Metcash (MTS) results for first half of FY2023 (May to October 2022) Metcash FY2023 First Half Results © 2023 by Hardware News Network is licensed under CC BY 4.0. To view a copy of this license, visit http://creativecommons.org/licenses/by/4.0/ Creative Commons Attribution-ShareAlike 4.0 International (CC BY-SA 4.0) You are free to:Share — copy and redistribute the material in any medium or format Adapt — remix, transform, and build upon the material for any purpose, even commercially. Attribution — You must give appropriate credit, provide a link to the license, and indicate if changes were made. You may do so in any reasonable manner, but not in any way that suggests the licensor endorses you or your use. ========================================================================= Presenter 0:00 Thank you for standing by. Welcome to the Metcash 2023 half year results briefing. All participants are in a listen only mode. There'll be a presentation followed by a question and answer session. If you wish to ask a question, please press star then one on your telephone keypad. I would now like to turn the conference over to Mr Doug Jones CEO. Please go ahead. Doug Jones, Metcash CEO 0:23 Thank you and good morning, everybody. Welcome to the Metcash Limited results presentation for the first half of the 2023 financial year. This is the six months to October 2022. My name is Doug Jones. I'm the Group CEO and I'm joined by Alistair Bell group CFO, Scott Marshall Metcash Food CEO, Annette Welsh Hardware CEO, Chris Barrett Liquor CEO, and Steve Ash General Manager of investor relations. Doug Jones, Metcash CEO 0:48 I'd like to acknowledge the traditional custodians of the lands from which we are connecting today. I am in [unintelligible] country and I pay my respects to elders across country past, present and emerging. Doug Jones, Metcash CEO 1:00 It wouldn't be appropriate if I didn't start with a brief comment on our purpose. It underpins not only what we do, but how and why we do it. Metcash is in a unique position of its strong purpose also being its strategy. [The] independent sector is a significant contributor to the Australian economy and society through the communities that they operate in and serve. This network consists of more than 5000 stores operated by around 3000 private businesses, almost exclusively family-owned. We believe that locals matter and that independents are worth fighting for. Our vision is to help create a sustainable future, and doing this by creating growth opportunities for our people and for our partners. We offer through that network a differentiated value proposition to our shoppers, that presents compelling values and alternative[s] to the national chains. Doug Jones, Metcash CEO 1:54 Just a quick reminder of our flywheel that I spoke about at our recent investor day. It incorporates the sustainable competitive advantages of our model. The end-to-end supply chain for our independent partners and route to market for our suppliers is at the core. The brands and banners that smaller entrepreneurs own and run, and that shoppers love is there too. And of course the services and support that allow them to compete on a sustainable basis. Doug Jones, Metcash CEO 2:20 Under the heading of group highlights, the group delivered strong growth on the back of a few important elements that I've outlined. Firstly, the continued acceptance of preference for the local offer that is increasingly competitive and relevant. Strong strategic acquisitions, higher inflation and underpinned by good cost management, all allowed for a pleasing financial result. All pillars in the portfolio performed well. I spoke at the end of the last financial year about the group balance. This continues. Retailer confidence remains high and this is evidenced by their continued investment. In the first half we saw continued improvement in the competitiveness and relevance of that network through price, range and store quality. On a three-year basis, the growth has been nothing short of exceptional, and it reveals the extent of the shift in quality of the offer, and the acceptance of that offer by shoppers in all three formats. Really pleased with ESG performance and I'll give a little more detail on that later in the presentation. Doug Jones, Metcash CEO 3:22 The business remains in a strong financial position. We continue to work through the challenges of the ERP program, Project Horizon, and as per the Investor Day, the focus is on the Food and Liquor pillars while managing the program to reduce risk and improve execution. Gearing as measured through the debt leverage ratio remains below the one times targets and returns on funds employed remains above 30% for the half. Most pleasingly, the underlying demand has remained strong in the first four weeks. Group revenue including charge-through sales is up 7.8% And EBIT is up 10.3% which is pleasing leverage. Underlying profit after tax of $160 million is 9.1% higher than last year, and underlying earnings per share of up 13.7% and dividends up 9.5% to 11.5 cents per share. As I've said the three-year growth numbers are more revealing of the fundamental change in the quality and shape of the business. Revenue over three years is up 22.9%. EBIT up 63.8%, earnings per share up 66.0% and dividends per share almost 92%. Cash realization in the half was lower. This reflects the investment in inventory to ensure availability and optimal cost in the face of both interrupted supply chains and elevated inflation, as well as changing the balance of the portfolio showing a higher contribution from hardware where the inventory cycle is longer, and where we have a company-owned retail network that is now substantial. Importantly, this has supported the improved sales and EBIT performance. Doug Jones, Metcash CEO 5:06 Turning our attention to ESG, we've seen significant improvement and we made that progress through initiatives that we've previously shared and discussed. Personally, I'm focused and particularly pleased with the improvement in our safety performance. It's our core aspiration to provide the safest work environment possible, both physical and mental health and safety. Our processes, systems, culture, and leadership are directed at supporting this. Our issue focus is in three areas: people, planet and the communities where we operate and who we serve. There's a lot of data and detail on this slide and I won't go through it all. But I think it's most accurately reflected by the improvement in the Dow Jones Sustainability Index, which has shown an improvement from the 69th to the 85th percentile. Doug Jones, Metcash CEO 5:57 Turning our attention to the pillar overview, you can see the strong balancing of portfolio. Sales and earnings growth momentum is strong in all pillars, and it is exceptional on a three-year basis, with food sales growth over three years of 20.5%, hardware almost 66% and liquor at 36%, with good leverage across the group. You should note that the first half is traditionally relatively stronger in hardware. As the Christmas peak season rolls around food and liquor will benefit relatively more than hardware will. Food sales were up 2.7% as we cycled extensive lockdowns. This number is 6.5% if you exclude tobacco. The supermarket growth of 2% and the convenience business up 12.9%. This has been founded on continued improvement in price competitiveness. And we're really pleased that we've seen continued reduction in the price paid index. Since we last spoke about this at the end of the financial year, we've seen a 60 basis points improvement. It's also underpinned by the improving network, the store quality and format alignment, as well as the overall offer to the shopper. Wholesale price inflation ex-warehouse is 6.2% and this accelerated in the second quarter to 7.4%. We've seen volume growth in all states except for New South Wales and Victoria, as they cycled the lock downs but I'm pleased that we've returned to positive growth, since those lockdowns were cycled out. Undoubtedly tobacco has been materially impacted by the availability of illicit tobacco, and by the underlying trend away from smoking. Doug Jones, Metcash CEO 7:36 Food's teamwork score remained healthy at 74%. And as I've mentioned, the confidence from the retail network is high as evidenced by the refurbishments, DSAs and then most new stores ever in the first half. The convenience growth is underpinned by growth in the customer base and the impact of the recovery within the food service sector. Food EBIT of $98.2 million was up 3.2% and represented a return on sales of 2.1%. The key points here are that the benefits of the investment in inventory ahead of price increases did pay off. Inflation remains well managed. With that benefit from price increases, being invested back to offset higher fuel and freight costs as well as labor and other costs of doing business. But most importantly, in supporting price competitiveness, as we look to use volume as the key value driver. Doug Jones, Metcash CEO 8:35 We've also invested in some of our capabilities. There's no doubt that the leverage was impacted to a degree by the decision not to pass on all cost increases to the retail network. And again, this is intentional, and the investment in working capital itself supported meeting the strong demand. We've made good progress across the four strategic imperatives within food. The network refresh is progressing well. The store banner alignments, signage programs and channel standards are moving ahead strongly. DSA is now standard at 764 with 49 in this half, and the results are still very strong, in fact slightly higher than the 15% previously shared. Price and values delivered through differentiated local-first value proposition and this is progressing well, too. Price competitiveness is underpinned by the price match program and the low process every day, which has improved the price position as I've said, and we continue to make steady progress in private brand. Doug Jones, Metcash CEO 9:37 In the supply chain, we've seen strong operational performance under continued difficult conditions. We've seen good progress on all supply chain and DC [distribution centre] projects. These represent investments towards improved service levels and efficiencies. And we hope these will deliver continued competitiveness and margin opportunities in the future. Doug Jones, Metcash CEO 9:57 Turning our attention to hardware is sales were up 16.8% with growth in both DIY and trade demand. The performance was across both IHG and Total Tools. And we've seen excellent contribution from acquisitions, as well as continued strong performance in the online channel. IHG sales were up 7.9%. As we flagged towards the end of the half, we did experience adverse building conditions, the flooding, and inclement weather undoubtedly impacted the ability to get onto site. In DIY we really haven't had a Spring. This has impacted outdoor, garden and paint categories. We're confident that the pipeline in trade remains strong. The recovery of the DIY Spring sales is less likely and dependent on the quality and length of the Australian Summer. We also lost a trading day which was the public holiday for the day of mourning. Doug Jones, Metcash CEO 10:51 We're seeing a steady improvement in the supply chain with better stock availability and trade inflation is moderating but it remains high. The split between trade and DIY in IHG is 65/35 in favor of trade. And we've seen continued strong performance from the Sapphire stores. In Total Tools, sales up 93.4%, and this is driven primarily by acquisitions. Network llike-for-like sales are up 4.7% or 57.6% on a three year basis. We opened two new stores in the half bringing the total number of stores to 102 by the end of the reporting period. And since then we've opened a further two. In fact, today store number 104 in Port Lincoln opens and we have store number 105, Lake Haven, planned for later this week. We've also added four stores to our JV network and that number now stands at 39. The colocated Total Tools and Mitre 10 stores continue to perform ahead of expectations. And we have a further 13 under consideration. Doug Jones, Metcash CEO 11:59 Hardware earnings are up a very healthy $17.7 million to $116.6 million. This is a 17.9% growth. Key drivers are the continued strong underlying demand supporting the strong trading results in both businesses, the pleasing performance of the acquisitions, and this is offsetting some of the costs we're experiencing like in the other pillars in labor, freight and fuel. Also offsetting the marginally higher trade contribution in IHG. The return on sales of 6.7% is pleasing given the diluting effects of high margins from franchise and exclusive brands income in Total Tools of the added retail network sales and increase in trade and commercial customer mix across the pillar. Doug Jones, Metcash CEO 12:44 In hardware strategy, we've made good progress on all strategic initiatives. The Sapphire store upgrade program, we have now reached 171 stores completed. The ravenhall distribution centre is now open. And we're planning the move of 3PL activities of Total Tools into that facility from offshore. We continue to focus on emerging categories. And the strategy of growth through adjacent category sales to existing customers remains valid. Doug Jones, Metcash CEO 13:12 Under the heading of build trade, we've now completed 40 Sapphires of standalone trade stores, and we're targeting all 50 of those standalone stores. We've completed the acquisition of the Petries Mitre 10 in Dubbo, and the Five Star business in Queensland. And we continue to bed these down. And I remind you that we now have 11 frame and truss facilities in the network. We've maintained the focus on trading technology to reduce cost and effort for all the customers and this has seen strong acceptance from those customers. Doug Jones, Metcash CEO 13:44 In Total Tools as I mentioned, as of this morning, the network is now 104 or 102 at reporting date, with a further four to be opened before the end of this calendar year, and we remain well on track towards the goal of 130 by 2025. Our JV joint venture and company owned stores is now at 39, as I said. We have a further seven planned this year. It's really pleasing that we've seen strong appetite from our JV partners to remain in the network We're better for them and their support and leadership is an important strategic advantage for Total Tools. We have continued strong performance from exclusive and own brands in Total Tools. And this will be supported by the future move into the IHG Ravenhall facility. Loyalty customers still contribute around 90% of sales and we're making great progress on our personalisation journey. Doug Jones, Metcash CEO 14:37 In Liquor, our exceptional sales growth continues. Sales are 11.6% or 56% over the last three years and the contribution in the last six months from volume and price is about even. In the retail network both IVR and contract customer remains strong. Shopping local and consuming at home continues to resonate. Basket sizes are up, too. RTDs [ready to drink] and spirits led followed closely by wine in category performance. On premise demand has continued to improve as 47.8% in the RBA network. This reflects the opening up since the lockdowns in H1 last year. As we shared before, our strategy is to grow the on premise contribution, and it's now back to 14%. And we believe there's more opportunity. Our own and exclusive brands are growing ahead of the market and the rest of our portfolio. And this has accelerated since FY2022. Liquor profits up $5 million or 11.3% on good sales and volume growth. As I've said in Food, volume is the key lever for value growth. Stock profits were reinvested into price and to offset higher costs. And as mentioned on premise mix is higher. As with the other pillars, the business has had to face into higher costs of fuel, freight and labour. And like Food, there's no doubt that the leverage is impacted to some degree by the decision not to pass on all cost increases to the retail network so as to keep them competitive. This has resulted in a flat, but very pleasing EBIT margin. Doug Jones, Metcash CEO 16:15 The Liquor strategy. As a reminder, we've been through these initiatives in some detail that our investor updates. The Liquor initiatives are aimed at strengthening the shopper value proposition through differentiated value and compelling and appealing shopping experiences. And also strengthening the core wholesale offering so that retailers can focus on serving their customers. As can be seen, we've made good progress on all fronts. It's pleasing that we've seen retailers invest in the refurbishment of their stores. Doug Jones, Metcash CEO 16:47 As you'll have seen this morning, we announced that Alastair has indicated his intention to reduce his executive load with a view towards his retirement. It is not quite goodbye yet, and we'll certainly make time to do that properly, and to recognize him properly. But I do want to thank him for his significant contribution to Metcash. And on a personal note, to thank him for his support to me in particular. Alistair Bell CFO of Metcash 17:09 Thank you. Thank you for those kind words, Doug. Good morning, everyone. I'm going to just start with some opening comments, before reviewing the detailed slides that follow. Metcash is in great shape, and we continue to trade strongly. It's really pleasing to be reporting that we've delivered another set of strong results. The underlying profit for the first half of $160 million is a record half. These group results are underpinned by strong sales and underlying earnings. The operating leverage for the half includes supporting the price competitiveness that Doug outlined, high costs, such as fuel, freight, labour, the impact of our portfolio sales mix, and the inflation. It's pleasing, though, that all pillars have performed well, and is another half of earnings momentum. In the detail, you will notice we finished the half with a healthy balance sheet, net debt of $364 million, or that represents a 0.65 times debt leverage ratio. And this remains below our target DLR of 1.0 times. Net financing cost is increasing, pleasingly credit margins are down. However, as we all know, the impact of rising cash rates is happening and is expected to continue to the second half. Alistair Bell CFO of Metcash 18:41 At the Investor Day, I highlighted our focus on the different elements of capital allocation. At Metcah, we have to fund working capital as our receivables from b2b sales -- that's $1.9 billion -- exceed our inventory and payables. There are a few elements to this allocation. Firstly, working capital. The first half we invested $128 million to meet increased demand and sales growth. There is also a greater weighting to hardware, which as you'll recall, has a higher inventory and receivables days and inventory in their retail stores. This has resulted in a lower cash realisation ratio in the first half, and in the second half we expect this to improve. Second component is capex and acquisitions remain in line with Investor Day disclosures. I'll come back to this. And thirdly, as Doug has mentioned, the directors have declared an interim dividend of 11.5 cents per share, and the payout ratio remains in line with our dividend policy. All up a very pleasing half that delivered a ROFE of 30%. Alistair Bell CFO of Metcash 20:03 Moving on to the profit and loss, Doug provided the insights in the strong trading performance across the pillars. For the Group, sales have grown by 7.8% to $8.9 billion, converting into an underlying profit of $160 million. That's up 9.1%. And as I mentioned, a record half. The earnings per share increase of 13.7%, which is down at the bottom right hand side [of the current slide] is a higher percentage, and that's due to the buyback that happened last year. Alistair Bell CFO of Metcash 20:42 In relation to specific line items in the p&l, I'd like to discuss a number of them. Depreciation amortization is up slightly in line with the acquisitions in hardware, and the increasing amortisation of software from Horizon. Net finance costs are higher, because of higher average debt levels, and the weighted average cost of debt being up 133 basis points. I'll cover this in more detail. And whilst it is pleasing credit margins are down, market cash rates are up, and cash rates are expected to be a bigger impact in the second half. Alistair Bell CFO of Metcash 21:26 The third item is significant items. These are higher. There are changes to the classifications. I'll outline those in a moment. But there are two main factors making up our significant items. The nature of both of these factors is the same for the past two years. First relates to the value of the put options in Total Tools in Hardware. With the continued favorable form [demonstrated by] Total Tools does come an increase in the value of the options. The fair value is assessed at each reporting date, and the uplift is a charge to the current earnings. So for the year for the half, this was $21 million. It's non cash for now, but obviously does increase the future option payment. The second relates to Project Horizon, the $12.8 million is slightly below guidance, and we expect the second half to be similar to the first half. For fiscal year 2023, this year, the costs associated with mFuture [are] now included in underlying earnings, and only the credits -- that's reversal of provisions -- associated with the COVID accruals are reported as significant items. I think everyone would agree that's a conservative approach. Costs associated with the mega-DCs of $1.5 million are reported as significant. Alistair Bell CFO of Metcash 23:01 Also, I'd like to share with everyone that a review of our classification of significant items, and any associated implications on dividend policy will be undertaken in the second half. If there are any changes, these obviously will be communicated at the right time, and will apply from fiscal year 2024. So just back to the result, in summary, another stellar result from our cash. So let's move on to the cash flows. Alistair Bell CFO of Metcash 23:33 There are two points I'll highlight. And both I'll touch on in more detail in the following slides. The first is operating cash flow and its relationship to the cash realization ratio. And the second one is capex and acquisitions of $107 million remains in line with our guidance and disclosures at the Investor Day. Now back to the operating cash flow for the half. This includes an investment in working capital of $128 million, which by nature reduces our realization ratio to 36.5%. As I outlined on the investor day, managing the seasonal fluctuations in working capital is a key focus area, particularly when the net position is relatively small. I'll expand on this on the next page, next slide. But in summary, receivables in inventory are higher in line with sales growth and inflation. And there is an increasing weighting to hardware, which has a longer inventory cycle. The receivable days is longer and we are holding inventory in the 160-plus retail stores. Doug touched on the adverse building conditions that happened over the half year end, and that obviously impacts some of the levels we carry. The third element is suppliers fund the inventory. But there is some shortening in payment days for smaller suppliers. We expect the second half realization ratio to be higher than the first half, but recognizing the ongoing impact of inflation and the change in shape and weighting of our portfolio. So, overall, we did increase our net debt and this is reflected in the balance sheet on the next slide. Alistair Bell CFO of Metcash 25:34 With the balance sheet, the key message is we continue to be in a healthy position. This is a busy slide, but the main points are starting with working capital and the top left hand corner. The table shows the components of the working capital. As I just mentioned on the last slide, each amount of receivables, inventory and payables is significant. So this demonstrates the importance to managing the seasonal nature of our inventory by delivering an acceptable net position at each reporting date. The changes in working capital in the half are weighted to hardware. This is because hardware is a greater portion of sales, and has longer inventory and sales days than food and liquor. With receivables, we closely monitor DSO trends, and pleasingly we continue to have a low level of past dues. The bottom right hand [of the] slide focuses on inventory as it's core to our flywheel. Inventory levels have grown as sales have grown. That's the blue bar. And the inventory days show a slight improvement due to the velocity of inventory turns in food and liquor offsetting the greater weighting to hardware. Alistair Bell CFO of Metcash 27:01 With the capex, top right hand side [of the slide], the vast majority of the business acquisitions -- the light blue bar -- relate to Total Tools and hardware at circa $29 million. As Doug mentioned, we've acquired three more JV stores in the half. In the balance of $81 million, $39 million relates to Horizon, and $25 million to growth. Capex includes Mitre 10 stores and the mega-DCs. With Horizon, the expenditure remains on track with the guidance that invest today. Just to remind everyone, the stage one capex for the 20 months to the end of calendar year 2023 is in the range of $95 million $105 million. We expect the second half capex to be lower than our first half. Alistair Bell CFO of Metcash 27:56 So finally, the net debt of $364 million is a good segue to the debt management slide. So just moving on. So debt management, in my opening comments I referred to our net debt remaining within our target debt leverage ratio, but net interest costs are increasing. This [slide] summarises the picture. During the half we have continued to reset the debt facilities by adding working capital lines in advance of introducing sustainability linked funding. The benefit of the new sustainability facilities will be to increase the tenure of the debt maturity. The average weighted cost of bank debt has increased by 133 basis points from last year. Credit margins are down which is good, but as we know, market cash rates are much higher and are expected to have an even bigger impact in the second half. Higher cash rates is adding to higher financing costs overall. Higher cash rates impacts our net debt and our Amex receivables facility. But it has a far less impact on our leasing financing. If you're interested, there's details in the half year report which sets out the splits there. Our funding, funding requirements move about. Our average debt level for the half was $485 million, and we finished the half with net debt of $364 million. This equates to a leverage of 0.65 times being well under our target DLR of 1.0 times that we announced that the Investor Day. Alistair Bell CFO of Metcash 29:51 The waterfall table on the top right hand side [of the slide] shows the changes in the net debt from the two reporting periods. The main impact to highlight is the operating cash flows is down, because of $128 million invested in the working capital. Now moving on to dividends. The board has approved an interim fully franked dividend of 11.5 cents per share, or $111 million of cash. The payout is in line with our target payout ratio of 70% of underlying profits. The dividend goes ex on the 20th of December and paid to shareholders on the 30th of January 2023. As a closing comment Metcash has had another stellar half year and continues to trade strongly. That said, while the outlook for the economy is uncertain, we do remain confident in our capital allocation framework and being in good shape to support our growth plans. Now back to Doug for the outlook. Doug Jones, Metcash CEO 31:05 Thanks, Alistair. Certainly the words stellar and record profits in H1 do instill a lot of confidence and excitement. It's very pleasing that the business is in such great financial position, as well as has a high degree of confidence. And as we've shown, the performance has continued into the first four weeks. So as we turn our attention to the outlook, you can see that group sales are up 6.2% in those four weeks, and all pillars have continued to trade well. The rates have moderated as we prepare them to the high levels during COVID. But they continue to be driven by underlying demand, and of course inflation. And volume growth remains broadly positive. Underlying demand in hardware is expected to remain strong for the second half. And we have an expected improvement in those adverse building conditions that will support the volumes. The supply chain challenges have improved, they do continue to be a risk for all pillars in the second half, as do additional fuel, freight and labor costs. And we'll continue to manage those responsibly. There does continue to be, as I flagged before, some uncertainty over the level of inflation going forward, as well as how that inflation and other costs of living increases may impact consumer behavior and the retail networks as well as in our own business. Doug Jones, Metcash CEO 32:27 So for the first four weeks in food sales growth accelerated increasing by 4% or 10.6%, when you exclude tobacco, compared to the prior period, and this reflects the continued strong demand in supermarkets and convenience and impact of inflation. Supermarket sales are up 3.2% or 9.5%, excluding tobacco. And as I mentioned before, we've seen a return to volume growth post cycling the impact of those lockdowns. Wholesale price inflation, which excludes tobacco and produce continue to trend up averaging 8.8% in the first four weeks of November. In hardware sales increased by 8%, driven by continued strong underlying demand in both IHG and Total Tools, as well as the contribution from acquisitions and the impact of inflation. IHG sales were 1.6% lower with significant adverse building conditions in those first four weeks in both Victoria and New South Wales, and Total Tool sales increased by 101.4%. In liquor sales increased by 8.9%. And this reflects the continued strong demand in both the retail stores and sales to on-premise customers. Sales to on-premise customers themselves increased by 20.3%. And this reflects both new customers and a cycling of the return to on-premise consumption following the end of lockdowns. And so that's brings to conclusion the presentation of this very pleasing set of results. I'll now open up for questions. Presenter 34:09 Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you're on a speakerphone, please pick up the handset to ask your question. In the interest of time we ask that you limit to two questions per person. Your first question comes from Michael Simotas with Jefferies. Please go ahead. Michael Simotas, Jefferies 34:31 Good morning everyone. My first question is is on hardware and specifically the weather impact that you've called out across the DIY and trade. So in DIY the categories that are impacted by weather are also the categories that seem to be slowing down globally due to a COVID pull forward. How confident are you that this is all weather related impact and not an underlying slowdown? And then similarly in construction, obviously weather has been pretty challenging in the last couple of months, but it's been pretty onerous for the last couple of years. Again, how confident are you that there's no underlying slowdown in demand? Doug Jones, Metcash CEO 35:14 Thanks for the question, Michael. I'm going to invite Annette wells to answer it. Annette Welsh 35:19 Morning, Michael, and thank you for the question. And it's certainly one we look at very closely ourselves. I might just answer the trade one first. As we spoke about at the Investor Day, the confidence in the pipeline of the market is still as strong as we talked about back then. And I would say, you know, having been in New South Wales and Victoria during the that heavy weather period, there was no ability for our vehicles to leave our stores and land on sites anywhere. So as the weather is, and I can only talk for New South Wales and Victoria. But as the weather seems to be improving, we're certainly seeing that return to the levels that we anticipated. So no current concern there. Annette Welsh 36:08 Yes, your point is a really good one in relation to the perhaps just I would call it the coincidence between garden paint and outdoor being affected. And they were the biggest ones for COVID uplift, I would say we'd already seen some paint rebalancing, coming through post COVID into sort of the last half of last year and the first half of this year. But I would say there's absolutely no question there has not been a Spring in most of the states. And the reason we have confidence is we can see that the results in Queensland and [Western Australia] are giving us an indication that this is a weather impact, and currently nothing more than that. Michael Simotas, Jefferies 36:55 Okay, thank you. That's good color. And then my second question is, is just picking up on the comment of the review of significant items and how that relates to dividend payout. Obviously, you've got to do your review. But I just want to understand what the potential outcomes of that are. Are you saying that given the extent of significant items that come through the p&l over the medium term that you may actually reduce the payout once you do that review? Doug Jones, Metcash CEO 37:25 So Michael, we're not saying that, all we're flagging is that we will conduct the review, and we will be mindful of the impact of the results of that review that we'll undertake with our board, on the dividend payouts. And so we'll look at those two things together. We're certainly not flagging a reduction. Michael Simotas, Jefferies 37:46 Okay. All right. Thank you. Presenter 37:52 Your next question comes from Brian Raymond with JP Morgan, please go ahead. Brian Raymond from JP Morgan 37:56 Good morning. Well, first one is just on the commentary around food, and the reinvestment in price over the period. I noticed excluding the JV contributions, earnings were pretty much flat. And you didn't call out higher operating costs. So just keen to understand the magnitude of investment in price that you paid. And also some of the magnitude of those fuel costs that you're going to be passing back on to retail customers in the second half, whether that will make any difference. Doug Jones, Metcash CEO 38:30 Thanks, Brian. Scott's gonna comment. Scott Marshall, CEO Food 38:33 Yes, Thanks, Brian. I think as we've said, previously, we do reinvest some of those [unintelligible] stock profits in the short term through buying promotional periods, but they are short term investments. The reset of our pricing and competitiveness has been supported by suppliers, and also retailers executing at store level. So that's not where the money's going. What we have called out though, we are still in a difficult period with supply chain and that those challenges that we've been incurring, so some of those price investment buyers have gone towards offsetting that, and equally trying to ensure that our retailers stay competitive. And I think you'll see through the performance that it seems to be working. Doug Jones, Metcash CEO 39:27 Right, I would add that as as inflation moderates, if and when, it will moderate on the cost of doing business lines roughly at the same time as it does in product inflation. And we'll manage accordingly. Brian Raymond from JP Morgan 39:45 Understood. Just to follow up on that, the fuel surcharge in the second half, is that likely to be meaningful as an offset to your cost pressures? Scott Marshall, CEO Food 39:55 Brian, I think we're comfortable that we've got the our charges and costs at the right level for the second half. Brian Raymond from JP Morgan 40:05 Okay. Okay. So just just a second one, then just on Total Tools, obviously, great result in terms of the earnings delivery, but just trying to look through the uplift from JV conversions and look at the underlying network growth. It looks like on my numbers EBIT, ex-acquisitions up 4%, sales ex-acquisitions up 9.5%. I just want to understand how, how that's trending. From an underlying perspective, I'm sure there's a lot more, certainly a lot of moving parts that would drive that. Are you seeing any kind of cannibalisation from your stores being rolled out to your competitor stores on the existing network? It'd be great to get some color around the underlying performance excluding acquisitions. Annette Welsh 40:51 Morning, Brian. [This is] Annette. So thank you for the question. No, I think probably the underlying performance, it's best to shape it in the mix between our NSO wholesale and our joint venture retail stores, I think that will probably give the better color. And I'm probably not going to define that as much as you'd like around the mix. We have no concerns in the underlying performance, although the costs of challenges around supply chain out of China did have an impact in the first half on our EBIT performance from a margin perspective, but no concerns around cannibalisation or competitive pressure in the half. Brian Raymond from JP Morgan 41:40 Okay, thank you. Presenter 41:44 Next question comes from Grant Siligari with Credit Suisse. Please go ahead. Thank you. Grant Siligari Credit Suisee 41:50 First question. I have just come back to the price competitiveness point for food retail. You call out I think some numbers in terms of improvement in an index of I think 60 basis points. Can you just expand perhaps on what you're actually measuring, with respect to price competitiveness and where it sits at the moment? Scott Marshall, CEO Food 42:13 Yeah, Grant. Thank you. I'm happy to answer that question. I think what we do call out and we've referenced this at our Investor Day, we have a basket of all common lines against our major competitors. We don't call out the overall index number. But what I would say and equally we said at the Investor Day, is it's now at a level that it's broadly the same. So not material in any way. And we're seeing shoppers are obviously encouraged and seeing that a store level. Grant Siligari Credit Suisee 42:53 Thank you for that. Second question if I could just on the inventory. You've called out a few factors driving the inventory, one being sales, I mean, obviously, there's price inflation. Are you able to sort of give us maybe a better decomposition of what was driving the increase, maybe, you know, sort of some building blocks there. And I guess just related to that, how much sort of buffer stock are you keeping still for supply chain disruptions? So where can we see the underlying inventory level go to in a more normal supply chain environment, please. Doug Jones, Metcash CEO 43:29 So I think, Grant, the slide I would refer you to is the balance sheet one in Alistair's deck. What's important is to note that the days in inventory at 27.3 is actually marginally lower than it was last year. So there is not significant amounts of excess inventory. The inventory investment was made in order to support those sales. So the dollars are up because sales are higher. And then of course, as Aleister said, working capital was impacted by higher sales, translating into higher debt as balances. Do you want to add anything more to that, Alastair? Alistair Bell CFO of Metcash 44:14 I think that summarizes that the .... We invested, excluding acquisitions, there is $104 million that went into inventory in the half. That's in line with sales growth, that includes inflation, and that's the day-to-day factors that each of the pillars have to manage. And just to remind everyone, each pillar is different in the way they have to analyze their stock funding ratio with their suppliers. And in hardware, they're both the sales days and inventory days are longer, it just has a longer life cycle, that's traditional, and we monitor each of those components. Grant Siligari Credit Suisee 45:02 Okay, thank you. Unknown Speaker 45:07 Next question comes from Shawn Cousins with UBS. Please go ahead. Shawn Cousins from UBS 45:12 Thanks. Good morning. I just have another question on working capital, the shorter payment terms to the smaller suppliers: is this a permanent change? And was there any boost to gross margins received by Metcash? And if not, why were these sort of payments provided was it product access or range enhancements, please? Alistair Bell CFO of Metcash 45:30 Yeah. The just to add to the one about improved margins. No, it is not improved margins. These are the small suppliers. You'll recall that there is payment times reporting that's now mandated to do. And we felt that it was better to refine some of our smaller suppliers and pay them earlier. Yes, it has an impact to our payables. But our inventory levels still flow through, margin continues as is. Shawn Cousins from UBS 46:06 So, sorry, this is just a step up, a change that we should see as more permanent [unintelligible]. Alistair Bell CFO of Metcash 46:12 Yes, that the payables day for the small suppliers is permanent. Doug Jones, Metcash CEO 46:16 Shawn, I think it's fair to say that we are much more active than we've ever been before in managing with our suppliers, who funds the inventory. So we're actively managing that. The small supplier payment is definitely once-off and permanent. But we're continuing to improve through that active management, who funds the inventory. Shawn Cousins from UBS 46:42 Great. And my second question is around hardware. Those sluggishness you've seen in the second quarter and into the third quarter? Can some of this be recouped, particularly in trade, by trades working through Christmas? And then more generally, you've called out the underlying strength in the business. From whom do you believe you're gaining market share from please? Annette Welsh 47:05 Shawn, thank you. In relation to can we recoup the sales from the weather or the adverse building conditions, we see that to be unlikely, essentially, the length of build times will just become longer. So we don't anticipate that likely in this financial year, and we'll see it more likely into next financial year. The question on market share is an interesting one, we don't have any analysis or information that gives us any insights into share. But as you know, that they're building numbers that are sizable in terms of what they've been over previous years. So I think there is a degree of rising tide here. Shawn Cousins from UBS 47:58 Thanks. Thanks. Presenter 48:02 Next question comes from Ben Gilbert with Jardin . Please go ahead. Ben Gilbert Jardin 48:07 Good morning, my first question is around the food margins. As we look forward -- because I would have thought you probably gonna get some benefits from mix coming through with less tobacco, but obviously, seeing improved terms, how you're thinking about margins moving forward, is it sort of a deliberate decision of the group to keep them flat and reinvest, or as we start to see some of the supply chain issues subside, would you expect to see some improvement coming through particularly on mix up? Scott Marshall, CEO Food 48:37 Hi, Ben Scott, happy to talk to that. I think we referenced this in our Investor Day as well, that that we do see, as things normalize in the supply chain, and also inflation that there's there'll be opportunities, modest opportunities to expand margin. And we have referenced that we do need to ensure that we have our margins at a level that remain -- or help our retailers remain competitive in the market. So I wouldn't suggest there'd be anything significant there. But there will be margin opportunities moving forward. Ben Gilbert Jardin 49:13 Can you talk for a second just abvout your market share trends, because it would suggest that, given the trading update, you're probably still winning share in the IGA network at the moment. Scott Marshall, CEO Food 49:27 Yeah, Ben, I think there's, again, there's a couple of different reads of the market. From our indications, there's definitely market share gains. What we can call out though, is our numbers and the fact that we're holding on to those sales that we gained over the last two years at store level, which is really pleasing. Presenter 49:55 Your next question comes from Tom Kierath of Barrenjoey. Please go ahead. Tom Kierath of Barrenjoey 49:59 Good morning, guys, just one on Total Tools I think you referenced there, like-for-likes in retail 4.7% [up] in the half? Could you maybe just give us a bit of color on how that kind of trended through the half. And then what that number is for November. So you've quoted there 100% sales growth for November, but it is really not that relevant, given the changes in the store ownership base. Annette Welsh 50:24 Certainly can thank you. It's been a bit similar to, I would say, the trade business. Strong first quarter, a second, a slightly slower second quarter. And similar, as I said, to what we're seeing everywhere else in relation to the slowdown in the second quarter, but some of that's also varying number of days around the strong promotional activity that we do with suppliers, and aggressive trading days. And we've got a different mix of those this year, versus last year in the first half versus the second half. And don't read anything into that; that's just how they fallen, in a competitive market. So, to summarize, similar to what you've heard from us in trade, slowing into the second half, to that 4.7%. Slowing into the second quarter to hit that 4.7% Tom Kierath of Barrenjoey 51:25 Yep. Cool. Thanks Annette. And just secondly, to some of the food business, I think from memory, it has about $400 million bucks of inventory at the [unintelligible] and I think yet inflation is running at 9%. So just to put some magnitude around the stock profit or whatever benefit, is it about $35 million? Which is similar to the level of investment that you've had on the fuel, etc. And the other costs coming through. Scott Marshall, CEO Food 51:53 Yeah, I'm happy to take that question. That's not ... the numbers were significantly less than that. It's a very crude measure to take the total stock value so that that's is definitely less than that. Tom Kierath of Barrenjoey 52:10 Sorry, why is it crude, prices have gone up 9%, and that's the inventory balance. What am I missing? Scott Marshall, CEO Food 52:16 Sorry. So when we when when you look at at mix and timings of price rises, etc. So that's, that's not the number that we've got. Tom Kierath of Barrenjoey 52:28 Yeah, okay. So less than $35 million. Scott Marshall, CEO Food 52:30 Yes. Tom Kierath of Barrenjoey 52:31 Yeah. Okay. Thanks, guys. Presenter 52:36 Your next question comes from David Errington with Bank of America. Please go ahead. David Errington, BankAmerica 52:41 Morning and following on from Tom's question. I'm sorry, can I get a question in on what do you mean by gains from stock revaluation applied to offset additional costs? Have you actually revalued your stock? Because I would have thought what you do, you buy your stock and then you just sell it at a higher price? Have you actually revalued your stock? Because that's what it infers that you've done. Alistair Bell CFO of Metcash 53:05 The terminology of the stock reval is when price increases come through, you're capturing that benefit that you're just referring to, as we sell it through into the network. It's just a terminology used to describe capturing that benefit. David Errington, BankAmerica 53:26 Beauty. So you haven't actually revalued your stock? It's the gain, similar to what Tom was saying, as you you sell a stock at a higher price than what you purchased it for. That's a higher gross margin in effect, is that right? Alistair Bell CFO of Metcash 53:42 That's right. Good summary. David Errington, BankAmerica 53:44 Yeah, yeah. Yeah, yep. Beauty. Yeah, just the phrasing, stock revaluation. It sounded a bit confusing, good. On the cash realization, Alastair I suppose this is to you. Look, I was really taken aback at the 35% cash realization. And it doesn't to me look like an inventory issue. Because you talked it to your inventory, but when you look at your balance sheet, your payables are up almost the exact amount that your inventory is up. It looks to me that it's actually a receivable issue, that as inflation is going up, you're actually getting hit more from your receivables. But because they because the prices are higher, they owe you more. Because when I'm looking at your balance sheet, your inventories gone up $100 million, your payables are up $100 [million]. So your net working capital investment in inventory is zero. It's all part it's all receivables. So what's happening here is what's causing the stress to the cash flow, is the fact that your receivables are increasing at a fairly high rate. And there's not much you can really do to offset that. So I'm wondering why [you say it's] an inventory issue. I don't think it's an inventory issue because your payables offset your inventories. It's receivables. Alistair Bell CFO of Metcash 54:55 Yeah, it's, umm, David, you'll recall that in part of my opening, I called out that we are in debt ... we have to fund our working capital, principally because of our receivables being b2b sales, we've got $1.9 billion. And in the half our receivables went up excluding acquisitions by $114 million. We disclosed that and in the detail financial statements. Inventory is up $104 million as well. Both of those are relatively the same. The payables, yes, was, we had to invest more into our payables compared to this time last year. And that's where you've got a mismatch of timing when we compared to last year. And once again, that is set out in the note disclosures to the half year report. David Errington, BankAmerica 55:53 You confuse me on the payables, Alastair, can you go for that one again, because your $128 million of cash has gone missing, hence, the 35% realization. Alistair Bell CFO of Metcash 56:06 It's a net position of $128 million. And so we're up in receivables by $114 million, we're up inventory by $104 million. And we've partly funded it by the payables by $91 million. Last year, in the first half the payables was up $183 million. So that was a favorable funding position last year, and this is just the balance of timing of coming into half year, the hardware is the greater proportion of all of these balances, and it comes with longer days. Doug, do you want to add something? Doug Jones, Metcash CEO 56:49 Just one point, David, that might assist. You're right to point out that the dollars movement in payables and inventory is roughly the same, which implies what we call a stock funding ratio of one times. Traditionally, and as you can see, in the absolute numbers, we actually have quite significantly higher stock funding ratio. Under normal circumstances had the things that Alastair has spoken about at length, not been in place, the growth would have been at that higher funding ratio, and you actually would have had a net positive working capital movement between inventories and payables. Does that make sense? David Errington, BankAmerica 57:28 Not really. But I'm because I'm still a questioning -- you talk about the second half [unintelligible] going to improve in the second half, so the cash flow is going to be under a fair, the pressure ... Doug Jones, Metcash CEO 57:44 Let me have another go. So under normal circumstances, the October inventory balances would have been lower. So you're right to point out that inventory, the movement of circa $100 million is the same between payables and inventory. But it normally is much higher in payables than it is in inventory. When I say normal under let's call it non inflationary, non supply chain pressured conditions. We made the decision to invest into more inventory for the reasons we've described, which which gets that funding ratio, in other words, the movement between payables and inventory back to one times, which is what you're anchoring on. David Errington, BankAmerica 58:33 And then the receivables. Now, the second half, you're saying it's not going to change much. Doug Jones, Metcash CEO 58:39 We saying it's going to improve, one of the important factors in how much it will improve will be the inflation that we experienced through the the second half, as well as the availability of inventory. As we've said, a few times inbound supply chain is not back to normal, or in other words, pre-COVID performance levels. And in order to maintain our stock availability, we have to hold the buffer for that poor inbound service level. Doug Jones, Metcash CEO 59:10 Well, what's the realization gonna be in the second half then? Doug Jones, Metcash CEO 59:12 Well, that's, I can't give you that guidance, because I'm not sure what inflation is going to be in the second half. That's what that's what I'm trying to point out here.. David Errington, BankAmerica 59:21 Say it's running its current level. Say it's going to stay at current levels, what would it be? Doug Jones, Metcash CEO 59:26 I'm not going to give you a number there. There's too much uncertainty. Alistair Bell CFO of Metcash 59:29 We won't give a [number], but we know that it'll be higher than the first half. Because that's the nature of the working capital trends that we've seen in the past but overlay it with the impact of ongoing inflation. It remains a real focus area. David Errington, BankAmerica 59:49 Yeah, well, 35% first half, it's gonna hit it would want to be a bit higher. That's not off the high base. But yeah, well, thanks for that. I might take a bit more offline because I'm still a bit confused. Thanks. Thanks, for having a go. I appreciate it. Presenter 1:00:03 Next question comes from Ross Curran with inquiry. Please go ahead. Ross Curran from Macquarie 1:00:06 It team, I'm just gonna ask around liquor. So very strong growth out of the on-premise channel. It's pretty good. Realize that, you know, we're comping the sort of Omicron lockdowns this time last period. Does that strength in liquor sales remain intact for the remainder of the half because of the variability around Omicron from last year? Chris Baddeck, the CEO of liquor 1:00:31 Thanks, Ross, Chris here. So in the half, we certainly saw the lapping of the lock downs of Omicron. And you have to remember that even when the on-premise opened up, there were continued restrictions. And so therefore, even after people said, 'we've lapped the lock downs', there weren't as many people in the on premise and what we're seeing now, of course, is the number of people in the on premise. Our strength in the on premises isn't just the lapping of lockdowns, it's the share of wallet of known customers and then net new customers. And I think we need to point out as well, the strength in retail has continued with IBA like-for-like up 1%. Ross Curran from Macquarie 1:01:23 So I'll leave it there. Thank you. Presenter 1:01:27 Next question comes from Craig Woolford with MST. Please go ahead. Craig Woolford, MST 1:01:34 Morning, Doug and team. Just a question. First up about the stock profit, and I guess net net on that food business. I think that you're suggesting that if inflation falls back away that some of the other cost items would also fall. Is that, how we should be interpreting the impact of the stock profit, because it feels like this could still be a risk, but wages and fuel costs remain elevated, even if inflation were to fall back. Doug Jones, Metcash CEO 1:02:04 Hey, Craig, thanks for the question. Indicatively, I was pointing out that inflation has an impact at the margin through inventory, cost of inventory as well as cost of doing business. And as that moderates, remember, it'll, you know, in both the price of goods and wages may stay elevated. But inflation is a measure of acceleration, that it should start to normalize, we are keenly aware, as a wholesaler of that relationship and are managing it very actively in that, you know, that's what we do all day, every day. So you've understood it correctly. And I want to reassure you that we're not we're not oversimplifying it, but we don't ... we're not foreshadowing a material risk in this call. Craig Woolford, MST 1:02:59 And so can I just clarify the fuel surcharge? Was there no fuel surcharge applicable in the first half? Was it just that your own contracts with the freight companies that meant that it's impacting the second half? Scott Marshall, CEO Food 1:03:14 Craig, I'm happy to take that. I think what the best way to explain it is timing. So when we've passed on increases to our customer base in the first half, which have now happened, hence the commentary around the second half, we don't think it will be an issue. Craig Woolford, MST 1:03:32 Thanks for that. And if I can sneak one in just for Alastair, perhaps what proportion of your debt is now fixed versus floating? Alistair Bell CFO of Metcash 1:03:45 We haven't provided guidance on that at this point. But we are at a stage of having low levels of fixed but very mindful of continuing to reset the debt book, which gives us the tenure and better credit margins. Presenter 1:04:14 Next question comes from Richard Barwick CLSA, please go ahead. Richard Barwick CLSA 1:04:17 Good morning, guys. I've got another question around the cash realization I'll just tackle it from a different way. I know your target is 90%, and you delivered slightly better than that last year. What's got to change what's got to go right for you to get back towards the 90%? I know at the strategy day, I don't think you're even flagged it. You hid it in 23. And after today's result, that seems pretty clear. But is this a prospect for next year? Or? I guess, I guess I'm thinking through the idea that you with hardware, taking a bigger and bigger share of the business. Is this just going to be an ongoing drag and is 90% not really feasible. Alistair Bell CFO of Metcash 1:05:02 Hi, Richard. I won't pass comments beyond this year. But you're right, we're planning to see a better realization ratio in the second half. And it is influenced by the ongoing inflation. And also the change in shape and weighting in our portfolio. It's important we get get the balance, right. And the ratio will be stronger in the second half than the first half. But we're not giving any direct guidance of what it will be. Doug Jones, Metcash CEO 1:05:39 Richard, I'll go slightly further and say you're right to note that the changing shape of the business, not just in the fact that it's hardware, but it's also hardware's extensive retail network, so we're holding stock beyond wholesale, we're holding it into the retail network. And so inventory levels, would naturally extend out in terms of total day's sales. Much of that, and you've seen the mix is to retail customers, which is primarily cash from that retail network, but the vast majority of it is on on trade credit. So that remains. And so I would expect that our cash realization rates long term would be slightly lower, but the profit margins would benefit equally. Richard Barwick CLSA 1:06:31 Okay. So just to clarify, you didn't name 90% of the target at the strategy day, how does your answer compare or stack up with that target? Doug Jones, Metcash CEO 1:06:47 Well as you've said, we almost certainly wouldn't hit that for the full year on, you know, on an average basis, at the moment that does remain our aspiration, but that is built up of a number of pillars and sub pillars. And so that's an average as much of what you see in our income statement and balance sheet. And so we will do a good job of explaining that as that changes. Alistair Bell CFO of Metcash 1:07:14 Yeah, you're right. The 90% is it's a way to think about it is to normalize when we're writing a like-for-like business and, and the 90% is a historical average. We'll continue to explain the components as the sub pillar levels shift about and our weighting moves about. Richard Barwick CLSA 1:07:37 Okay, all right, thank you. The second question is just on the number of stores. [I] see that you called out -- sorry, talking about IGA -- you talked about opening 18, but closing nine, so a net nine increase, but the numbers you've given in the appendix would suggest there's actually a fall in the number in total stores. Obviously, core IGA has actually fell by 25. That's October versus April. Can [I] just get some clarification there. And I'd love to also to, as part of the answer to hear your expectations, for the store numbers coming into the second half. Scott Marshall, CEO Food 1:08:15 It's Scott here, I'm happy to take that one. We've called out as part of the network of the future and getting the stores by location in the right format. There'd be some de-bannering going on, that's what that number is. Those customers remain our wholesale customer of Metcash. But not necessarily under the branded IGA. Some of those will fall into banners like Village Grocer, Friendly Grocer, and, you know, contract customers like FoodWorks. Look, we're not -- in the second half we don't think there'll be a material change in those store numbers. Richard Barwick CLSA 1:08:59 Okay, so come April they will look like they are today. Scott Marshall, CEO Food 1:09:03 Broadly. Look, we said also at the investor day, we expected to de-banner potentially more stores than we are, as in stores that don't fit into the network. The way we have approached this is absolutely to increase the executed offer at store level. Hence we've probably targeted the lower less compliant stores first. So that's why I'm saying I don't think there'll be a significant change in what you're seeing. Richard Barwick CLSA 1:09:37 When a store is de-bannered, Scott, what's it mean for Metcash as far as a sales or an earnings outcome? Does it actually change very much? Scott Marshall, CEO Food 1:09:47 Not significantly. They're still a wholesale customer. Richard Barwick CLSA 1:09:53 Okay, well, I think it'd be useful to see, I don't know if you have disclosed it historically, like the number of wholesale customers tha basically [are] these unbannered stores. How that store number moves around from time to time. Presenter 1:10:17 Next question comes from Lisa Deng with Goldman Sachs. Please go ahead. Lisa Deng Goldman Sachs 1:10:21 So back on the foods business, I wanted to better understand the positive volume growth that we're seeing in November. Can we talk a little bit about key drivers of that? Is that, you know, local shopping not really [regressing?] or is that as [unintelligible]? What are the key drivers of that shopping? Will we expect that to continue to the second half? Scott Marshall, CEO Food 1:10:48 Hi, Scott again, happy to take that. Look, what we're seeing, we are calling out really strong sales growth, I think, as [we are ] very excited to be not cycling lockdowns anymore. Outside of that we are seeing shopper retention and growth momentum through the retail network. Lisa Deng Goldman Sachs 1:11:09 So that's a positive trend we're expecting to continue into the second half? Scott Marshall, CEO Food 1:11:14 Well, what we're seeing is really positive signs. And we're not seeing that unwind of shoppers leaving or, you know, so we're not buying into that commentary that we're hearing from others. Lisa Deng Goldman Sachs 1:11:29 And then on the IHG trend, as well as the second question, that minus 1.6, we do expect that to be more of a rise as opposed to a trend. And as we're starting to see weather patterns improve, do we expect that to basically go back into positive territory into the second half? Annette Welsh 1:11:50 So Lisa, [this is] Annette, obviously, we've given you the outlook in terms of the last four weeks, I don't think we're going to do it much more than that. But as we've as I've already spoken to, and all of us would have experienced, Spring has not sprung. And Summer, we are hoping for a better position from a DIY perspective and trade, the outlook still looks positive. Lisa Deng Goldman Sachs 1:12:17 And then, in fact, if it is a weather pattern, it's just lost as in that Spring shopper sales are lost, or are they pushed back at all? Annette Welsh 1:12:25 So depending on which side of the trade or the DIY side for small or medium builders and tradies, which is you know, the majority of our business is that we anticipate just to be an extension of the build time. So we don't anticipate that returning this year. And as Doug, I think said in his opening comments, if we have the fortune of a prolonged Australian summer, then we anticipate that some of those Spring sales, may -- i.e., barbecues, outdoor settings, lawnmowers -- may have an extended sales period, but that's not in my hands. Lisa Deng Goldman Sachs 1:13:05 Got it. And so just one last one if I can just clarify something for the Food business how much in the first half was actually that stock revaluation, contribution to the EBIT? Doug Jones, Metcash CEO 1:13:18 Let me let me answer that. So Lisa, David was 100% right to call us up on language, it's not a revaluation, you don't take the stock on hand and multiply it by the increase and there's your number, what this represents is an opportunity for us to have increased margins by simply changing our selling price. And we're flagging that we didn't do that, in all instances. Some of the instances where we did it was to offset higher supply chain costs, specifically labor fuel and freight. It's a very difficult number to calculate because you could simplistically do it by multiplying stock on hand by increase but that's not actually what it is. The number was, as Scott said, less than $30 million. And, and not significant. So I hope that provides a little bit more clarity on this issue. Lisa Deng Goldman Sachs 1:14:14 Okay, got it, thanks. Doug Jones, Metcash CEO 1:14:20 Okay, I think that's the end of the questions. I just want to make a few comments about about cash realization. Firstly, to be very clear, we expect that when the levels of inflation in the business normalize, we will, we're very confident that we will go back to normal levels within each of the pillars, in terms of cash realization. The uncertainty is because we don't have a crystal ball and we're not able to predict inflation into the second half. It's very important that that uncertainty is not misunderstood for a lack of confidence on our part. We're very clear in the ability to make sure that we have inventory appropriately funded, and that we're collecting funds from our customers. Doug Jones, Metcash CEO 1:15:11 As Alastair said, the book is actually in very healthy shape. The changing shape of the business between hardware and the other pillars as well as hardware's retail network does have a structural change, there's no doubt about that. And we will continue to communicate clearly around the impacts of that. Doug Jones, Metcash CEO 1:15:33 So with that, I want to thank everybody for your time this morning. I look forward to engaging with many of you over the next few days and I wish you well, in your day. Thank you