Edited Transcript of PIK.J earnings conference call or presentation 12-May-20 7:30am GMT

Thomson Reuters StreetEvents

Full Year 2020 Pick N Pay Stores Ltd Earnings Presentation

Kensington Jun 2, 2020 (Thomson StreetEvents) -- Edited Transcript of Pick N Pay Stores Ltd earnings conference call or presentation Tuesday, May 12, 2020 at 7:30:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Gareth Mark Ackerman

Pick n Pay Stores Limited - Non-Executive Chairman

* Lerena Olivier

Pick n Pay Stores Limited - CFO & Executive Director

* Richard William Peter Brasher

Pick n Pay Stores Limited - CEO & Executive Director

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Presentation

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Gareth Mark Ackerman, Pick n Pay Stores Limited - Non-Executive Chairman [1]

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Good morning. Welcome to the Pick n Pay Annual Results Announcement. We're speaking to you from our auditorium in Cape Town, where we have an empty auditorium, and we're really delighted that all of you could join us this morning.

These are extraordinary circumstances to be presenting our results. I'm sorry that you're not with us. But you'll understand why we are presenting them this way. We're also apologizing that our results are being published slightly later than usual. This was due to having to additional JSE requirements in the wake of the coronavirus pandemic. We don't know when this pandemic will end, but we can be sure it will leave us all profoundly changed. We all know about the damage to people's lives and the economy that this has caused us over the past couple of months, but we all have a responsibility to remain positive and to look to positive change, where possible.

I'm incredibly proud at how our company has stepped up to the crisis. One of our core values, business efficiency, has never been more important. I mean the pressure on the team has been immense. From the earliest days of the crisis, we've had to accelerate all our work to stay safe, stay working, stay open and stay fully stocked. Our core value of consumer sovereignty, putting our customers first, has been at the forefront of everything we have done during this crisis and will remain so. We have stepped forward when it counted, and so many at Pick n Pay have done truly heroic work on the front lines of a national emergency.

I'd like to thank the Pick n Pay Boxer and our Africa teams for the magnificent response. Our IT team has delivered faultlessly in responding to substantial additional demands, and our supply chain team has worked tirelessly to keep our stores full. The store teams have labored under punishing pressure and deserve both praise and thanks, the Consumer Goods Council of South Africa has also done important work in representing the consumer goods industry, and we thank them for the role that they are playing.

And lastly, thank you to our customers. You have trusted us to serve you safely, and we have done so for over 50 years.

Just turning to food security for a moment our vital role in society is to keep the nation fed. Our Pick n Pay and Boxer stores play a major role as distributors of social grants and are a critical and highly efficient network. We trust government adequately appreciates the role retailers play in ensuring food security in South Africa. True to our value of doing good is good business, our Feed the Nation program has done incredible work alongside a large number of NGOs to feed some of the most vulnerable in our country. In doing this, we have benefited from wonderful generosity from farmers, suppliers and customers.

We are also a distribution and delivery vehicle for the Solidarity Fund and are also instituting a virtual voucher system. The Feed the Nation campaign has raised nearly ZAR 33 million from customers, partners and benefactors. This has helped us to deliver over 6 million meals to date, which we think is an extraordinary result.

I've talked about the importance of food security for many years and it's taken this crisis for the debate to become mainstream. We are learning good lessons every day about what is produced at home and abroad, where the vulnerabilities are and how they can be overcome in the short and long term. We must not forget these lessons when this crisis is over. We must use them to plan for the future.

Reducing food waste is one simple and powerful way to improve food security. I'm sure the crisis has made many of us more conscious of waste and more determined to use and reuse rather than throw away. I'm encouraged by the progress we are making in our supply chain. I'm also grateful to our major suppliers who have joined us in the 10x20x30 food waste initiative to achieve a 50% reduction in food waste by 2030 that we are rolling out. Unfortunately, it's a bit delayed due to the fact that we can't meet.

An important focus of this country has been around competition issues. And it's important to focus not only on the immediate crisis but on how we can play a positive role after the crisis. As the President has made clear, we must take every opportunity to nurture new businesses and hasten the pace of transformation; the Acumen, Pick n Pay and other foundations do brilliant work on this. We must now find ways to do even more.

In its recent report, the Competition Commission expressed concern that exclusive leases might discourage small and specialty retailers from opening in shopping centers. This is not our experience. We want to see thriving centers where innovative and diverse businesses excite customers and raise the bar for everyone.

To end any doubt, I'm happy to announce today that Pick n Pay will not seek to enforce any exclusivity agreement against a small or specialty retailer in any center in which we operate. We have had an excellent dialogue with the Competition Commission and will seek to finalize a commitment with them. I hope that after the current crisis abates, government and competition authorities give due priority to stimulating healthy competition in South Africa. This will enable us to create jobs and transform the economy in a way that will desperately be needed.

If I turn to the Pick n Pay dividend for a moment, the coronavirus pandemic is a massive shock to the economy, just when we thought that the economy had hit rock bottom earlier this year. We must take the right decisions now to safeguard our future, individually, in our institutions and as a nation. This is why after much deliberation, we have taken a very difficult decision to defer our annual dividend.

In normal circumstances, on the back of these results, the group would recommend a final dividend in line with our dividend cover of 1.3x headlined earnings per share. However, given the current economic upheaval and the great uncertainty about events in the coming months, the Board has taken a prudent and responsible decision to preserve cash at this time.

We understand that many shareholders rely on their dividends to supplement their incomes. Please be assured that we will review the situation just as soon as we have greater clarity later in the year. Lerena will say more about this in a moment.

If we look at the road ahead for us all, it's been 10 years since I became the Chairman of Pick n Pay. We have made enormous changes to the company. We're a very different company today than we were 10 years ago and a much stronger one. By becoming stronger, we are better able to weather the storm. Our values have remained strong, and they mean even in the middle of the storm that we'll help our customers and communities first.

Last year has been enormously challenging -- has been an enormously challenging economic environment. And COVID-19 is a once-in-a-lifetime event and a defining moment for our country. I recognize the challenges facing the government at the moment. It has the extremely difficult task of taking steps to limit spread of the virus while trying to ensure that these actions do not destroy jobs and create greater hardship. My plea is that in charging the way forward, the government gives due emphasis to the impact on the economy, on livelihoods, on companies that provide jobs and on the tax revenue, which funds the work of government.

Within our business, our people have demonstrated true commitment, and execution has been phenomenal and extraordinary pressure. We have learned better than ever how to work as a team. At the fore of our response to this crisis has been our CEO, Richard Brasher, and his executive team. He and they deserve enormous credit for the leadership, especially during this crisis. Richard has earned huge respect both internally and externally and deservedly so.

Thank you to everybody. And I'd now like to call on our CFO, Lerena Olivier. Thank you.

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Lerena Olivier, Pick n Pay Stores Limited - CFO & Executive Director [2]

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Thank you, Gareth. Good morning, everybody. I'm very proud to stand before you today in these extraordinary circumstances to present our FY '20 financial result. It's been a very challenging and unprecedented time that we are currently experiencing in South Africa, the rest of Africa and the world at large. This adds to the already trying time that we have experienced in the past year in this country. And furthermore, today, we are presenting the most technical result we have ever presented as a group. We have attempted, in this presentation, to cut through the technicalities and focus on our underlying performance to give you a clear view of where we are as a company. We have included in the technical appendix detail on various technical items as well as restatement tables in our summarized results. These pertain to hyperinflation in Zimbabwe, as we have explained in the first half of this year; a full retrospective application of IFRS 16 leases; data and airtime that we now record on an agency basis, and that has impacted the comparability of our turnover analysis; and the fact that we have got a 53rd week in our base result.

Furthermore, this result is also presented against the backdrop of COVID-19. For the group, COVID-19 is a nonadjusting, post-balance sheet event. This result is effectively presented on a pre-COVID basis as the first case in South Africa incurred post our result announcement. We will take the time to take you through the impact on our business and further clarity of our responses in COVID-19, but for the purposes of this result announcement, COVID-19 itself did not have a material impact on us as a group.

Our South African operations has delivered in a challenging economy. Strength at our South African core has enabled us to deliver sustained earnings and margin improvement in a very constrained economic climate. Sustained execution of our long-term plan has delivered greater relevance in our customer offer, sustained gross margin improvement, increased cost discipline and consistent return from our investment program. This has delivered an increase in our South African comparable PBT of 15.2%.

Challenges in the rest of Africa, specifically in Zambia and Zimbabwe, has put pressure on this result and have removed 8.7% of earnings growth. The group's tax rate has also increased up to 31.2%.

Later in the presentation, I'll take you through the technicalities as to why that has increased. However, that has removed 7.1% of earnings growth. And as a result, our comparable headline earnings per share for the year of ZAR 2.79 is in line with that of a 52-week basis.

Our turnover growth for the period was 4.7%, against a strong base. We have delivered a 2-year CAGR of 6%, ahead of the South African retail market growth. The strong base, alongside specific challenges in load-shedding specifically in our last quarter as well as supply chain labor disruption over our Christmas trading period has resulted in a challenging second half. We responded with greater operating efficiency, and this has mitigated these challenges as well as the cost inflation that all companies in South Africa has experienced. Notwithstanding these, our South African comparable PB still delivered double-digit growth, mitigating the pressures in the rest of South Africa. Including the rest of Africa, our comparable group PBT is up 6.5% to a net margin of 2.1%. This presents a margin improvement of 0.1% for the year.

Our South African turnover is up 5.1%, with a like-for-like increase at 1.9%. Sales growth in South Africa for our second half was recorded at 3.8%, reflecting the challenges I have previously articulated. As a result, we have volume retraction for the full year of 1.1%. Net new stores added 3.2% of turnover growth, with strong turnover in both our Boxer and clothing estates. We have opened 116 new stores, consistently on focusing on improving the overall profitability of our estate. Our stores, on average, is now 25% smaller than they were a number of years ago.

Lower prices and greater value for our customers remains at our core. We have again restricted selling price inflation to 2.6%, well below CPI food of 3.6% for the period. This has been made possible by our better buying program, range optimizations specifically across our core and value store segments, less waste across the business, supply chain efficiencies across both Pick n Pay and Boxer as well as strong cost discipline, specifically in the second half. This consistent execution of the group strategy has driven sustainable improvements in gross profit margin, notwithstanding the impact of supply chain disruption over the Christmas period.

Pick n Pay centralization journey is now at 80%. The focus is to increase efficiency. We're doing that through optimization of our infrastructure and greater clarity on our store segmentation across core value and select as well as the ranges that serves each of these stores has assisted us in that process.

The Boxer centralization is now up to 45%. Boxer has 3 dry good DCs as well as 2 outsourced frozen DCs, with 1 coming in the new year. Their focus is to accelerate the centralization of supply and further optimizing the model through economies of scale and ensuring that they harness and increase distribution allowances.

Our other trading income is up 6.5%. Franchise fees, excluding the impact of moving our data and airtime sales from an inventory to an agency basis, is up 3.6% on a comparable basis. Operating lease income is up close on 25%, supported by an increase in kiosk [screen tools] as we offer more services to customers across our estate. The large bucket of commissions and other income of ZAR 1 billion includes rebates that is not directly related to the sale of inventory. These are items such as the fresh living advertising we receive as well as monies received for data analytics support to suppliers. It also includes our value-added services, which is up 14.2% for the year.

The improvement in this area for our customers has delivered low-cost banking options through our partnership with TymeBank, money withdrawals and deposits at our tills in South Africa, domestic and international money transfers as well as insurance policies for our customers through our partnership with Hollard.

As I've mentioned, it has been critical for us to focus on cost control. Trading expenses growth of 6.3% for the year, like-for-like on a 4.0 basis, has illustrated great cost discipline. This has restricted the growth in trading expenses in the second half to 2.9%. Our employee costs were very well controlled, up 3.7% for the year. If once-off incentive reversals of ZAR 100 million is excluded, that increase is still at 5.3%. This is great progress on our increase in H1 employee costs of 12.5%. Notwithstanding this control, we have still delivered strengthened management structures, structure around our new store segmentation of core value and select stores specifically under the Pick n Pay banner. We've also delivered a 3-year wage agreement for our store labor.

Occupancy costs is up 9.5%. This has been driven by regulatory increases in rates, increases in insurance costs as a result of a hardened insurance market, notwithstanding our improved claims history of the group during the year. This has also been impacted by the increases in security costs for the group.

Our operations cost is up 10.8%. Efficiency and lower consumption of energy, water and utilities has mitigated the increase in this classification. However, the significant impact of load shedding has still resulted in a double-digit increase in our operation expenses. Our IFRS 16-related depreciation and interest costs is up 3.4%, reflecting the stability of our large lease portfolio.

As I have mentioned, trading in the rest of Africa has been tough. However, we are proud of the fact that this division remains profitable. Our segmental revenue of ZAR 4.7 billion is up 2.8% in constant currency terms. The division delivered a segmental profit of ZAR 90 million, excluding the impact of hyperinflation in Zimbabwe. That is a decline of 57.3% year-on-year. The decline is largely as a result of the challenges we've experienced in Zambia and Zimbabwe. TM has been plagued by hyperinflation and liquidity pressures in country and Zambia by currency weakness, the onslaught of a drought and therefore power supply disruptions. We are still proud of this division, and they have our full support. They now constitute 154 stores across the rest of Africa continents.

Notwithstanding the currency and liquidity challenges in Zimbabwe, our business, TM Supermarkets, remains resilient. Our associating country has delivered a strong trading performance with sustained market share growth, notwithstanding the negative volumes they are experiencing in country. Our equity investment is now at ZAR 50.4 million, reflecting the hyperinflation-related impairment of ZAR 174 million during the year. This impairment is excluded for headline earnings per share purposes. And amounts receivable is now at ZAR 40 million, with more than ZAR 90 million received during the year as liquidity becomes available in country. We are operating in 59 supermarkets in Zimbabwe, with 24 now trading under the Pick n Pay banner.

We have delivered sustained margin improvement in both EBIT and EBITDA on a group level, supported by improvements in our SA operations. Group EBITDA at ZAR 6.1 billion is up 7.2% year-on-year. That represents an improvement in margin of 0.2 percentage points, up to 6.8%. The South African EBITDA, up to ZAR 5.9 billion, has increased by 8.4%, with margin improvement of 0.3 percentage points.

Our net interest is up 2.5%. This includes our implied IFRS 16 lease's interest. And the increase is reflective of the stability of our lease portfolio. Our net funding interest, however, is up 26% or ZAR 24 million year-on-year, reflecting higher inventory levels and as a result higher borrowings, specifically in the second half of the year.

We have experienced earnings pressure from an increase in our effective tax rate. This is similar to what you would have seen in the reporting of some of our retail peers. Our group tax rate has increased from 24.3% to 31.2%. This is largely as a result of two reasons. Firstly, we have experienced a significant reduction in the share option obligations we have in terms of our share option scheme. This is a result of the pessimistic outlook of global and local equity markets that has resulted in lower share prices year-on-year. As a result, we have had a reduction in the share option obligations, and IFRS has required us to reverse the related deferred tax assets. This has increased the tax rate by 4.2%.

Secondly, the pressures in the rest of Africa, with currency weakness and hyperinflation, has pushed up the tax rate by a further 3.3%. The tax rate, we believe, will remain volatile as long as these circumstances persist. And for the foreseeable future, we see a tax rate of approximately 30%.

How is this reflected in our earnings per shares number? Our reported earnings per share reflects the impairment as a result of hyperinflation in Zimbabwe of ZAR 174 million. And as a result, that has declined by 11.7% for the year. Reported headline earnings per share exclude this impairment and all other capital items, and that has increased by 2.6% year-on-year. This does, however, include the noncash net monetary gain in Zimbabwe of ZAR 43.2 million. And as per our half year, we believe it more prudent to present a comparable headline earnings per share that excludes the impact of these net monetary gains. And as a result, we have delivered headline earnings per share of ZAR 2.79 on a 52-week basis, in line with last year.

As Gareth has indicated, under normal circumstances, the Board would declare a dividend of 1.3x our headline earnings per share. Due to the onset of the COVID-19 crisis, the Board has decided to preserve cash at this time and do not propose a formal declaration of a dividend. This will be reconsidered, and we will report back at our October results meeting if sufficient progress has been made and clarity has been found in terms of the impact of COVID-19 on our business. We would have declared a dividend of ZAR 1.73 per share, bringing the full year dividend up to ZAR 2.1586 at a cover of 1.3x headline earnings per share.

The group remains cash generative. Our strong free cash flow is supported by our strong cost and investment discipline. Cash generated from operations was ZAR 3.9 billion for the period. The inflow in working capital of ZAR 200 million was benefited from working capital cutoffs. Operational challenges and higher inventory balances in the second half has increased the group's net funding position and as a result, its funding costs.

The higher level of inventory was driven by an increase in our estate, higher levels of centralization in our Boxer chain as well as strategic investment of buy-in inventory at year-end to capture prices in order for us to ensure we can give the best price to customers.

Inventory focus and working capital optimization remains critical for us as a group, and we believe we can do better. We have invested ZAR 1.7 billion of CapEx during the year, and as a result generated ZAR 1.8 billion worth of free cash flow that has funded a dividend payment to shareholders of ZAR 1.1 billion.

We have spent ZAR 1.7 billion on our investment program during the period compared to ZAR 1.4 billion last year. ZAR 1.4 billion in the current year is focused on customer-facing initiatives. We have opened 160 new stores, including 12 Boxer supermarkets and 8 Pick n Pay supermarkets and 32 clothing stores across our estate. Our CapEx remain focused on improving our trading densities and our returns on investment.

Our balance sheet remains strong. We have no structured debt and access to high levels of liquidity. Our year-end funding position of ZAR 1 billion was supported by unutilized facilities of ZAR 6 billion. The group's prudent approach to balance sheet management has stood us in very good stead during the onslaught of the COVID-19 crisis. We have constructively engaged with our funding providers, and we are confident that we have sufficient liquidity in order to ensure that we pay our suppliers, our service providers and our staff during this trying period. In order to preserve cash, we have drawn down at 65% of our borrowing facilities as additional liquidity assurance.

In summary, our resilient South African operations has delivered in a tough climate. Our consistent sales performance over the last 2 years has given us the opportunity to deliver sustainable gross profit margin improvement. We have experienced challenges, specifically in the second half of the year, including load shedding, supply chain labor disruption and playing off a very strong base. We have responded with greater operating efficiency and cost control to mitigate these challenges. Challenges in the rest of the Africa remains with us, but the division remains profitable, and we have a solid plan for the future.

Our firm OpEx and CapEx discipline has delivered sustainable, increasing investment returns for our shareholders. Our conservative debt and liquidity management, supported through our balance sheet strength, has put us in a strong position to weather the COVID-19 storm. We have a strong team, one that I'm very proud to be a part of, and we have strong plans to steer us through these tough times ahead.

I will now hand over to Richard to take you through the operational elements of our results as well as the impact of COVID-19 on our business. Thank you.

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Richard William Peter Brasher, Pick n Pay Stores Limited - CEO & Executive Director [3]

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Right. Good morning, ladies and gentlemen. Thanks, Lerena. Thanks, Gareth. This is properly weird as have been the last few months. So we're presenting to an empty auditorium that I believe that we've got the biggest audience we've ever had, either because you've switched off DSTv or you couldn't find another channel or you're all sat down with the family, having in-home education on both the company, Pick n Pay, the market in South Africa and the impacts of COVID-19.

But I would remind you that this result is actually pre-COVID. We actually finished our result in February. Feels like a lifetime ago, but it was at the end of February. So all of this is pre-COVID. But what we're going to attempt to do now is to give you a presentation, which not only updates the sort of the excellent presentation that Lerena has given on our results. Because I've never felt at any time in my career that we're standing up giving the result which you're less interested in because it's in the past, and you're more interested in what happens next, which in fairness, probably, everybody in the world is at the moment.

And as Lerena said, I don't think there's been a year in the last 35 years of being a shopkeeper that each year we say, crikey, that was tough. But it was quite tough. And it's tested us. It's improved us. You've seen in this presentation of our results, we've still got the delights of sort of IFRS 16, IFRS 15, hyperinflation, currency devaluation. And I've learned more things about deferred taxation on share-based payments plans and its possible impact on HEPS. But when you look all through that, all of that, you still see a very solid business, a solid company and one that actually, in our core South African business, delivered a 15% increase in PBT. So I think of that, we can be very proud.

We've got a new thing called post-COVID balance sheet adjustments. So we had to contend with that whilst we were doing this. We're obviously doing our results and our audit process during a lockdown. And therefore, that's required special work by the finance team of our company and indeed our auditors, but I'm pleased that we've come through that very well. And the result is -- has been audited fully.

And unusually, we're going to try and talk about things other than the result. Normally, I'd just say this is the result, and we're going to go and do it again. And if it's good, you clap, and if it's not you boo, and then you mark our card and we move on to questions. This time, I mean, it is truly unprecedented. I mean we always comment on this, but never in the history of most people that are alive have any of us faced into the kind of personal and professional challenges we're now making.

The whole world has changed in the short space of 3 months. And the reality is, is that we find ourselves in the enviable position, I know, of being an essential service provider, and we adopt that responsibility and we embrace it. And we are proud of the role that we're playing, and I'm proud of the team that is playing it. Stress doesn't just happen for customers, it happens for staff, it happens with suppliers, it happens for politicians. And I think there's a fair degree of stress in the environment at the moment, and we will have to work together to ensure that we still deliver efficiently and effectively.

I'm going to very -- be very light on the performance because I think you've had a very thorough presentation on that. I want to talk a little bit about the actions that we've taken since the announcement of the crisis, the situation that the President told us that we were in a stated disaster, quickly followed by a lockdown and therefore just update you on the hard work.

I was reminded that lockdown was only 6.5 weeks ago, 6.5 weeks ago. It was only on the 5th of March that we had the first case in the country. So a hell of a lot of water seems to have flowed under a bridge in a very fast period of time, and we'll do our best just to give you some insights in that, hopefully, without boring you. Because I know all of you out there, whichever country you're in, live on the diet of COVID-19 updates, either from companies, presidents, kings, queens and prime ministers.

So without further ado, let's get into our performance. I think it was a solid performance. I don't think it was startling. I think that some of you will say, "Could have done better, should have done better, might have done different." But actually, when I look at it over a compound, either of 2 years, 3 years, 5 years or 7 years, I feel that we are still on track. I think our still -- plan is still in place. And I would like to start by just thanking everybody in the group: our suppliers, our customers, our franchise, my Chairman, Gareth, who's a continual support, and to my Board, who I think have been performing exceptionally well, and I'll talk more of that later.

So a good, solid result delivered despite the challenges. And the impact in Africa, I think, have been well commented on, but we did make a profit in Africa. And I would say that, that is a remarkable achievement by Dallas Langman and his colleagues. And they've thrown everything at us, and we're still there. We're still committed to Africa. We'll still stay in Africa. Slow and steady wins us race. We never bet the farm. But the reality is there will be opportunity. The sun will rise, and we will still have a business better, simpler and cheaper coming out of this crisis than we had going into it.

I think the South African results at 15.2% and 6.5% is creditable, and you've seen the sort of cascading effect on our headline earnings per share. They are -- it is indeed flat year-on-year with mitigating circumstances, but the underlying performance of the business, I think, is still robust.

But there'd be many things in the year to celebrate. We reorganized our business around demographics. And I have to say it's gone extremely well. I think that Adrian Naude and his divisional heads have done a great job, despite all the other changes that we've been facing into.

Core value and select. I have to say, it's remarkable how clear it is when you go into a crisis that the crisis affects everybody. It doesn't discriminate, race, creed or color, but people behave differently, partly because of their income, partly because of their attitude, and it becomes quite abundantly clear when you look at the different divisions and the different regions in the country, how, and we'll share a little bit of that with you

We've stayed competitive on pricing. You've seen our inflation is 2.6%. So we've kept that under control. We've managed to pull off a trick, which is quite hard to do, by reducing our range but still being seen as #1 for range by customers in the TNS spotlight survey.

I think our fresh food business now is transformed compared to when I first turned up in 2013, and it's a credit to all of the people who are involved in that across all the areas. And I think that we should recognize the remarkable industry we have in agriculture in this country. And that's particularly clear when we look at the last few weeks in terms of keeping us supplied with protein and fresh fruit and vegetables and added value lines. We redesigned 5,000 own brand products. We're now at 22%. So again, that journey over 7 years has taken us from not very far to quite a long way, and it's a real part of the landscape now. And I think in the years ahead, it can -- still has the opportunity to grow.

Smart Shopper has been around now for more years than I have. It's been around -- I think it was probably 8 or 9 years. And it's actually had one of its best years yet. We've risen to a challenge of competition. It's another player in town. But actually, it's still being voted the most -- the best loyalty scheme. The participation in terms of sales has gone up, not down. We've used it to give people greater discounts at a time of need in a difficult economy that's in recession, and we delivered that, especially to some of our cardholders, through smart price promotions. Personalized vouchers are good for suppliers, good for customers and good for business. So we can target things more directly, and the growth rate in those personalized vouchers is up 50%.

TymeBank, which was launched last year, does give double points when the purchase is in our shops and also single points when they purchase elsewhere with their card. And that's been a remarkable success, 1.2 million members. And I believe it's now up over 1.5 million. And again, Smart Shopper points can be earned at BP garages and also can now be spent at BP garages.

It's also been a big year for innovation. And I think if you want my honest opinion, I think this year is going to be an even bigger year for innovation. Necessity is the mother of all, as they say.

In added value services, we're up 14%. This is an area that was modest in our business many years ago. Now it's a material part of what we do. I've mentioned TymeBank. We're the first retailer in South Africa to offer deposits at till points with FNB, Investec and Discovery. We've got a partnership with Hollard. We've done money transfer for 4.6 million domestic and cross-border transfers. And our online business pre-COVID was still up 17%, showing the continued progress that we're making in that channel.

We were busy expanding our business as well as you heard from Lerena. We've got 1,925 stores, 774 franchise. And you can see that of the 160 stores we opened, 80 were corporate; 77 franchise and 3 were in Zimbabwe. So in spite of the challenges in Zimbabwe, we've internalized the investments that have been created through the performance of that company to continue to expand, hoping for a better tomorrow. We've closed 30 underperforming stores as our continued drive to make sure we update our estate and continued renewal across the country.

It was a particularly strong year for franchise, and I do want to mention them separated out from the rest of the result. Our franchise colleagues are among the most innovative people I know. And in the face of the crisis, and I'll mention it a bit earlier -- later, is that they, because they've got skin in the game, because it is their business, their ability to react and respond to customer requirements is truly inspirational. And we as a corporate business benefit from that level of creativity and in turn they benefit from our scale and our efficiency and our systems and processes.

We opened our first compact Hyper, an old store that had seen better days, and we've reinvented it into being a much better store for customers. Think of a huge hyper and then think of one that's been squeezed. It's kept all the good bits, and it's doing very well, and that's an exciting prospect for some of our very large supermarkets around the country.

And then slightly, ironically, a very strong performance in clothing and liquor, just until they shut, but they will return, and they will return with force, and we will be better coming out than we were going in. We just would have liked to have missed that bit in the middle when we were shut. Liquor clearly isn't open, and I'm not going to get embroiled in that discussion. But I think that at some point it will still be legal and it will still be available and drunk in moderation. It is part of social life around the world.

Boxer. I can't thank the Boxer team, the whole of the team, enough. When things got tough, they got pressed on even harder, opening more stores, converting Pick n Pay stores into Boxer stores, which has been a new advent in some of the areas where we felt that their offer was better placed for the consumer than the Pick n Pay model. We opened 12 supermarkets, 15 liquor stores. A significant growth in their own brands. You know it's a limited range discount store, but it's a really modern business.

If you wanted a case study in transformation, this is one to have a good look at. And it's down to people like Eugene Stoop. It's down to people like [Merrick], our new managing director there. We've converted almost all our Boxers. Now 87% of them are now looking in the new-generation format. And then when we open our new depot in Polokwane, hopefully, God willing, later this year, that would allow us to continue -- we'll be able to refit the balance of the estate.

Africa, we've talked about quite a lot. I think it's always -- you would always push a team to be better and work harder, be more creative. But it's a very difficult thing to cope when an economy collapses as it has done in Zimbabwe. Hyperinflation is a reality. And just the added intensity to change prices, to adjust, to get hold of stock and be available, I think, is going to be one of the biggest achievements I've seen in the time I've been in Africa. And it may not be reflected in rand or dollar or euro or pound, but the fact that they actually provide a service to the people in Zimbabwe, I think, is remarkable, absolutely remarkable. And hopefully, they will see better times. And then in fairness, they've also gotten now to deal with corona -- COVID-19. And as I say, we're profitable. We're staying. We will get better. And I think out of this challenge and crisis will come a stronger and better business.

Okay. So on to what happened. As recently as January, this was a disease from a faraway place. Whichever part of the world that you were in, the majority people weren't in Wuhan. And those of you who go back to 2003 would remember SARS. SARS was something that was in faraway place. And if you were in London, Ebola was a thing from a faraway place. And it stayed far away, by and large, and it didn't go everywhere. And MERS and avian flu, they have been all of these things. So it's not unsurprising in case when people say, "Oh, yes, well, there's a new one. It's called COVID-19. They go, oh, that's in a faraway place."

So in all of our lives, we've never seen the spread and the speed and the scale of pandemic that is clearly amongst us. And we've now been locked down for 6.5 weeks. And in that time, we've been very busy.

So at the risk of boring you, I'm just doing this in fairness of doing it as much for my team so that I acknowledge them in public as it much, you would say, I already know this. But I think just bear with me for a few moments as I run through it.

5th of March, first case; 15th of March, state of disaster; 27th of March, level 5 lockdown. So this happened very quickly, and there was no rule book, and there was no sort of business recovery disaster plan and all of that good stuff that we talk about. It just happened. So we committed that we'd stay open, stay safe, stay full, stay working, and that's what we've done.

In the worst of times, you end up finding out the best of people. I think the performance of my team in the last 8 weeks is nothing short of remarkable. I don't know where they've been hiding that game for the last few years, but they found it. So it shows that every dog has its day. So as long as we can keep up the pace, and as long as we can actually respond to the ever-changing requirements of either legislation or the impact of this disease on society, I think that we will come out of this in a better way. As I said, the franchise stores have done a remarkable job. And I think that they've shown customer service and attention to detail with their customers, as I say, is a lesson for us all.

We're clear on our responsibility. We don't have to write long sentences anymore about we've got to look after everybody all the time, and it would be really nice and great world citizens. No, we have to feed the nation. That's our job. And everyone has really embraced that and I think are becoming better human beings in the process, even if they're slightly tired.

What we have done altogether is learn a lot more about hygiene, and that will protect society in years to come. Forget whether it's COVID-19. There's plenty of other diseases that are transmitted because of poor sanitation. We put face masks into all of our stores. We have -- I have a -- my face mask there as well, but I'm socially distanced from everybody. So we're also fine. And this has been swabbed down. So I'm very, very safe, very careful. And I think people have adopted that and getting very clear on it.

We've perspex screens in our stores. We've got a very clear, effective protocol about people feeling ill. We are temperature testing our staff, we're screening everybody who comes into -- our staff when they come to work, so we find out whether they're feeling okay. And if they're not, we have very clear protocols. And if anybody actually ends up sadly catching this virus, we have very clear protocols about what we do next in terms of sanitation, cleaning areas and contact tracing so that we can make sure that we keep everyone safe.

All of these things, I think, have stood us in good state. Our fan scores in our stores with our customers, our customers are showing a new level of tolerance, to be honest, that I think was lost maybe somewhere in the past of commercialization and privilege. But I think people are now more sensitive also to the people, the people who are serving and the people who are being served.

I think one of the biggest challenges actually in any of these unlocked scenarios, and I now know that people have got into trouble by saying stay alert or coming up with various other names that it's going to be when you lock down and stay at home, go to work, go to work, stay at home, being clear, it's very hard for politicians to come up with something that is so precise and unambiguous as if they've been here before. They haven't.

How do you get 40 people that used to be in a classroom into a classroom that's not there when you can only fit 15 in it with the social distancing requirements? So we are all going to have to join in with this thing. Stop sort of finding someone to blame and start taking a bit of accountability. And as lockdown starts to unlock, people when they socialize and when they go out into public again, very, very quickly forget that they're meant to be further away, further away from each other, not back to normal. And I think that's going to be a big problem for us as individuals, customers coming into our stores and the sensitivity that customers can have about other customers. So it's not just about tolerance of staff, it's about tolerance of each other. Anyway, that's my lecture over.

But we have done a lot in keeping people safe, and I'm really pleased with that. We have stayed open. We've opened all of our stores despite challenges, whether it's to do with transport or any confusions in law enforcements. We've stubbornly stayed open, and we stubbornly got on with our jobs. We do liaise a lot with governments. Funny enough, if I went back 7 years, I don't think I ended up being contacted once by government and probably not -- never invited to actually help or support or have an opinion. I have to say that businesses are being engaged. It's a bit difficult on occasions getting super clarity about what you can and can't sell and when you can and can't do something. But we've abided by the law, and we've acted in the spirit of the direction, even if it wasn't always exactly precise.

We open our stores a bit earlier for people who are a little bit older. We try to make it easier for people to shop if they're health care workers. And we will continue to innovate and find ways in which we can support people. And I would really pay tribute to the whole supply chain in keeping the lorries going, the products being packed, the things that have been grown and keeping us full, which was our next challenge. Obviously, keeping stores well stocked.

And I'm going to talk a little bit about some of the behavior that we all displayed when people said, "Whatever you do, don't buy more than you need." Until people said, "I might never be able to buy it again ever, so I'm going to buy as much as I can physically fit in whatever receptacle I've got with me, including filling a garage with toilet tissue."

So anyway, we've been through this experience, and I think that we handled it well. And the good news is, we source over 90% of what we sell is produced and manufactured here. Although there are knock-on ripples, obviously, around the world with suppliers of suppliers of suppliers. And I would say, by and large, the government and the officials have been helpful in making sure that we stay open and we stay full.

We did introduce quantity limits, and many of those have now been relaxed as people have calmed down and got into a better rhythm. But obviously, there are still some areas which are quite light. We've all become home bakers by the look of it. And judging by my ability to get into my suit, which I haven't worn for a while, it's been well received by the recipients. But actually, shortages on flour and yeast and various other things, which, to be honest, we're the best in the world, we could probably anticipate it now, but the whole supply chain has been struggling to catch up.

And then, finally, stay working. We have set up our offices to be able to operate in this system. And we've changed a lot about the way in which we operate, a lot about the way in which we work.

All of us are sort of fixated by Zoom or other versions of the same thing. Some of us sort of still get up and shave in the morning and try and look presentable. Some people look like they've been taken hostage and held in the cellar for a couple of weeks. But anyway, either which way, their own way, they're getting on and doing the job. And we, as you've heard, have been very active. Some people would say conservative, but I think conservative is a good word with a small C at the moment. I think we've been conservative in terms of making sure we're financially robust. We have no debt, and we tended to keep it that way. And our liquidity is important so that we can make sure that we pay staff, we pay suppliers and we keep everything going. And as Lerena said, we revisit that on a regular basis.

Okay. I think I'm getting the hurry up. As I say, the worst of times can bring out the best. And you've heard from Gareth and Lerena, Suzanne Ackerman, who's been running our Feed the Nation campaign. I mean what it's shown is that the huge generosity of spirit, one by the business, secondly, by people within the business who donated part of their salary to it, and to customers who come into our stores and add a little bit knowing onto their [to] receipt, knowing that Pick n Pay will make sure all of that gets to where it's meant to get to.

We're privileged to be working with a Solidarity Fund as well. We're doing a great job, and we have ability to actually reach people because of our network.

Well, one thing I would say and this is me probably on the soap box again, so apologies. You might have switched off by now. When we're getting cross and we do, I can't walk here or I can't do that or I'm not allowed to swim in that or I can't jump up and down on that or I'm being disadvantaged, I'm being disadvantaged, just spare a thought for the people who go to bed hungry. And that is a big reality and an even bigger reality now. I've been shocked, to be honest, when I go through and I look at the reality when all of these informal trades suddenly are stopped. Whatever people's misgivings about either giving money to people who take your rubbish away or giving money to -- it is an economy which enables them to actually eat. So hunger in this country is actually a proper problem. In our small way, and there's others who do even more, we've managed to -- I think we've had sort of 2 million people we've been able to feed.

And it seemed an unusually small amount of money, but ZAR 21 makes a difference. It can actually provide a meal for a child for a whole week at the feeding programs that we used to do through the schools because the schools are shut. So the next time either you wander into your garage and you look at your surfboard and say I must be able to get on that or I look at my bike and say I must be able to ride up that hill. I just -- I encourage my son not to be so -- because it's tough for young people. They're meant to be out having a laugh, having parties, but actually, it's a lot tougher for some people than it is for us.

I just want a quick thank you to the IT team. I mean we have always had a plan to actually try and do remote working. We've had it -- I think it's probably -- I think probably Raymond started it 53 years ago that maybe it was a good idea. But bloody hell, necessity, the mother of all invention, 1,850 people working from home in 3 weeks, I think that's remarkable. And I would also remind them that we did it on almost no budget, no overtime and no complaint, which was also remarkable, too.

And we've created something remarkable in this business that we work with called BOTTLES, which BOTTLES was meant to be, if you wanted a bottle and you needed it urgently within an hour, they'll deliver it to your door from our liquor store. Now clearly, that business wasn't a good business model when we shut all liquor stores. And they managed to actually produce an online on-demand app to do grocery shopping, and they did that in 4 days on almost no money. Whereas before, it would have taken at least a year and ZAR 100 million, and that's just for starting.

Franchise stores introduced things like drive-thru before anyone ever had even thought about it. Sort of how the hell would you do that? That can't work. It mustn't happen and the reality is it did. So I think a combination of all of those, and I'm also proud that the Board approved an appreciation bonus to our staff at the front line in our stores.

Okay. On to some tougher stuff. The current trading. I put -- oops, that's not current trading. That's current trading. A long time ago, far away, we thought the problem about coronavirus was going to simply be, we might not get the heaters from China in our delivery or we might not a get few pairs of underpants because that's where the clothing comes from. And then how -- wow, that changed pretty quick. So you can see that spike. You can see that surge, which was the lockdown or announcement of a lockdown. So pre-lockdown, but after the announcement, affluent parts of the country started collecting things, toilet tissue, tinned meat. Some of them have not eaten tinned meat in 20 years, but it was obviously a human instinct that when you're going to go into this sort of wintery weather, you need -- and a storm, you need to have tinned meat. So there was a huge sucking sound as the stores were empty. We actually did open the day after and the day after, and we've been open every day since. But it is like a human instinct.

What you can then see is we're now in stage 3, and stage 3, obviously, there was a drop-down because people couldn't actually buy any more. They couldn't fit any more meat in the freezer. They couldn't get any more toilet tissue in the loft, and therefore, it came back down. And now you're seeing it steady. Now -- but the reason that there's a gap between where it went in and where it came out is because actually a number of those areas are still closed, and we know which they are, so we don't need to labor them. But in our business, it was somewhere around about 20%, and now it's probably somewhere nearer 15%.

So that is the shape of the lockdown. People have got relatively strong food businesses and associated products and fresh foods, but obviously, all of the other discretionary stuff is either closed or people's behavior's changed, and they feel that it's not essential to them at the moment.

So if you wanted to look at what people thought was essential going into a lockdown, there's obviously some very sensible things in there long-life milk, sort of an absolute sort of fanaticism about spaghetti given the volume of spaghetti that went into the market, bleach to keep -- because diluted bleach was a -- is an inexpensive form of sanitizer, rice, sweetcorn, oh and vodka. Yes, obviously people in a lockdown thought that might be an essential item, too. And of course, you can never be without a toilet roll.

And I'm sure if you did actually run out of toll roll, it would have been a problem, but most of the running out was the problem of the people having more than they actually needed. But I'm glad to say that we are in stock of toilet tissue in our stores if you get short.

It's changed slightly the shape of the way it happens, so you actually see now that because the days do slightly blur into each other in a lockdown period, the weekends have slightly less relevance because you can't go out then. You can't go out in the week unless, of course, you go to work. But then, of course, you're working from home quite often, so all of those things changed the way they shop. And I think also, psychologically, people feel that it's actually going to be quieter to go when it used to be quiet, i.e. sort of Monday, Tuesday. So people then went there on Monday and Tuesday.

But anyway, I think it's finding a new cadence now, and I think that the queuing systems are in place and people are patient, and they've got the time to be patient. And I think it's better to be safe than it is to be in a hurry and put yourself at risk.

We've also seen that people choose fewer shops. They're not wandering around sort of trying to find all the different bargains in all the different shops. They shop less often and they shop big. And again, of course, it's logical and sensible, but I'm just confirming that you obviously are logical and sensible people.

This is just a little bit of fun. Obviously, being at home is a rare, rate treat. Being at home with the entirety of your family is an even rarer treat. Being there for 6.5 weeks, that's quite special, I think. So paint brushes and paints have gone up a lot. Had of a lot of cooking going on. It's 94% on cake flour, but I think it could have been 9,974 on cake flour because we've all become bakers. As a friend of mine in America quoted in his results that, "We're entering into the hair color phase of the lockdown." And I don't know which color you'd like to be, but we've got full stock of hair colorants if you don't really like the one you've already got.

So that's been interesting. And obviously, sadly with hospitality restaurants and, for a period of time, takeaways being shut. We're all learning new skills in terms of cuisine. Seems to involve a lot of curry interestingly. That's obviously a very comforting thing, obviously not just for people who -- that's more their diet than not, but for those of who aren't particularly able in that front, we've been raiding the spice cupboards on a regular basis.

I've sort of done this one. Our grocery home shopping has increased. We've increased our capacity by 5x in the last 8 weeks, and you can see that this is the BOTTLES app that we've launched. It's actually available now in 90 stores. It's 200% increase in active transactions. The overall is difficult to tell after such a short period of time, but the growth has been exponential, and it's hard for people to get a traditional slot. But the BOTTLES app allows people to buy smaller quantities delivered quicker from the store local to you, and we're very excited about that. And I think that this will be a catalyst for change within the online sector, and we feel like we're well placed to benefit from that if indeed it occurs.

Right. Onto a couple of more sobering topics, the impact on margin. I think that there's sometimes a feeling that because we are an essential service and because we're open that everything that we sell is available, and it's not. We're doing very well for customers on groceries and our fresh foods and our perishable business, but the truth is, is that our liquor, tobacco and, recently opened, our clothing business and general -- half of general merchandise was all off limits. So those things traditionally, not so much the tobacco, but the rest of it would be margin accretive. These are -- account for 20% of our revenues, and therefore, that does have an impact on the economics of our business.

I think also that just general reduction of overall consumer ability to spend is also a feature here. No one actually got wealthier during this crisis, and more people sadly are unemployed as a consequence of this lockdown. And therefore, it will have an effect even on some of the basics of life.

There's additional costs, whether that's the sanitization, extra hygiene, social distancing measures, changing the way in which we all work. And it's not just retailers. It's everybody, and those who are not open yet will have to go through the same process and also the front-line bonus that we gave for people during the national lockdown.

I'm not going to labor this one because I think it's been made clear. I think we're very prudently geared. We only have overnight monies, short-term money, no long-term debt, and I think we're well placed to survive whatever this crisis throws at us.

One for the technicians. Apart from my slide, if you read it carefully, says I really don't know. But actually, the essence of it is, is that we all have to do scenario plannings, the high road and the low road, and this chart simply indicates this is how severe it was during the lockdown. And then depending on how both the government plays it and in fairness, probably we as a population play it, we're going to take 1 or 2 routes here. Either on our best case, we'll see a relatively controlled outbreak with consequence and sadness even in a controlled one and a timely return to more normal economic activity.

Obviously, the longer outbreak will have a slower transition out of 4 and 5, and -- but it will mean more severe economic contraction. And therefore, when you look at forecasts and you've got them out of the polls, it's not real. It doesn't ever going to happen to -- it's going to be the end of the world. Somewhere between 5% and 9%, and if you pick the middle of that, it's 7%, is the scenarios that we look at in our business at the moment as to what the possible impact could be as an economy contraction as a consequence.

Just to give you a bit more, this is more, in fairness, for the analysts out there that we've ever given anyone before. We'd normally be on Q&A now and you saying I wish you would. But the reality is the potential impact on us I've tried to indicate in this simple chart and it's available, which indicates that, obviously, on food, nonalcoholic beverages, we believe that we can do a good job for the country, and we can get people fed, and we can support them appropriately.

On alcohol and tobacco, that's above my pay grade, but as and when people tell me things are legal and as long as they're legal, then we will support people who want to buy them.

And clothing and footwear, I think, is a moot point because even if it opened up fully for more than winter clothing, whatever winter clothing actually is, it is unlikely. My experience in other countries and friends around the world is that clothing sales have been traditionally down quite a lot because it's not really the climate in which -- I don't mean temperature, the climate in which you want to go out and buy a lot of new things. One is because where are you going to go out in them and who's going to go with you. So all of those things are going to have an impact on some of these industries, which has less to do with the law saying you can't sell it and more to do with the customer who says I don't actually think I need to buy just at this stage.

So obviously, eating at home, reversal trends of shopping less frequent bigger shops, shifting of interest across categories, private label having a moment in the sun, acceleration of online, people spending a lot of time online probably driving themselves crazy with it and social media, but that is important in terms of how do you communicate with people if no one's buying the newspapers or even the newspapers aren't being printed. And in fairness, you can only watch television for so long before -- certainly with the range of channels that we have without wanting to sort of jump out the window.

So what stayed the same? It's still tough out there. All of the things that it was before is just doubled up, so there we are.

So what do they mean for us? I think we'll have tighter ranges. Manufacturers will produce a tighter range, which, of course, they are because they're having to meet the challenges of COVID. I think we'll have tighter ranges. We need to offer even better value. I think that, that's crucial. I think own label has a big role to play. I think it'll be quite a while before people are going out and eating out as regularly as they might have done in the past, and therefore, we've got a big job to do to help people home dining. There's a whole youth population, haven't got a clue how to eat anything other than the pizza. They can just about get it out of the packet and get it in the oven.

But since cooking skills probably wouldn't go amiss, I think we're going to have smaller formats. I think they're going to be closer to where people live. And I think that people's appetite to visit large places with large congregations of people will be muted for a while. And I think online will have and added value services will be key.

I think we're going to see smaller different offices, more flexible ways of working. I think technology, even for old people like me, has become an important part of my life. I think we need a simpler, more robust supply chain, which I think will come with tighter ranges, and I think broader use of technology and a stronger presence on social media for companies communicating with consumers is a necessity.

Right. Nearly there. So what's our long-term plan? What's our long-term plan? And the truth is, is that we've always had a long-term plan. We've always written a long-term plan. Back in 2013, I wrote a plan with the team, and I think it's been a successful plan. I think that we've stuck to our knitting. We stuck to our plan, and I think that it's actually been beneficial.

The output of that has been this performance. So this is our performance over 7 years. And I think that we're a materially stronger company than we were. I think we're in better shape to face into this crisis. I think one of the things that I'm most proud of is that we're starting to create more and more internal talent. We don't have to go and take it from somewhere else. We're getting good talent coming through the youth of our company. So I think that we -- no one would ever wish this crisis on anyone as a test of our ability to actually stand up to it, but given it's here, I think it'll be a tremendous test for the people who work in Pick n Pay.

I mean it was interesting as we've grown by ZAR 32 billion. Our PBT started very small, and it still needs to be bigger, but it's 17% compound average growth. Our return on capital employed is up at 40%. Our headlines earnings per share, although flat this year, is up 19% compound over the 7 years. And we have delivered more than ZAR 5 billion in dividends when they're declared. And obviously, we'll do everything we can to ensure that continues outside of the prudence that we've shown today in terms of withholding it for the time being. And we've opened 800 net, 800 net new stores in that time. And I'm proud of what my team have produced, and I think that it's a great achievement. And I think it puts us in a good state for what is yet to come.

So what's yet to come? The good thing about our current plan is it's actually a good one. And the test of a good plan is when you're actually in the [dwang], do you reach for the plan? Or do you change the plan? And the truth is this is a solid plan, and we're going to reach for this plan. We already are, and we're going to go harder and faster. And it's got 6 engines of growth. Obviously, Pick n Pay, most trusted retailer and I think everything that we're doing today is reinforcing that with our customers, whether it's giving things away to people who've got less or facilitating them being generous with small amounts of money that get directly to the people who need it. I think the Boxer has had a remarkable year, and I think is on a good trajectory to become Africa's favorite discounter.

The one that I put on more forcibly last year, the last time I presented to you, was bearing down on costs, which we have been, but I'll just talk a bit more about that. Value-added customer services, we're growing well. We need to grow further. Growth outside of Africa, I suspect that this is a controlled period for us. We won't be looking at a massive expansion until the climate improves and the economics steady. And as I said, on the force for good, when the going gets tough, Pick n Pay steps up and does good because doing good is good business.

So without going into the details of it, but I've put it in your packs, is that we have got a plan. We've produced it end of last year. We launched it in January of this year, which is Project Future. And Project Future is to ensure that we will deliver reductions in the company through reducing waste, increased efficiencies and being more effective in our use of people, which includes people -- resources, includes people but also property and energy. And we need a simpler and more effective organization, a company that needs to be modeling the way it works, including structure, organization of our head office teams, the way in which we meet, decision-making process, and use of information and technology.

All of these, we believe, give us the ability to improve the value in our business to the tune of ZAR 1 billion over 2 years. These actions were put in place pre-COVID-19, and I have to say COVID-19 has only made it even more required as we [face] into the crisis.

I'm not here to judge any company what they do, only what I do and what we do. But I would be surprised in the coming weeks and months that if most companies in the world, let alone within South Africa, will be facing difficult and challenging decisions -- and some of those decisions will be the lesser of two evils. It's the same challenges that politicians are facing. Do you want the low road or the high road? Well, we want both of them. No, no we can only have one of them. Well, there's a consequence in that.

So in fairness, we, as a business, are looking very carefully at the decisions we have to make. We can't be reckless. We can't be thoughtless. We have to show sensitivity, but we also need to make sure that we take those difficult and brave decisions for the long-term benefit of all.

So that's it. I'm -- there's a summary chart, I think, that's on there. But there is something I want to close on that's important to me. And for those of you who'd followed me over 14 results, I do like to go off-piece a bit and rattle around, and today is not the day for humor because this is a serious crisis. But I want to just say something quickly, so forgive me if it appears to be reading something I've written because I am.

So I couldn't be more proud of the company over the last -- well, over the last 7 years. I mean, jeepers, some of them have driven me up the wall, frankly. But they're all well-meaning, all good spirited, and to be honest, I think we've come out of it pretty well.

But I think what's happened in the last few months has been a real revelation. Being given the -- we always knew we weren't just -- we're not just grocers. We're not just shop keepers. We do actually something quite important. It might look very boring to people. We just put stuff on shelves and we open tills. And we hopefully keep the place clean and tidy, and occasionally, we might even smile at you. But the truth is we have found that we are essential, and it's given a lot of people in the business a real sense of something worthwhile. We don't pay people a lot of money to do what they do. The jobs can be quite repetitive. But what's been particularly pleasing is the fact that staying open, staying safe, staying full and staying working has been something that all of us, whether it's the people who push the trolleys in the carpark to the security guard who doesn't just growl at you, now he actually squirts you with sanitizer, there's lots of things that have happened that make this a remarkable business.

I think we can do what we've done because we've built a better business over 7 years. I think we're more relevant. We're more consistent. We're more modern, and we're more reliable, and we're definitely better value. I think we wrote the right plan, and we delivered it year after year. And even when it's been tough, even in the national disaster like -- the likes of which none of us have ever seen, our plan is still robust.

The job I set out to do in 2013, and this was written at a time pre-COVID, I think has been fairly successfully achieved. I think, as always, in retail, there's always more to be done. I've been in retail for 35 years now, and I've done it in 4 continents. But the last 7 years have been quite special. I think because the business is better when I leave it than when I arrived, it feels like a job well done. And I'm pleased with what I've done, and I'm pleased with the way that I've done it. The time has flown by, and I've enjoyed almost every minute of it. Not every minute of it to be honest. This is quite crazy place, but I've enjoyed most of it. And I have a responsibility for me to face my future as well as reflect on the past. And in truth, in a modern world, 7 or 8 years is a long time for any leader in the 21st century to be doing the job. And I do believe that in fast-moving world, institutions and individuals must be ready to refresh and renew themselves, which is why I'm so proud that there's enough talent that's coming through our company.

Now Gareth, my Chairman, has known of my plan for some time, and it was my time now. This was meant to be my last match. So my plan was to step down about this time, enabling the group to begin a new chapter from a stronger position and give me a bit more time for other things. I still have other ideas and thoughts not necessarily as being a grocer but other ideas and thoughts that I still have to do in my life. And I feel that over 35 years of retailing, I've achieved more than I could have imagined and enough to satisfy me that, that's done.

However, and to spend -- sorry, I did write that down and spend more time with my family. They didn't write that. I wrote that. After the last 6.5 weeks, I'm not sure they might want to rewrite that one.

But clearly, this virus has changed everyone's lives, including mine. And I mentioned it today because, obviously, everybody has a limit to their tenure, and therefore, I am delaying that. I believe that in the biggest crisis that I've seen -- and I know I'm not alone in having to change or postpone any personal plans. We've all done that. You've all done that, I'm sure. I think the company, in the way it's run and the way it's set up at the moment and the tens of thousands of colleagues, workers, I think, deserve for me to provide a bit more stability in the leadership going forward and the continuity. And I hope that my experience that I've gained over many years will be of service to the company.

So ironically, at the moment that I thought I was going to have an emotional step down, and I'm not that emotional because actually I'm bloody stepping up. I don't know how that happened. Anyway, I find myself stepping up, but I step up willingly, happily, and actually, I couldn't have gone away anyway because, actually, together with my team, we're rolling up our sleeves. We are going to face the biggest professional and personal challenge along with everyone else in my team. And I suspect you and others around the country and other businesses will also be facing the biggest personal and professional challenge.

I've always enjoyed challenges. I want to be on the pitch to face this one. We're approaching it, I believe, with strength and energy and as well as being there for our customers. We will use the time to make our business fit for a world after coronavirus. So we have to steal ourselves that we've got 3 plans: today, tomorrow and the day after tomorrow. So I'm focusing my time in supporting the teams on today, tomorrow, but also with a [light] to the day after tomorrow.

I think that -- I think despite the uncertainties, I'm certain that we will succeed. I think we can look forward to better days because these are dark days at the moment. And I think the thing that I've said to my team is when we reach those better days, we want to look back with pride. We will remember not just the size of the challenge but how we stepped up, how we gave it our best and how we won through in the end because at its heart, Pick n Pay is a people business. And therefore, together as a team, I'm proud of what we've done, but I'm going to be even prouder of what we do next.

Okay. Slightly weird doing that to an empty room. So sorry if we've overrun our welcome because we've been going 1.5 hours. We're happy to take questions if anyone's still awake. Thank you to my team. Thank you to the Chairman. Thank you to the Board. And I look forward to talking to you next, hopefully in happier times with clearer certainty for us to the future. Thank you very much.

Right. So how does this Q&A work?

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Questions and Answers

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Unidentified Company Representative, [1]

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I have the questions, Richard.

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Richard William Peter Brasher, Pick n Pay Stores Limited - CEO & Executive Director [2]

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All right. Why don't you -- can you do both of us at the same time?

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Unidentified Company Representative, [3]

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Yes.

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Richard William Peter Brasher, Pick n Pay Stores Limited - CEO & Executive Director [4]

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Well, you just flip from camera to camera. Okay. Right.

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Unidentified Company Representative, [5]

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Yes. I have a question from Jeremy Gorven at Stonehage Fleming. What was the rough proportion of gross profit produced by alcohol, tobacco and clothing during FY '20?

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Richard William Peter Brasher, Pick n Pay Stores Limited - CEO & Executive Director [6]

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Well, Mr. Stonehage. What was his -- sorry, didn't catch his name?

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Unidentified Company Representative, [7]

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It is Jeremy Gorven.

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Richard William Peter Brasher, Pick n Pay Stores Limited - CEO & Executive Director [8]

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Jeremy. Jeremy, we don't segmentally report down to categories. But given I commented on -- that they were quite successful categories in terms of clothing, that they were higher than average, but that's not a well-kept secret.

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Unidentified Company Representative, [9]

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I have a question from Jiten Bechoo from Avior. Could you give us an estimation of how much of the gross profit margin improvement was attributable to the dynamic of a lower franchise mix?

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Richard William Peter Brasher, Pick n Pay Stores Limited - CEO & Executive Director [10]

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Well, I'll let Lerena touch on some of that. I don't think from memory that the franchise mix had an impact on margin, and in fairness, I think the franchise margin was marginally up. But one of the biggest changes, obviously, in terms of the gross profit, if that's what he's referring to, were a couple of things which we thought were sustainable, which was the increased level of centralization, especially by Boxer. And the mix effect of the performance not so much in terms of franchise versus corporate but more in terms of accretive areas growing faster than nonaccretive areas.

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Lerena Olivier, Pick n Pay Stores Limited - CFO & Executive Director [11]

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And I think in support of that, the mass effect that we had in the first half is very much now in the base, and the gross profit margin that we do have now is sustainable. And it's there as a result of the increase in the underlying operating model, as Richard has mentioned, specifically from the Boxer supply chain centralization and us improving our underlying profitability of [aging] supply.

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Unidentified Company Representative, [12]

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Another question from Jiten Bechoo from Avior. Could we elaborate on why the H2 '19 effective tax rate was as low as 24%?

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Lerena Olivier, Pick n Pay Stores Limited - CFO & Executive Director [13]

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The tax rate historically was at approximately between 24% and 27%. We have had certain items in our base that wasn't taxable as well as some deductions relating to share-based payments.

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Unidentified Company Representative, [14]

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Question from Rishay Dhanraj at Eskom Pension and Provident Fund. The ZAR 1 billion cost saving over the next years, how are we going to achieve that?

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Richard William Peter Brasher, Pick n Pay Stores Limited - CEO & Executive Director [15]

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Well, it's a combination of things. I did -- there is a list on that page. We can always waste less. We can improve the efficiency of our operation by better ways of working. So if you look at things like supply chain, we can be more efficient in the way we pick stock in our depots. We can be more efficient in the way in which we transport goods. We can be more effective in the use of working capital, so we can have less interest payable. I mean I could go on. The thing about retail is it's not one thing. It's everything. Now to be honest, we want to fish in the ponds where there's bigger fish, so we tend to look at various areas. We can be more efficient and effective in our stores, and that's been led by Adrian. I'd say that we've become far more efficient in recent years in the way in which we manage it.

We deliver things on rolltainers to the back of shops, so we don't have to have people unloading lorries. We can turn lorries around quicker, half your supply chain costs are in transport.

So there's any list of numbers that you can look to. Obviously, you have to control the cost of your offices. You have to control the cost of every piece of our operation. And also, we have to be very selective in terms of what we spend on things that people don't value.

One of the things that's remarkable in a crisis like this, it shows you exactly what people think is essential. I mean I asked the commercial team, after we've been completely emptied along with every other retailer in the country, the night before lockdown, to go and look on the Monday morning or whichever morning it was at what hadn't moved at all because if nobody wanted to buy then, why is anyone ever going to go and buy it. So there's a lot of things. It's a bit like, although the clothing shops were shut for 5 weeks, it was rare that you saw anyone running around without any clothes on because it's not that we haven't got them. It's just we would like a different one or a different one or a different one. And therefore, there's a real scrutiny in the company as to customers only appreciate value, not the cost that you put into giving it to them.

And I think when we've looked at it now, we're finding that, on some areas, we're just putting in far too much cost, and people just don't value it enough. And then when we actually hit the right spot, which we're doing now in terms of our value stores and our core stores and our Boxer business, which actually says, "Just give me what I want at lower prices and better promotions and make sure you've got it in stock when I get there."

So some of this is a little bit back to the future. I think like any way in an economy, as it expands on its consumers and I want another one of these, and I need another counter of this and another piece of that and another of that and I needed more and more range, actually, when it really comes down to simplicity, that actually what they really want is they want better value. And I think that's what Project Future is all about.

So it's not one thing. So it's not like I'm just -- we're just going to take out a whole swath of something. No, this time, we're actually going to go do it and reengineer it.

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Unidentified Company Representative, [16]

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I have a question from Paul Steegers at BofA. Could we elaborate on the supply chain disruption in -- over Christmas? And has this been resolved?

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Richard William Peter Brasher, Pick n Pay Stores Limited - CEO & Executive Director [17]

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Yes. Well, happily, it's been resolved. It happened over that tricky Christmas period. And it happened in one depot, not -- it wasn't across the whole supply chain. It was in one depot, but it happened to be our biggest depot. And Paul would know that, that's happened to our competitors as well, sometimes over a slightly more extended period of time. It was awkward. It was uncomfortable. It was painful. But it is resolved, and everything is working smoothly.

But sadly, it probably cost us in the region of ZAR 250 million of turnover. And probably -- and if I wanted to give a number a lot less than my competitor said, but probably about ZAR 100 million give or take.

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Unidentified Company Representative, [18]

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Peter Cromberge from Mergermarket. The company is in the process of terming out some of its facilities. Can we elaborate on the terms of the longer-term borrowings and the rationale behind this?

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Lerena Olivier, Pick n Pay Stores Limited - CFO & Executive Director [19]

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As I've mentioned, we've been in constructive conversations with all our funding suppliers, and our focus is to turn some of our uncommitted facilities into committed ones. And the time frame we're looking at is maximum 18 months, but mostly, these are done for 12 months or less. The reason for it is simply to sure up our facilities in a marketplace where there is pressure on liquidity.

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Unidentified Company Representative, [20]

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A question from -- a number of questions from Sa'ad Chothia, Nedbank. Are we planning to reduce any CapEx in FY '21 to preserve cash? That's the first one.

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Richard William Peter Brasher, Pick n Pay Stores Limited - CEO & Executive Director [21]

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Look, it's unclear at the moment. I mean we've got a provision to spend money, but obviously, you've just seen that we've been conservative in our use of cash. We've cast the dividend at the moment, and therefore, we're not going to be reckless in terms of using cash to put into capital. It's unclear as to how quickly the economy actually opens up as to whether or not it will be practical to open. We

(technical difficulty)

so it's a tough question. I just knock it off.

So we'll -- most of our capital goes into refurbishing new stores and building new ones, and at the moment, that's not possible. So the answer is, yes, we will be spending less capital. How much less, I don't really know. But we don't -- equally -- we don't want to mortgage our future just by battening down the hatches. I don't think any world leader has stood up and said this is never going to end. They all want to stand up and say it's going to end tomorrow apart from it won't.

So we all know that we're in for a bit of a journey here. But I suspect that if we're back here talking about this in a year's time, we'll all be feeling a lot better about it and a lot different about it. And how -- whether life returns to normal, who knows? But it will be more normal than it currently is, and therefore, we want to make sure that we're in a good position, both in terms of our capital assets and in terms of our underlying business model to make sure that our business comes out of this even faster than it went into it.

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Unidentified Company Representative, [22]

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Could we talk a little bit about our online grocery sales growth during the lockdown period?

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Richard William Peter Brasher, Pick n Pay Stores Limited - CEO & Executive Director [23]

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Any particular category or just generally?

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Unidentified Company Representative, [24]

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Generally.

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Richard William Peter Brasher, Pick n Pay Stores Limited - CEO & Executive Director [25]

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Look, the truth is my experience here and my experience with all of my friends and colleagues around the world is when it's full, it's full. So you've only got so many slots. You've only got so many bands. We managed to increase the size of our order book by fivefold, which I thought was remarkable. But they -- when they're full, they're full. So they're up a lot of percent because they're full.

Now whether they stay full afterwards and whether we did it well enough for anybody who wants to do it again, that's our challenge at the moment. I think that I'm quite excited about the work they're doing on this online app because that's a different model because it utilizes the store rather than it utilizes a depot, and therefore, I think the economics might be quite interesting in that. And it does mean that you can expand the reach of it quite quickly because it's in 90 stores now, but we've obviously got more of that. So it's up a lot of a little if that helps in the analysis.

I mean, look, we're the biggest, but we're the tallest dwarf in the class. So it's not a major feature. In the more affluent suburbs of Johannesburg and maybe Cape Town, then -- that there's a good business there. And I've got a cracking team. I mean they're tireless in their work, so watch this space.

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Unidentified Company Representative, [26]

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We have another question from Rishay Dhanraj from Eskom. How much of the cash and cash equivalents are locked in Zambia and Zimbabwe?

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Lerena Olivier, Pick n Pay Stores Limited - CFO & Executive Director [27]

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So the Zimbabwe numbers was in the slide presentation. They're -- we're exposed to ZAR 40 million of receivables, and we've received ZAR 90 million during the year. And the Zambia business is a limited exposure.

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Unidentified Company Representative, [28]

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Question from a private investor. 7% escalations with rentals, do we think this should be adjusted more in line with inflation?

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Richard William Peter Brasher, Pick n Pay Stores Limited - CEO & Executive Director [29]

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Well, I think with all our partners, whether they're suppliers or whether they're landlords, then we have to engage in sensible conversations. They've got businesses to run. We've got businesses to run. And Izak Joubert, our Property Director, is doing an excellent job. We've deliberately tried not to be overtly hostile in this process because we all have to get along in the end, and it's not like that the property industry is having a picnic. So the truth is we are going to have to look at models that have to be affordable. At the end of the day, if it can't be done affordably, then we'll have to close the shop. So we are very mindful of the fact that in the old days of sort of 6% to 10% inflation, 7% escalations, everything worked just up until it didn't.

So we have regular conversations. And I must say some of our landlords have been extremely helpful in this process, not particularly on the point of escalations because that's a long-running debate. But I'd say that people signing up new leases or extensions are not doing them on the same terms that they had them in the past.

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Unidentified Company Representative, [30]

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Nick Webster from HSBC. Have we seen any change in spending on private label? And have we had any supply constraints there?

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Richard William Peter Brasher, Pick n Pay Stores Limited - CEO & Executive Director [31]

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Yes and yes. We've seen a significant spike in private label. And as a consequence, we've had some supply challenges. I think what we have to do is -- I think, in our business, the first presentation I gave in this room back in 2013 was about private label or confined label or whatever terminologies people use around the world.

And I think that we've now reached a critical mass where actually our products are brands. They're not private brands. They're brand brands, and that's certainly true in the development of Boxer. So our private label business is up year-on-year.

And I think that we need to make sure that whichever partners we have with private label really care about it. It can't be the one that they just produce on a Friday afternoon, and if you run out, then that's tough. We want to produce proper big brands, and I think that that's an exciting adventure for any retailer.

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Unidentified Company Representative, [32]

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Shamil Ismail from Primaresearch. Do we have a target in respect of the VSP? What percentage cut in employees are we targeting?

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Richard William Peter Brasher, Pick n Pay Stores Limited - CEO & Executive Director [33]

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Well, it's difficult to target a voluntary process. And we've offered it to our staff, and a number have taken it up. And that will be -- that's fine. That's voluntary.

What we hope to do over the 2 years of this Project Future is to come up with more effective and efficient ways of actually reducing our costs, and some of that will be to do with people, but a lot of it has to do with process. So I wouldn't be particularly drawn on I've got a secret target, and until I hit it, I won't rest. I've got a target which says that we need to create a business that's fit for the future, and I've just demonstrated slightly emotionally that I'm not resting.

So -- and I'll miss you Shamil running down to this podium to ask me what the like-for-like is yesterday. No, in fact, actually, you asked me what it is tomorrow.

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Unidentified Company Representative, [34]

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Londiwe Buthelezi from Fin24. You've had a few stores temporary closing as staff members test positive for the virus. What would be the impact if this keeps happening?

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Richard William Peter Brasher, Pick n Pay Stores Limited - CEO & Executive Director [35]

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Well, obviously, the -- it's always a challenge, isn't it? When the first case is cited, there's a lot of noise and emotion around it obviously. Sadly, more people will get it. I mean that's inevitable. And the only question mark is how long does it take before all of us in some shape or form have been exposed to this pretty virulent virus.

I think that the stores have become very good at making sure you can actually clean a store very well. I know it seems a bit odd, but you can actually clean it very well on surfaces and the science of it of cleaning it in terms of surfaces that people have either touched or walked on or the like, I think is actually we're getting pretty slick at it. Every time someone tests, we obviously make sure everything is sanitized. We go and look at who they've been with and what-have-you so that we can actually do trace -- track and trace in our business. And clearly, it's disruptive, disruptive for the staff. It's disruptive for customers. But to be honest, that's the price. That's the price of it. What -- no one would want us to say, "Oh, we don't really care this week because we -- because everyone -- because half the people have got it. We decided what the hell. No, we have to keep on working. We keep on trying. We keep on sanitizing, and that way, we minimize it.

And I would just make the point. I think sometimes people suggest -- no, I won't make that point. That wasn't the question.

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Unidentified Company Representative, [36]

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Tumisho Motlanthe from Coronation Fund Managers. On the final dividend for FY '20, has it just been deferred? Or has it actually been canceled?

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Richard William Peter Brasher, Pick n Pay Stores Limited - CEO & Executive Director [37]

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Well, I'm not a lawyer, and I'm not as qualified in accounting as my learned colleague. But there's things that you can say about a dividend. There's things you can't. If you say you're going to definitely deliver one, then you have to issue it. And if you say that you're going to have it under review, you obviously haven't issued it, but we still got the money. And that's roughly where we are. We've created the money. We've published the results.

We've told people exactly what the dividend would have been had we issued it, but we haven't. And I -- we will work tirelessly to ensure that shareholders get different answer to the question when we've established the severity, the impact on the economy, which in fairness, none of us can know. I mean maybe you'll ask the President about that one rather than me. Until we actually know the impact of this, and I don't think we'll know it for a number of months, then it's prudent and that all we're demonstrating today is prudence and a conservative accounting in the way in which we run our business, which has been the bellwether of the business that Gareth's run for 10 years and his father founded.

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Unidentified Company Representative, [38]

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So question from [Tumi as well], but it has come through from a number of people. What is the company's policy regarding the payment of rental during the lockdown period?

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Richard William Peter Brasher, Pick n Pay Stores Limited - CEO & Executive Director [39]

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We paid all our rentals at the beginning of the lockdown period because I think that it was right and proper. We're a legal business. That's what we thought we should do, and we did. And we wrote out to all of the landlords. I know that there's been different groups set up, the clothing committee and various other committees, and there's lots of people with the point of view about it.

We engage privately with all our landlords as to how we could find a solution. And I'm hopeful that, together, we will find a solution that is mutually beneficial. But the first thing we were asked, I can't remember when. Was it the April payment?

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Lerena Olivier, Pick n Pay Stores Limited - CFO & Executive Director [40]

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April.

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Richard William Peter Brasher, Pick n Pay Stores Limited - CEO & Executive Director [41]

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April payment is that we paid in full. That's right? Is that? Yes.

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Unidentified Company Representative, [42]

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Funeka Maseko from Renaissance Capital. The 30 stores that were closed, were they loss-making or just not meeting profitability targets?

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Richard William Peter Brasher, Pick n Pay Stores Limited - CEO & Executive Director [43]

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Well, a combination. Sometimes we open a better one down the road, so it's of no real value. Sometimes, it's -- it might be a franchise store where the franchisee has decided he doesn't want to run it, and we don't want to take it on. There's no way of us actually recycling that store into another version. And sometimes it's because the store -- the town has moved -- the town moved on and the store didn't. They were either old and tired, and it didn't make any money, so we choose to close it. So it's all part of a continual renewal. I mean if you're going to run in the state of 2,000 stores, you're always going to be opening something and shutting something.

By the way, we tend not to close profit-making stores by the way. Just a skill I've learned over the years.

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Unidentified Company Representative, [44]

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Kathryn Robinson from Visio Capital. How should we be thinking about food inflation in the year ahead, particularly considering the currency movements?

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Richard William Peter Brasher, Pick n Pay Stores Limited - CEO & Executive Director [45]

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Look, there are pressures. There are pressures on inflation because a lot of people want the same things, and the rand has been devalued against most of the major sort of currencies, whether it's the dollar or the euro or the pound or the like, and therefore, that will put -- inevitably put it inflationary pressure. Not so most directly the things are made here because we do make quite a lot of stuff here and we do grow a lot of stuff here, but the truth is there are elements of the packaging or the screwtop or anything that actually comes from somewhere else. So I think there will be inflationary pressures.

The problem is, is inflationary pressure's fight -- going into the teeth of a severe downturn in the economy where people have got less money. That's not a popular combination. So our job is to referee that one. We've -- I think we've done it pretty well. We don't like inflation because it means prices go up, and we've committed to make sure that we don't -- anyone put prices up just because people want a lot of it. But sometimes prices go up because it costs more to do it. And we don't know quite yet what the impact of fuel will be.

I mean the oil price has been as volatile as anything around. So if fuel prices stay down and therefore, some of the constituent parts of -- if the fuel crisis -- if the fuel stays low, then that will obviously be a slight release.

But we've got junk status. We've got an economy in recession. I think it's quite tough. I think it's quite -- I mean, look, to be honest, Kathryn, I don't know. Like a lot of things at the moment, I don't know, but we will be making sure that, whatever it is, we do less. That's what we're going to do.

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Unidentified Company Representative, [46]

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Question from Lulama from Mergence Investment Managers. Can we say what percentage of our grocery sales are online? And what does this mean for our grocery margins?

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Richard William Peter Brasher, Pick n Pay Stores Limited - CEO & Executive Director [47]

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It doesn't make a lot of difference to our grocery margin. Our -- look, we've got a good online business. As I said, we're the market leader, but -- and it might be the equivalent of a dozen stores. So -- but it's not a participation that's at the scale of a European country or North America. It's not at that level. I mean one day it will be, but it isn't today, tomorrow or the day after tomorrow at the moment.

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Unidentified Company Representative, [48]

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David Eborall from SaltLight Capital Management. We mentioned the movement towards smaller local stores. Can we share how material that deviation is? Does this influence our future store mix growth?

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Richard William Peter Brasher, Pick n Pay Stores Limited - CEO & Executive Director [49]

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Well, all I can say is whatever size it was, it's going to be smaller. So if you take our estate at the moment, stores that we open, even supermarkets, would be a minimum of 25% smaller than they would have been before. If we were going to open a compact hyper, it would be half as big as one of our old sort of juggernauts. So the principle is that whatever you've got, think smaller. However much you've got in your range, think less. Whatever the prices, think lower. That's the spirit.

So of course, if you go to a BP Express store, which in France people aren't driving much, so they don't go there quite so often. But that's a little shop, but it has a particular role in your shopping experience when you're popping in to a buy a bottle of milk or a loaf of bread. Smaller supermarkets close to where people live actually, by and large, have done very well, but people on occasions do want to go to a large shop and do a far more interesting shopping experience and go to On Nicol or Constantia and there's more excitement and more things to do. So there is no rule of thumb apart from less is best.

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Unidentified Company Representative, [50]

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And then Kaeleen Brown from Standard Bank. Can we talk about our expectations for working capital over the first half of '21? And how much more cash do we expect to invest in our supply chain?

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Richard William Peter Brasher, Pick n Pay Stores Limited - CEO & Executive Director [51]

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Wow, I don't know. Sorry, I'm going to get flippant now. Look, first half of 2021, God willing we're all here, is going to be very exciting because we're going to be lapping a lockdown of the unknown, and we'll know 12 months more than we know now. Our plan is to make sure that we have got better management of working capital. I mean the challenge on the shutdown is you're shut, but you've got all the stock. So you've got the opposite of cash flow.

You've got it all. Nobody is buying it because you're not even selling it. Then when you open it, you hope they still want to buy it, and then you can get shot of it. Then you have to decide how much more do I want to go and buy. So I think that 2021 first half, which is a year from now, I believe the company will be in rude health. That's what I think. And I think all of those things that we've said that we're going to do, we'll have done at least half of it. In fact, we've probably done all of it. And I think it'll be a happier day for everybody, and maybe we'd even have people in the audience.

Okay. Good. I think that's -- I don't know about you, but I'm done. So thanks very much for your attention. Good luck if you're still online. Thank you for your patience and attention. I think this is a solid result. Thanks to everybody in my team and to the -- our suppliers, franchisees and customers, and stay safe and stay well. Thank you.

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