use our retail space and make product ranging decisions across our network. So the in-store range is tailored to serve the local market, taking into account location, store size, layout and format. When I reflect on our history, the absence of an omnichannel offer then we had to carry wider ranges in our smaller stores, often meaning stock availability was compromised to ensure range with. The development of our online store and last mile capabilities along with recent investments in inventory and order management technology means we can reduce some range width in our smaller stores and ensure we have greater availability of the key products our customers need with our full range of products available for customers online. We've been trialing localizing and curating range based on geographies, climate, customer demographics and trends. Our visual merchandise and data science teams have been using space planning technology in some small format stores to help us understand the improvements to return on space as well as testing macro and micro range choices. The results are really promising, and we'll be keeping on building this so that we can compare the performance of our ranges and offer across our network and drive more relevant customer offers and increased sales density at scale. And we look to deliver this capability across our 50-or-so small format stores as a start point across our network in the year ahead. Our team is known for making every interaction in store friendly, helpful and tailored to our customers. As purchasing habits change, we're making sure our digital experience as seamless and reflects those same qualities that our in-store team is famous for. Pre shop, our retail and trade websites and apps are major destinations for project inspiration and planning. We see around 41 million customer sessions on these channels every month. Customers who are members of the Flybuys, OnePass in our PowerPass programs, our invited to visit us online through regular e-mail updates that are tailored to their interest in their current projects. And we know our customers, as Nicole said earlier, more engaged with OnePass having a higher spend frequency. Over the past 30 years, we've moved from offering 34,000 hardware and home improvement items in store to an omnichannel model offering close to 300,000 home, commercial, lifestyle products through multiple channels. We're working with our suppliers to expand our product offer online further, including extended ranges and growing our profitable marketplace. We've also enhanced product information and host an array of content to inspire and inform our customers. Recently, we added augmented reality to our online store, so customers can visualize what a product looks like in their home or their garden. Our digital ecosystem makes it easy for customers to move from product discovery and planning through the shop phase. For example, a shopping list you create on your app before you visit can be turned to a map with the location of those products in your local store. Post shop, we curate How-to content for customers based on their shopping list with tips on how to get the best out of their project. For example, we have a group of customers that's very enthusiastic about their lawns. And we support them with step-by-step guides product and maintenance information that helps keep their pride and joy looking at best across all four seasons. Using insights to invest in our relationship with customers supports a more meaningful and loyal customer base. For our suppliers, we've been encouraged by the early uptake of our trials of a retail media offering in partnership with our colleagues at OneDigital. Our suppliers have embraced the opportunity to more meaningfully communicate with our sizable and relevant customer audience, and we're looking forward to growing our offer in a way that is incredibly customer-centric in the year ahead. In the commercial space, we have a very clear focus on our growth opportunities. First is our strategy to be a better partner to our builders across the whole of build. Build as a time pool, and we want to support this segment with expert account managers, refurbished builder design studios, our PowerPass app and through our expanded commercial ranges. In the frame of fixed phase, we want to aim to make it as easy as we possibly can for our builders to access the frames trusses, timber cladding insulation, plasters, windows and doors that they need on spec and more importantly, on time. Our investment in our frame and truss plants comes as a residential construction industry is facing labor shortages and a need for efficiency, which creates growing demand for prefab products delivered direct to site. Our latest site, this one based in Wacol Brisbane takes our total to 7. Wacol service is an important growth corridor and the automation we have in the plant means we have an increased capacity to bring frames to market and at a lower cost. During fit out, we see real opportunity to grow the supply of kitchens, bathrooms flooring and installed appliances. Part of this strategy focused on Beaumont Tiles, this is now well established in Western Australia rounding out its national presence and its expansion into timber and hybrid flooring is resonating strongly. In the finishing phase, we support landscape trades to broaden their offer as well as commercial paint ranges to bring a better participation to these trades in the final stage of build. Our second opportunity for growth is in better equipping our trades with all their business needs, helping with all the tools, workwear and safety equipment that they need. We keep evolving our commercial tool offer across warehouses and small formats. And at Tool Kit depot, we're doubling down on online to accelerate our national reach, while leveraging the Bunnings network for fast fulfillment. We've set up a trade assist line which is a new phone, text, e-mail and chat service to make it easier for trace the order. And since its full rollout in March, we've seen increased use from trades who are using it to transact more frequently and pleasingly select more items. The third opportunity is in businesses and organizations. This is where we're positioning ourselves as a solutions provider. Our customers here range from small operators to local government to large complex businesses across industries like hospitality, education and assisted living. Across all our commercial customer segments, we continue to improve our PowerPass offer to give our commercial customers the tools and benefits they need to run and grow their businesses. We're looking at more ways to reward their loyalty through tiered benefits and value in the future. We've been encouraged by our progress in productivity and excited about the opportunity to further leverage our investment in technology and processes for a faster and better customer experience. For example, our new rostering technology gives us deeper insight into how to match customer demand with our team. That creates a customer experience and efficiency advantage. It also makes it easier for our team to access their roster and confirm their availability from their own device. We continue to invest team member time away from task and back into service. We are well progressed with putting Gen AI to work to make it easier for our store team to get things done. We're running a trial where store team members make chat-based queries on their handheld devices. They're able to ask for instructions to set up the latest product range, check a customer order and estimated delivery and confirm when a product is in stock. Our consumer app road map has self-serve features to improve the customer experience in store, so our customers get what they need to complete their projects even faster. And overall in the year ahead, we expect to redeploy over 1 million hours of task back into service across our network. Our supply chain continues to evolve, and we take technological customer-led approach to realizing efficiencies and building our capabilities to support online and commercial growth. Our unique supply chain model has been built through a number of long-term partnerships with our suppliers, and we'll continue to develop this as we evolve. We do more than 1 million customer deliveries every year. And we continue to provide a brilliant last mile experience that's in step with what our customers expect. For faster deliveries and friendly personalized service, we're expanding our Bunnings local delivery service. Bunnings store teams use a fleet of special utes for parcel, boot load and bulky product deliveries to retail and commercial customers. We've had great feedback from our initial trials and are rolling this now out to 50 stores, to complement the range of third-party delivery providers we already work with. This also leverages the competitive advantage of our diverse network of stores and warehouses. We're removing cost and complexity by consolidating our DC network expanding these distribution centers around the country and driving operational and transport efficiencies through stock consolidation. Technology plays a major role in introducing efficiencies too. We're improving our warehouse management systems to get stock flowing more through our DCs, more smoothly, including voice picking, advice for our team. Our new forecasting tools will help us and our suppliers keep availability of products high, improving the customer experience, while at the same time helping us to manage inventory more efficiently. We see lots of runway ahead for growth through the expansion of retail space at our existing sites and through new and replacement sites. In the year ahead, we've got 10 significant projects scheduled, a combination of new stores, replacements and expansions, and we anticipate growing our retail floor space by around 10% in the next 5 years. We expect to add new Bunnings stores serving communities like Frenchs Forest here in Sydney and expanded offers through replacement stores -- replacements or expansions, I should say, such as Dubbo in Western New South Wales. Our established network planning program is informed by deep analysis, so we can identify the right formats and sites based on demographics and evolving customer preferences. In moving to outlook. We are incredibly energized by the opportunities we have ahead of us. As always, our growth mindset means we are focused on driving sustainable earnings growth over the long term in both consumer and commercial segments and across all channels, including in-store and online. Our value credentials are resonating really strongly with value-conscious customers, and we're identifying and delivering cost efficiencies that continue to support this. Population growth, housing demand both remain positive macroeconomic drivers, and we see plenty of opportunity to support the anticipated recovery in building commencements over the long term. And of course, we continue to invest in new and expanded ranges optimizing space, supply chain and accelerating our data and technology investments to improve our customer offer and maintain a low-cost model to support growth over the long term. Thank you for your time today. I look forward to taking questions shortly, and I'll now hand over to Ian Bailey.

Okay. Good afternoon, everyone. My name is Ian Bailey, and I'm the Managing Director of Kmart Group, and I'm very much looking forward to sharing the Kmart Group strategy this afternoon. Turn to Slide 41. Last year, I talked about the unique advantages of our business model and outlined our strategic priority is to grow our share of customer wallet. These priorities for Kmart remain consistent and are underpinned by the pillars of a great place to shop that is simple to run and better products at even lower prices as well as exploring the new and profitable channels to market through our Anko brand. These pillars allow -- continue to allow Kmart to maintain and grow its competitive advantage of lowest price leadership. In late 2023, we announced the integration of Kmart and Target processes systems and organizational structures to achieve one operating model across two brands. We have made significant progress on this integration with Anko general merchandise products now available in Target and our operating model integration progressing to plan. Our progress on each of the strategic pillars during the last 12 months is as follows: firstly, winning in omnichannel. We have improved the overall customer experience through enhancements to digital platforms improved stock availability and a better delivery experience whilst increasing the efficiency of the operating model. We continue to invest in the OnePass customer value proposition to drive subscriber growth and engagement. Digitizes in-store experience. We successfully rolled out our RFID platform, including TORY robots to our New Zealand stores and continue to invest in digitizing our team member experience in store, resulting in much improved availability for customers. Leverage product development capabilities. Our product offer continues to grow with successful introduction of additional apparel ranges that target new demographics such as our recently introduced youth range and AFL fan range, both of which have seen early and promising successes. Digitized sourcing and supply chain. We have continued to invest in our digital capability include expanding the use of 3D design and building an ecosystem of interlinked design, planning and ranging tools. This is resulting in lower end-to-end costs and accelerated lead times. Expanding Anko into new markets. We have made good progress on our international growth strategy with Anko over the last 12 months. Whilst it is still early days, we have learned a significant amount both in terms of how our product resonates with consumers in new markets and which operating models work best in those markets. Today, I'd like to focus on the strength of Anko's business model as a competitive advantage and what opportunities we have to continue to leverage it for our future growth. Turning to Slide 42. The core insight, which has driven the Kmart business for many years, is the idea of lowest price without compromise. It's two elements which really then come together into our overall purpose, which is making everyday living brighter for our customers. The first one is the importance of lowest price. Now in the current economic climate, I think we all understand how important that is when consumers really are under pressure. But the reality of this is true in every economic climate. The vast majority of Australians and New Zealanders do not have enough money to do all the things they want to do in their lives. And if we can save the money on the basics, they really appreciate it. So I would never underestimate the power of lowest price in, I think in any category, but especially within ours. The second thing that we've done, which has really created the emotional connection with our brand, with our consumers is take products which were previously unaffordable and bring them to a price point, which is suddenly gives them permission to play. So we are frequently 1/3 of the price of the equivalent product. And when I say equivalent, I genuinely mean equivalent. I'm talking about the lifespan of the product, the quality of the product, the specifications of the product, pretty much exactly the same when you get it for 1/3 of the price. I think this is one of the reasons why as we see customers trading into our business at this point in time, we have confidence we can retain those customers for the long term because once you've experienced the value that we can provide, it just makes sense that you stick with it and use your cash to spend on other things which may be more expensive in your lives. This purpose helps us then try and bring the joy back to shopping and empowers our customers. Again, I wouldn't underestimate this. If you think about going into some retail stores, they can be quite intimidating. So particularly if you go into a high-end boutique, you sort of know that you're going to be under pressure with the price point. And whilst you might be excited to look at the products, it's also a little bit awkward as you sit there as a consumer. I think one of the things that we've established with the Kmart brand over time is pretty much everything in that store is affordable. And we hear it from our consumers consistently that I don't need to check the prices anymore. It comes back really clearly because they have so much confidence in the value proposition that we provide. We take that very seriously, and that's why we keep a very close eye on all of our price points to ensure that every one of our products is the lowest price for the equivalent item irrespective of the price point of where it sits within our product offer. And the next piece we want to remove is the stress of have I bought the right item. And again, if you -- I don't know the last time you went into a clothing store and tried something on, if you were there on your own, what do you think about it? Did you think, I like it, but will my partner like it, will my friends like it and so on. And we all have those natural stresses. I think customers are also getting faith in our design capability that what they buy will be on trend. And when they do take it home, they're likely to get a good reaction from their partner and their family. And again, takes another piece of stress out of shopping. Let's move to Slide 43. We strive to be #1 or #2 market share in every category that we play in, and we have made progress on this over the years. In a later slide, we talk about how much market share we have in these categories, and we still see a great deal of opportunity. But to call out a couple of the points, the first one is we are the market leader in home when you exclude furniture. We're a very small player in the furniture part of the market, as I'm sure you know. But if you exclude that, we clearly are the largest. When you look at the toy brand, this one is an unusual stat, but Anko brand currently only sold in Kmart is the #1 toy brand in Australia. And if you take brands 2, 3, 4, 5 and 6, if I got that right, I think it is then they add up pretty much to the same as the Anko brand. So it is an amazing stat, which gives you a sense of the power of own brand even in a category like toys, which historically would have been thought of as a highly branded category. In terms of clothing, approximately 1 in 5 items of clothing sold in Australia is either Kmart or Target. Our market share there as a percentage, is more like 7%. So you can see we have -- whilst we still have a high representation in terms of units, we still see a lot of opportunity in terms of our potential to grow share within that market. In terms of our sustainability practices, when you consider this volume, we have a big role to play and we accept that. And we come up very highly rated in a lot of the global measures around sustainability, and we take it very seriously. So we frequently appear in the top 3 in the global Fashion Transparency Index. I think we're being #1 or #2 in the last couple of years, and we appear in the top 5 of the Corporate Human Rights Benchmark. And there are many others, of course, which we participate in and performed well. Turning to Slide 44. Our focus is on continually simplifying every step in a fully integrated model from product development through to the end customer. Importantly, we are retailer who has become a product company. I just want to emphasize that point. Most of the time, you're either a retailer or you're a product company that's become a retailer. We're one of the few that's gone the other way and really have found ourselves as being a product company. We strive for pure retail and we remove all the impurities and unnecessary processes and costs, which is why we can deliver products to customers at prices our competitors cannot. Not many people have the factory relationships and the proximity to the factories that we have, a lot of work through agents globally as well as Australia and our ability then to work closely with our factories in the way that they operate, and we can co-create with those factories. So that we can eliminate costs systematically and develop really amazing products at incredible prices. We are different because at the core, we have structural advantages which make replication of our model very hard. At the core of this is the power of Anko, our mono brand. A single brand helps in so many ways that you wouldn't immediately appreciate. The first one is, it enables us to have a very complete offer in a very small space because there is zero duplication. So if I give you a practical example, if you go into most retailers and you look at something like frying pans, there will be 3 or 4 brands of frying pans and each one of those brands have products that do roughly the same thing as the other brands that are represented. Therefore, multiple points of duplication. What we've done is we've eliminated the duplication and each product we arrange has a specific purpose and should be unique relative to any other. The net result is a customer has the right choice. It's relatively easy to choose and they're not overly bombarded by too much, too many choices to make. The next result is a very high volume per SKU. Now if we're the #1 market share, and we have less SKUs than our competitors and our price are lower, you can imagine just how much more volume we purchase than anybody else in the categories we play in. And it would be multiples of our nearest competitor in terms of the multiples of each items that we purchase. And those economies of scale are very hard to replicate. The last one, which we haven't talked about too much historically is the quality of our data. We have, again, 100% owned brand in many categories. We have no promotions. And what we have is very pure sales data which we could then use for future forecasting and future analysis. Combine that with the product data that we have through some of our 3D tools and our digital tools around product life cycle management, we have an incredible data set which we can now start applying more and more analytics tools, which can help us with future ranging, future quantification and future pricing options. We have an ecosystem of interconnected digital tools across the operating model from 3D design to digitize in-store processes powered by RFID and the much talked about TORY, the robot. 10 years plus relationships with our many manufacturing partners who share our passion for finding ways to make better products with us at lower prices, again, is so important. I know I've mentioned them already. They are real partners to us. They're not contracted partner that we just contract with for one's season. We go out to tender for the next. These are partners which we've worked for, for more than a decade. And so that over that time, a trust and a working relationship that's very efficient is formed and it's something that we hold very dear to our model, and there are a group of people that are incredibly important to us. We have significant scale across our end-to-end supply chain, which enables strategic long-term partnerships and cost structure advantages as well as control and visibility of the movement of product from factory to consumers. So what does all this unlock? Well, first of all, it unlocks lower prices, the second is it unlocks a completely integrated brand experience. We get simplified and easy selection for our customers. And we also get this bonus of accelerated brand awareness. We haven't spent $1 on the Anko brand in terms of marketing. And yet, it's one of the best-known brands within the country because it appears on so many products, that monobrand gives incredible resonance to consumers because it's there. The piece I would add to this is one of the pieces we've been working on in the last couple of years is getting around some other retailers around the world, talking about Anko and the products. I'm increasingly confident our model is unique. There may be businesses out there which undertake a model that's similar in categories, but I haven't found another retailer yet globally that does what we do across as many categories as we do. So I genuinely believe we have an asset which is globally relevant, not just locally relevant. Turn to Slide 45. Anko has become a competitive brand in all the categories that we offer in all the categories we offer in Kmart. But with an addressable market of more than $100 billion in Australia alone, there is plenty for us to play for. We have also expanded selected general merchandise products to Target, bringing Anko to a new customer base whilst maintaining Target's unique customer value proposition in apparel, soft home, and toys. Leveraging Kmart's in-house design and direct sourcing, the Anko range is being selectively expanded into new markets globally to grow our total addressable market well beyond our home markets of Australia and New Zealand. Turning to Slide 46. Kmart operates in a large and growing and yet highly fragmented market. Since last year, the total market has grown in categories of apparel, general merchandise, and home. Overall, we've seen -- we have grown share in this period as we have attracted new customers. But more importantly, we have expanded our share of wallet with our existing customer base. There is significant opportunity to grow our share of wallet further by expanding share in existing categories through range improvements and expansions and enhancing our product offerings in growing demographics. Beauty is an example of existing product -- of an existing product category where we are looking to build out our current range, offering a comprehensive range of solutions for our customers using our in-house product development capabilities. Beauty is a category where we have seen strong customer demand across value, especially with young consumers. FanZone is a new category where we bring together our low-price points to a whole new market of sports lovers. We have recently launched an AFL-branded range, and we'll look to expand this to other sports clothes in the future. From a customer perspective, Gen Z is a growing demographic, which provides opportunities to develop range adjacencies. We have already seen our youth apparel range, which has benefited from a much shorter design to shelf lead time, apparel operating model. This range is bringing young consumers to Kmart, and we continue to build out this range to meet Gen Z's changing tastes. And Gen Z would be the fastest-growing segment when you look at it through the different customer segments within our consumer groups. The most important customer segment remains young families, of course. And for those of you that have young kids, you know why. There are so many things that you just need to buy when you have a young family. But what we are seeing is our ability to play in every section of the community. And the more, of course, that we can bring in Gen Z now then, of course, those customers will stay with us as they start to mature and have families of their own. Turning to Slide 47. In 2023, we announced our one business, 2 brands operating model. One business means leveraging the scale benefits of common systems and processes across Kmart and Target, enabling a lower cost structure. Two brands means retaining unique and differentiated propositions between Kmart and Target to access a larger addressable market than each brand could address on its own. So we leverage similarities between the 2 brands, and there are similarities, of course. The first is the families are the core of both businesses. We do everyday items at high volume because scale, of course, is critical to both brands. We direct source the majority of our range, and we will operate one range across both businesses across all stores. So one range for Kmart, one range for Target. Critically important, though, is to retain the differentiated offer of the destination categories of apparel and soft home for Target. For Target, the anchor we are looking to establish in customer's minds is elevated quality, which leverages the brand's strong heritage and delivers products at half or 1/3 of the price of specialty competitors. The strategy for apparel and soft home remains unchanged. And the operating model changes enable us to give an enhanced focus to continue to improve these offers while supplementing the customer offer through the introduction of Anko in general merchandise. Importantly, Target enables Kmart Group to participate in higher price points in apparel and soft home, where Kmart does not and should not play. So going back to that point where customers know the prices in Kmart are affordable, that puts a natural threshold on where the top of those prices should be. Target gives us the ability to play in higher price points. And therefore, we can go after a bigger share of wallet than we could do with one brand alone. Turn to Slide 48. We already compete against the world's retailers in Australia and New Zealand, but only point our supply chain to those 2 countries. When you think about the globe's population, that's 30 million people out of a population of many, many more than that when you look around the world. So over the last 18 months or so, we have begun to investigate taking our Anko product and operating model to global markets. We had some key questions we tried to answer. The first one, will anchor products resonate with consumers in other markets? Can we deliver attractive margins for both Kmart and our partners? Can we move products sufficiently to consumers across the globe? Whilst we continue to learn at pace, we now know that the answer to these questions is yes. Our understanding of retail, our great product ranges, our data capabilities, and the scale of our manufacturing base are allowing us to create new partnership, both with retailers and brand owners. As an example of this, our new partnership with Mattel in wooden toys is one where Kmart is responsible for the product development and manufacturing. And then we leverage Mattel's Fisher-Price brand and world-class distribution network. Later this month, this product collaboration will launch across 1,000 Walmart stores in the U.S. with Canada and Central America to follow. We are also launching a small trial, I'll emphasize that it's small with Carrefour in France in the pet accessories category. And that's both in stores and online. That offer is now live online and will be live in stores over the course of the next 2 or 3 weeks. We are also exploring potential partnerships in Asia to open a trial of small format stores. Therefore, our global approach looks to leverage existing retail brand partnerships in developed markets, which already have dense retail networks and seek to develop a store network over time with partners in developing markets. We will retain our focus on developing profitable businesses, keeping capital and operating costs low whilst these business models are in their infancy and will only invest more materially when we have a clear line of sight to acceptable returns. In the near term, cost and revenues will be immaterial to group numbers. And in terms of reporting, global revenue is reported in total Kmart Group revenue but not in headline or comp sales. Turning now to Slide 49. The strategic priorities for Kmart remain consistent. This strategic agenda has allowed Kmart to maintain and grow its competitive advantage of low-price leadership especially in the face of growing competition. Historically, when customers have discovered value, they do not go back. Why pay more for everyday items when there are so many other demands on their income? We see this period as a great time to grow customer numbers, but more importantly, expand the number of categories our existing customers participate in. Anko is the driver of future growth for Kmart Group. Our model is unique and difficult to replicate. There is a significant opportunity to continue to grow both Kmart and Target with the adoption of our one business, 2 brands operating model. And finally, before I go to questions, I would, of course, love to thank the Kmart and Target teams for all the hard work that they do. I know our customers really appreciate it. Thank you for your time this afternoon, and I'll hand over to Sarah.

Okay. Good afternoon, everyone. I'm Sarah Hunter, the Managing Director of Officeworks. Starting on Slide 51. Officeworks purpose to help make bigger things happen. And our vision to inspire Australians to work, learn, create and connect remain consistent as do our 5 strategic priorities, which provide the road map for delivering sustainable long-term growth. Turning to Slide 52. Officeworks is delivering profitable growth by meeting the needs of a broad customer base, which includes personal shoppers like students, families, hobbyists and flexible workers and business customers like micro, small, mid-, and large-sized businesses as schools, early learning centers and government. Families remain at the heart of Officeworks customer base, relying on Officeworks for solutions that help their households operate day-to-day, whether it's setting up a gaming/study area, buying a present for a birthday party, printing wedding invitations, helping the grandparents with their laptop upgrade or back-to-school suppliers. Officeworks also has a well-established presence in the B2B market, where we've built out our capabilities over the last few years and expanded into new customer groups. We see more opportunities to accelerate growth in our B2B business, particularly as we begin to win more large businesses, schools, and government tenders. Turning to Slide 53. We continue to see digitization accelerate for our customers due to the need for productivity, flexibility and efficiency coupled with the accelerating adoption of AI and Gen AI. For the last 30 years, Officeworks has always evolved its range and offer to meet the changing needs of customers. And we see the acceleration of digitization as a key opportunity and driver of growth for our business in the years ahead. Turning to Slide 54. As a leading retailer of technology, with 59% of our sales coming from a tech business, we are uniquely positioned to help our customers digitize. In addition, changing customer preferences continue to provide us with opportunities to expand into new and emerging categories. We will be expanding our range to include additional premium laptops and PCs launched with Next-Gen AI capability. We anticipate the significant hardware innovation will lead our customers to consider upgrading to the latest generation of devices. And we expect when upgrading their device that our customers will look for new and improved accessories to match such as headphones and wearables. We also continue to expand our digital display range as our business customers look for multipurpose solutions for their offices and workspaces, including monitors, digital screens, and televisions for displaying a wide range of content. In addition to growing our existing technology ranges, we're also exploring opportunities to expand into adjacent products and services. For example, we are a significant retailer of [ Outright mobile ] handsets, and we're exploring ways to complete the solution with a telco plan. And given the current economic conditions, our customers are looking for more -- for a broad variety of payment options to help them manage their finances. We need to have options to assist our customers with the cost of purchasing devices. And in the coming weeks, we'll be launching a partnership with Latitude Financial, enabling Latitude customers to finally shop at Officeworks. Additionally, through our device trading service in partnership with Moorup, we're accelerating opportunities for customers to trade in their old or used devices for an Officeworks gift card, providing additional value and allowing them to trade up their technology to a new product. Turning to Slide 55. Officeworks remains focused on delivering profitable growth through growing market share across all categories. In stationery, education, and art, we continue to increase share with strong availability in the products that we are known for. And through the expansion of our private label brands such as Studymate, J.Burrows, Keji and Born. Private label brands now represent nearly 60% of our units sold in these categories. We're continuing to expand our private label Born range in art and craft, which we've built last 5 years. Now the #1 art supplier in the market, there are over 1,100 SKUs in range. Customers recognize and respect the brand. And year-to-date, unit sales of Born are up 8%. We have new ranges coming that will enable our customers to access the latest high-quality art and crafts at affordable prices. Our furniture business is also predominantly private label. And we're now expanding our brands into premium products, starting with the addition of premium sit-stand and gaming desks. Exclusive brands also play a critical role. And a great case study is what we've done in A4 paper. In this sector, at an industry level, volumes are declining 5% per year. However, the inclusion of the exclusive range of reflex paper, coupled with great private label availability, sees Officeworks growing at more than 6%. Our private label and exclusive brand strategies help us to ensure we can continue to provide great priced, high-quality products for customers and differentiate Officeworks from our competitors. Turning to Slide 56. We continue to leverage our omnichannel capabilities for our B2B customers as a competitive advantage over pure online or store-only retailers. Our business and education customers can shop for their office and school suppliers how they want, whether in-store, online or over the phone and with our best-in-class delivery proposition, click and collect and our 30-day account offer. We intend to accelerate the growth we've experienced in recent years by investing in a new digital experience and platform for our B2B customers, scaling our education offer by expanding our range into textbooks and digital resources through our partnership with Box of Books, growing our early learning center customer base and broadening our parent pay model to more schools and geographies across Australia. Expanding our B2B range to access new customers and sectors and in doing so, seeing more opportunities to grow, particularly as we begin to win large business and government tenders. And from the 1st of July, just around the corner, same-day print will launch, enabling our B2B customers to order products such as flyers, banners, and business cards online, picking them up in store on the same day. You can see on the photo a large Konica Minolta machine up there on the slide. There are 45 stores across Australia now with these machines operational, enabling us to deliver this unique service to our customers. This new offer will enable over 17 million Australians or nearly 65% of the population access to same-day printing for these items. I'm also excited that our new business loyalty program, Officeworks for Business will soon be here. Launching in FY '25, Officeworks for Business will incorporate our new B2B digital experience with a range of benefits for our loyal customers. Our B2B offer continues to resonate with both existing and new customers with continued strong sales growth. And notably, over the last year, a 60% increase in the number of businesses spending -- or in the number of businesses who spend more than $250,000 per year with us and a 40% increase in sales from existing customers who spent over $250,000 per year with us. So more businesses spending more with us more often. Turning to Slide 57. Our accessible store locations, easy online experience and market-leading fulfillment options continue to support an easy and engaging experience for both our personal and business customers. For our stores, we continue to invest in customer-facing team member service to allow our team members to provide advice to our customers when making considered purchases, whether a new desk, a new laptop, or a new business card. Online, there remain many more opportunities to leverage our investment data to help improve conversion rates and improve the experience. For example, we're progressively launching improved search and guided buying capabilities to help customers find, compare, select, and assess the products and services they need. For loyalty and value, we now have 5.2 million known and marketable customers. And this number is growing. And we know these customers who are marketable benefit from personalized experiences and in turn, spend more than double a nonmarketable customer. We also use our customer understanding to improve our marketing effectiveness and improve the marketing effectiveness of our supplier partners. And as we are able to market to even more customers, and we better integrate into the Wesfarmers data ecosystem, we expect the benefits and value of loyalty and personalization will only grow. For example, we have a number of Officeworks loyal customers who have become OnePass subscribers and are now getting great value across all the Wesfarmers brands. And pleasingly, OnePass is also bringing new customers into Officeworks, particularly, as Nicole mentioned, through key trade periods like Cyber Week and back-to-school. Our partnership with Flybuys continues to strongly resonate with value-conscious shoppers, allowing them to get even more back from every dollar they spend with us, both online and in-store, particularly during back-to-school. Our fulfillment options are market-leading due to our convenient and accessible store locations with 2-hour click and collect, 2-hour delivery, same-day delivery and our next-day delivery available to around 80% of Australian households and businesses. Turning to Slide 58. Our 4 customer missions, work, learn, create, and connect, are underpinned by the credentials that our customers know and trust us for. Our low prices, widest range, and best experience. Our everyday low prices are supported by our price beat guarantee, meaning we won't be beaten on price. We continue to invest in lowest prices across the range to ensure we can provide trusted value, both online and in-store. Every day, twice a day, we review thousands of prices to validate that we are providing the best value in the market. And we continue to create even more value for our customers through member benefits and loyalty rewards through OnePass and Flybuys. Our widest range supports our customers to have access to great quality products at various price points, offering choice and value. And we know that when we are delivering the best every channel experience, whether it be online, in-store, through our B2B team or our delivery partners, our customers will shop with us more often and spend more. Turning to Slide 59. We remain focused on driving productivity and efficiency across Officeworks. We are realizing the benefits from our recent investments in supply chain. For example, our Victorian import distribution center and customer fulfillment center and our recently launched Perth CFC are all delivering in line with their business cases. This has allowed us to increase efficiency while continuing to support our same-day and next-day delivery offer for customers. In our stores, we've made investments to drive efficiency and improve the customer experience. And significant improvements have also been made in the way we plan and roster our workforce. We believe there are further opportunities to digitize and automate processes to drive efficiency and to increase team member time for customer service. And we've made pleasing progress with our demand planning and replenishment transformation program with the pilot phase commencing in FY -- later in FY '25. When complete, we will have an end-to-end view of inventory across our operations, enabling improved availability, lower working capital and freeing up team member time for service in stores. Turning to Slide 60. We have an integrated approach to sustainability, which includes building stakeholder trust by embedding people and the planet into our decision-making. This is underpinned by our people and planet 2025 commitments. We have a relentless focus on keeping our team members safe, healthy, and well and have made continued improvements in TRIFR. We've reduced our absolute Scope 1 and 2 emissions by more than 40% since 2018, meeting our target early. And we expect to meet our 100% renewable electricity target in 2025 driven in a large part by installing solar PV systems across our network. We continue to grow our people and planet product range, a range of products that have sustainability attributes such as being recycled materials or products that are recyclable at end of life. Turning to Slide 61. In summary, Officeworks remains focused on meeting the changing needs of customers as digitization is transforming the way our personal and business customers work, learn, create, and connect. We are evolving to meet their needs across all categories and channels, broadening our technology offer to include the latest products and services, accelerating growth in B2B and leveraging our data and loyalty programs to deliver a leading omnichannel customer experience. We will continue to expand our store network by 2 to 3 net new stores per annum to provide more customers with the ability to experience our products, seek advice from our team and to give customers the immediacy that stores provide. We continue to progress broader efficiency and productivity initiatives that will deliver financial benefits across stores, supply chain and support center. Officeworks is well positioned to leverage our established position of low prices, widest range, and best experience across every channel to deliver the products and services customers need to run their households and their businesses. The team and I are confident that Officeworks will continue to deliver strong returns for shareholders over the long term. Thank you. And I'd like to invite Ian and Mike back up to the stage so we can answer any questions that you might have.

It's Ben here from Jarden. And maybe just 2 questions. Maybe first one to you Sarah -- just you're obviously doing more in the electronics side of things, the plans you're obviously doing more in TV or NAV at the moment as well. You probably got a bit of a disadvantage versus, say, [indiscernible] like in a sense that you've got office written in your name. How do you expand and teach the consumer? You get the younger people are looking for the gaming. You commit to [indiscernible] when you go and buy TV. And how much of a focus is that for you?

It's a great question, Ben. So when we did a piece of work about 4 years ago, 5 -- 4 or 5 years ago, around our brand, one of the specific things we knew when we were putting together our strategy was that we were going to go broader in tech and into different adjacencies, including things like art and craft, as I mentioned before. And so as well as trying to build our B2B business. So one of the specific questions we tested for when we were doing our branding work was actually whether the term office in Officeworks held us back. And all the evidence tells us it doesn't. We've successfully expanded into a number of adjacent categories. We've obviously grown our technology business. In FY '19, it was 52% of sales. It's now 59% of sales. We don't see our brand holding us back. In fact, it's quite the opposite. When you talk to customers, when you hear their perception of Officeworks and we look at our brand health and where we're first choice, there's huge strength in the brand. We're one of the most reputable retailers in the country. We've got one of the most recognized brands. We see it actually as a massive opportunity.

So I know you're obviously big in tech, I think probably the third biggest for PCs nationally. Do you -- are you sort of on the journey? Or is this to start, a bigger push into TVs. Likely you're now talking about mobile plans. You've obviously got Apple ventures in your stores. Like is this the start or is this just progressing?

We've had a strategy in place for over 4 years now to really move towards premiumization and technology and expand our range and really refine it. And so for us, this is not new news, but it is great to be able to share a bit more of the story with you today.

And just second for you, Ian. I think it's the first time in a long time we haven't seen the cartoon on the front of the store with the 1061.

I'm glad somebody remembers it. So thank you.

I like it. It's nice color. But it seems you sort of moved outside of the house or the store now with the business. Anko, I know you're not here to give guidance, but it's probably on track to be what, $8.5 billion, $9 billion brand for this year. What does the future look like in terms of how do we think about it conceptually because it must be much higher margin. But as you deal with Walmart and Carrefour and these players, is that dilutive? Or does it just feed the machine that it should be accretive? And could it be a $20 billion the next 5 years?

I mean I'd love it to be that. I think the first thing is we're looking to create a long-term model. Let me start again. Maybe over the medium to long term, we're looking for a model that generates equivalent EBIT returns that we deliver today. So that's our ambition. But of course, when you're at the start of the journey, you've got to set up costs, which are going to dilute that to some degree. When you look at the impact on the P&L over this year and over next year, it's, as I called out, completely immaterial because we're keeping the operating cost of the business really low. So what you'll see us do is you'll see us grow revenue and you'll see us grow our cost base. And there will be an expansion of margins over time as we fragment that cost base with incremental revenue. But at the end, the run rate position we intend to get to is an EBIT margin very close to what we deliver today. When you say, how big can this business be? That's something we're trying to figure out if I'm really honest. That's why we've got some different models in market. As you can tell, we're starting to get some traction and some progress but there's a long way to go before this becomes a multibillion-dollar business. But clearly, that's our ambition.

Mike, this is toward you. David Errington, BofA. I think now that we're through COVID, we've gone through the COVID bit. We've done 2.5 years from Bunnings of -- you've consolidated, I suppose, is a good way of putting it. Sales and earnings have been relatively flattish. So this question I'm asking is with an optimism glass half-full rather than as a glass half-empty criticism. When you look at like your sales density, sales per square meter, you look at your online penetration, you probably look at when I listened to Ian on the Anko direct sourcing model, I mean, geez, that's a powerful model that he's created with Anko where direct sourcing is very low. So these are opportunities, I think. And you mentioned today look to space intensity, but you only talked about 50 small stores, I gather. I'm trying to figure out in the next 3 to 5 years, how big a prize can you go after by narrowing the gap in sales per square meter because you've about 2/3 of that of what the global leader is. Online sales is less than 2%, whereas the lead is 15%. And you're on -- your direct sourcing is, what, 15%, 20% when you look at someone like Ian, he's up around 100%. You look at the way Anko going, it just is really powerful. So is that a realistic target that we can map for you that you could probably do this for Bunnings? Because at the moment, the last 2.5 years has been pretty modest. And Anko's, I'd hate to say it, Kmart has got stronger growth prospects than Bunnings at the minute. And soon, Ian will be #1 presenter rather than you. What can you do to get this thing really back on its -- to be the #1?

A little bit of...

Well, I didn't like his thing where he had Richmond and Carlton at the AFL. I didn't know where Colin was there, but we won't touch that.

Colin we won't feature in my presentation. Look, they're all really exciting opportunities. And I think bringing it right back, our go-to-market position is fundamentally different say, for example, to Ian's. We are very open and proud house brands, and we think we can really drive value. And certainly, the brands are responding very well to that because we are providing a really meaningful channel to market for those brands. A lot of those brands are exclusive. You won't find them on our international competitor at least when they're playing in the online space in Australia. We've got brands coming to us, enjoying the opportunity to work with an organization that wants to work with brands. Many others going down the private label strategy for all the right reasons, particularly if you listen to what Ian is doing with Anko. The way I think about global sourcing now is it's an enormous opportunity for us. So we don't want to take our foot off the accelerator of innovation and brand enhancement for what we're doing. Well, we are going closer and closer to source on a huge array of our globally sourced products. That gives us an opportunity to create incredible value for consumers. But we're also very mindful of the product assortment that we have. There are many of our products that are quite technical, quite specialized. And there's real value in working with agents and partners to bring those products to market. So I'll give you an example is the Spa bath. We're bringing Spa bath direct to market from a factory, but we bring with that all the risk, compliance risk that's associated with that. So we're very mindful of that. We're very mindful of the position we occupy in the community from a trust point of view. We think about space, we look at it more on our gross margin return on space -- or through a gross margin return on space lens. If I think about Home Depot, and I think that's the example you're using. You have to sort of bear in mind they've got a really, really large extended range. And I talked to that growing from sort of 34,000 to close to 300,000 SKUs in -- we've got another 100 that will come online over the next 12 months through our marketplace, for example. Those external sales don't point to the existing space at Home Depot, which creates a slightly distorted view of sales per square meter at a store level, but they are stronger there. So I don't get away from that. If I think about the last few years, our gross margin return on space has improved by about 5%. So we are using space differently, and we were definitely inhibited by not having an omnichannel offer because we advertise our products, we had to have those products in store. So we went wide even in a small store. So the Bunnings network goes from 2,000 square meters or thereabouts at Yamana in Central Coast to 20,000 square meters at Alexandria. Optimizing that small source -- small store space is the very first step in a lot more to come. So what can we do in Alexandria? All of a sudden, we can now have instead of 40,000 SKUs, 60,000 SKUs. We can showcase that for the consumer. We can do that across our large stores. We've got dozens and dozens of stores in rural and regional Australia. That's an exciting opportunity for us. And understanding space better means we can now start to optimize or minimize categories to give space to other things. So if you think back, automotive was in a Bunnings warehouse in 1994 when we opened in Sunshine. It came out for a period of time as we prioritize that space to other categories. Now that we use space better, we can bring that back without sacrificing anything else. So I think across those different elements that you touched on, there is lots more to do. There is a lot more upside. And net space will grow by about 10% on top of that. So new stores, expanded stores, replacement stores are opening into a much -- Northland Preston, which we both know quite well, 6,000 square meters bigger, let's us showcase a much stronger. So they are all upside opportunities for us. And at the risk of sounding defensive, and it's definitely not, when you look at Bunnings versus our global peers on growth, we're literally the only large format home improvement reach on the world that didn't go backwards post-COVID. So I think what we've been able to do is continue to demonstrate strong growth credentials as well as now demonstrating operating leverage through the P&L, which you sort of saw at the half if you back out properly because of the sort of cost investments we've been making and we'll keep making to drive that to line growth.

So optimistic for the next 5 years.

Optimistic, yes. We're a very growth mindset.

Shaun Cousins, UBS. A question for you, Ian. Maybe just a little bit about how you're seeing the performance of your business across different customer cohorts in that I think in the past, you've sort of said 1/3 each sort of low, middle, high-income earners. And maybe one of the areas you sort of focus on trying to get customers to shop more categories. In terms of in the past, there's been a focus by consumers really on mission shopping for one item or one category and not playing there. Maybe just sort of how many categories does your average customer shop with, and what's that come from? I'm just curious around how we can sort of get a benchmark around how you're getting the customer to shop more with the shop, please?

Yes. So first of all, talking about the category, the segments between like high, middle, and low income. We're seeing growth in all 3 groups. Not surprisingly, the growth is biggest in the middle and the high income as they've got greater capacity to divert more of their share of wallet. If you look at it from a percentage of share of wallet, of course, it's biggest in the low income, and it's smaller as you go up as I'm sure you'd understand. So all 3 groups are very important to us. So that idea of 1/3, 1/3, 1/3 is a pretty good way of thinking about it. If you look at it from where we're getting our growth from, we're getting it from more customers. So I think we're doing a very good job bringing customers into our business. And clearly, the increase in the population is helping us with that as well as finding those few people still out there who don't shop with us normally, which there's not many, but we're still managing to get those to convert as well. So that really helps. So we've got more customers than we've ever had before. Frequency is the next driver. And when you look at what we're seeing with our customer base, they're coming in more often, which means they're choosing us for more shopping missions than they were previously. And what we -- we look at things like value and frequently when we look at our customer groups. And if you look at that -- to that high-value, high-frequency group, the number of people that qualify in that definition is growing. And so that's evidence that we're seeing more people get across more categories and shop more frequently because they're shopping more categories. To give you a sense of the -- if I give you some very rough numbers, these are not like to the cent or to the percent. But roughly, customers are going to shop half our categories. An average customer is going to shop around 20%. And a new customer is going to shop less than 5%. So you can get a sense that our ability to migrate people up that ladder gives us real potential. So we're seeing this is a wonderful time for us to collect new customers. And then, of course, our mission over time is to leverage the data tools, the customer information, OnePass and other tools to ensure that we can then start stretching their spend into new categories so that we can get an expanded share of a wallet over time.

Great. And my second question, Mike, can you just talk a bit about toolkit depot in that conscious around the online effort that you've played, the role that Bunnings is playing there for store collection and the like there. But you had indicated some time ago that there was an ambition maybe to get to 75 stores in the sort of medium to longer term. Does that still play -- is that still an ambition? And then just what are you seeing in broader the competitive dynamics in the tool space and that there's a lot of stores being opened by Sydney Tools and Total Tools as well, please?

Yes, it's a great question. Look, what really has surprised us is the engagement online and in markets where we haven't got -- or no physical presence like here in New South Wales or Queensland, we've got just the one store. So continue to sort of optimize the model. It's a little bit more work through for us in private label through the accessory space. And we'll continue to optimize the network as those opportunities present. But one of the things that we were really clear on very early in the journey was Toolkit Depot standalone and not sort of trying to integrate some of the big corporate pieces into what's a very different operating model, reflective of the industry in which we're playing. Now we've established that we are able to sort of integrate PowerPass. So you can now use your PowerPass card at TKD is emitting customers straight away, able to engage in store, online with TKD. We've been able to leverage the marketing power and the marketing spend of Bunnings. If you're searching for products, we don't sell at Bunnings but we do sell at Toolkit Depot in the Bunnings website, it will now take you to the Toolkit Depot website. It's a really big step. And that online piece is actually really giving us a significant opportunity to engage thousands of new customers in those markets. So it may well be over the next 12 to 18 months, we actually rethink that even more and the ability to be pretty capital-light. We have got a lot of stores, we've got a lot of reach is allowing us to be incredibly competitive on brands like Milwaukee, are bringing incredible value to the trade customer base. So it's an exciting time for that team. It is a really small business, as Rob said earlier today. So it gets plenty of attention because it's an important customer. This is a white-hot market in terms of competition, and we're really enjoying the fact that we're bringing some new value into that space.

And you're not in breach of -- I think one of the -- the whole purpose of the Adelaide Tools acquisition you could get -- if I go to Bunnings and then I kick through to TKD that...

You won't find a Milwaukee product on the Bunnings website. You won't find a Milwaukee box in a Bunnings store. Yes, we're completely compliant with all of that and a great relationship with TKD as well.

Tom Kierath from Barrenjoey. Sarah, a couple of questions for you. AI-enabled laptops sounds really cool. Firstly, when do you start selling them? Second, do you think it leads to a replacement cycle in laptops that we all bought start of COVID? And thirdly, what are the benefits of them? I asked my IT guy at work. He couldn't explain one, but how we're all going to be smarter because of this technology?

So very soon, months, not very many months is the answer. And I'm really conscious that, obviously, I can't breach the very important relationships I have with my very big suppliers who are very important to us. And we have very strong trusted relationships with them, so we can get visibility of what's coming down the pipe. So I'm very respectful of that, and it's important to secure the right products and the right availability for our customers. So very soon, Tom. In terms of do I think it will trigger a generational shift, the answer is yes. Over what time frame? I don't know. But I do know that if you believe the -- our suppliers, they will tell you globally, they expect this to be quite a transformation in terms of hardware over the coming year or 2 as the adoption of AI and Gen, specifically Gen AI-enabled hardware really starts to gain momentum. In terms of how do you use it, it depends on how you use your laptop. So I expect Microsoft through Copilot will be very focused on productivity and how that drives businesses, in our case, small businesses, large businesses, in the case of the people in this room, whether your company adopts Copilot or not. In the case of other types of devices that we sell, so for example, premium gaming laptops, it's really in that create, in that interaction space and connection and feeling really connected into a game and how that interaction works. More broadly than that, if you've got a small business who's a content creator, it will be through how you use your device to create content and run your small business. So it's very dependent on your mission and what your purpose is. And it's pretty exciting.

Good. Nice. And I've got a really quick one for Ian. The global deals you do with Walmart, Carrefour, et cetera, are they exclusive in the U.S.? Like can you go to other retailers? Or can you sell the same product to other retailers? Are you kind of hamstrung there? And yes.

So if I go back to the Walmart example, that's actually with Fisher-Price and Mattel, which is a deal we've done with Mattel globally. So they've got exclusive rights to those products to leverage through their global distribution, and Walmart is the first up. But it's wooden toys to give you a sense of how small a [indiscernible] that is, still a meaningful amount of orders when you consider the size of that brand across the globe. But if you consider what we have left to sell, it's a lot. When we're dealing with other retailers, we're really trying to not get into an exclusivity arrangement mainly because we inevitably we're going to start at a modest size and want to grow over time. And until we get to a certain scale, I think giving away exclusivity is premature. So the work we're doing with our other customers is not on an exclusive basis. However, our preference is to work with a small number of very large players as opposed to a large number of small players.

So Bryan Raymond, JPMorgan. I realize there's no quantitative trading updates today, but just wanting to check if there's been much in the way of change to the momentum that you guys reported in February. I think it was strong in Kmart, circa 2% in Bunnings and flat in Officeworks. Would that broadly consistent over the intervening couple of months?