Good morning, everyone, and welcome to the Woolworths Group full-year results for the F2021 financial year. Given the current circumstances, we are conducting this call completely virtually today.

So I apologize in advance for any technical difficulties we may experience. Stephen Harrison, our Chief Financial Officer, who will be joining me in presenting our financial results a bit later, and our other business heads are joining us on the phone.

Today's briefing will include an update from me on our financial results for the year and our progress against our strategic priorities in F2021. Steve will then present our financials in more detail before handing back to me to finish with an update on our current trading and outlook for F2022.

There after we will be happy to answer any questions you have. Just focusing in on Slide 4, before I reflect on F2021, I would like to recognize the Woolies team and express my gratitude for the extraordinary efforts as we continued to be challenged by COVID and the more recent Delta outbreak.

As I’ll talk this morning, we have over 3,300 team members in isolation and three in hospital. Our team continues to work tirelessly to ensure we provide a stable supply of food and everyday needs to the communities which we serve and continues to demonstrate real care for each other and our customers.

I also wanted to thank our customers for their support and patience as we navigate an ever-changing set of challenges and for continuing to shop COVIDSafe. As a Group, we remain firmly committed to operating COVIDSafe and ensuring we are doing the right thing for our team, customers and communities and by leading the way to make shopping safe.

We know how critically important vaccination is and I'm proud of the work we are doing to partner with the Federal and State governments and other food retailers to establish pop-up vaccination centers at our DCs as well as increasing access to vaccines for our store teams. We've also revised our vaccination leave policy to ensure all of our team members can get vaccinated.

We are clear that vaccination supported by both PCR and rapid antigen testing and other COVIDSafe protocols are essential to ensuring a secure supply of food and everyday essentials. Moving on to Slide 5 and summary of the F2021 financial year, which I must confess feels like a lifetime ago.

F2021 was however, a year of significant achievement for our business. And in addition to continuing to navigate COVID, we achieved a great deal during the year with the most significant being the successful demerger of Endeavour Group in late June.

We are now entering into a new era for Woolworths Group and with the caveat of the challenges of Delta in the next few months, I couldn't be more excited about all the opportunities we have in front of us. In F2020, we outlined plans to transfer Woolworths Group into a more focused food and everyday needs ecosystem by building partnerships and delivering adjacent services and products for our customers.

We've continued to make good progress on this plan, which I'll talk about in more detail later on. The Group's trading performance in F2021 was strong with Group's sales growth of 5.7% and Group EBIT growth of 13.7%.

F2021 was a tale of two halves or more accurately, a tale of three-thirds as we cycled the impact of COVID from late 2020 last year. H2 sales growth slowed as expected in our retail businesses, but RF businesses reported sales growth in H2, and contributed to EBIT growth with the exception of New Zealand Food, which was impacted by subdued market growth.

E-commerce was again a highlight in F2021 with continued operations, e-commerce sales growth of 63%. Sales penetration increased over 3% during the year to 8.5% of sales driven by material investments in capacity and capability during the year.

Moving to Slide 6. Operating sustainably is not unimportant to our customers and shareholders, but it is increasingly intrinsic to our business.

We launched our Group Sustainability Plan 2025 with ambitious targets across the three pillars of People, Planet and Product, focusing on areas where we believe we can make the biggest difference. There are too many things to call out individually, but I'm particularly pleased in the progress we have made on diversity and inclusion during the year, including being voted the most diverse and inclusive company in Australia according to Refinitiv.

We have reduced Scope 1 & 2 carbon emissions by 27% since 2015 and removed over 2,500 tons of plastic from our products in F2021 alone. We recognized that there's much more to do, and we aspire to act like a leader and speak up of issues that matter on the topic of sustainability.

Moving to Slide 7 on progress against our three key strategic priorities. I'll talk to Slide 7 and 8 in parallel in tandem, which detail the progress against our key strategic priorities for F2021.

I will call out some highlights, which I think are important to reference. As we looked our purpose of being best together for a better tomorrow, we were pleased to be recognized as Australia's most valuable brand according to Brand Finance, an Australia's most trusted brand according to Roy Morgan in F2021.

We also continued to support the community through direct investment of $35 million, including support for the Salvation Army, Rural Aid, OzHarvest, Foodbank and Lifeline. In F2021, e-commerce and digital accelerated at an unprecedented rate as our connected customers increasingly took advantage of our e-commerce services.

I have already mentioned our strong e-commerce growth and increase in sales penetrations, but another highlight was the increase in average weekly visits to the Group’s digital platforms. On average, 17.2 billion customers visited our website and apps, up over 40% from the prior year with most of the growth coming from app usage.

As we continue to increase e-commerce capacity, we announced a new automated fulfilment center to be opened in 2024 in Auburn, New South Wales in partnership with Connect and now have four operational Takeoff micro-fulfilment centers operating two in Australia and two in New Zealand. Despite the COVID interruptions, we worked hard to differentiate our food customer propositions and completed 75 renewals in Australia and New Zealand in F2021.

We also continued to make progress in tailoring ranges for our customers with the tailored premium or UP range recorded rolled out to 31 supermarkets and a new community range launched in Cabramatta in Sydney based on the needs of that area's diverse Asian community. I have touched on the successful demerger of Endeavour Group in late June, but again wanted to thank all the team across both businesses they worked so hard to bring this together.

We look forward to working in partnership with Endeavour Group for many years to come. Turning to priority five, the performance of BIG W was one of the highlights of the year in F2021 with strong sales growth and an increase in EBITDA of over 300%.

Unfortunately, F2022 is shaping up to be a much more challenging year for BIG W, but I am incredibly proud of the BIG W team and what we have been able to achieve. Finally, to conclude on our strategic priorities, we have prioritized the safety of our team and customers this year and we look to do so in F2022.

We've made progress in the rollout of our new workforce management solution and continue to progress the modernization of our supply chain during the year with work now underway at the Moorebank Intermodal. Just moving to Slide 9 and the Woolworths Group’s food and everyday needs ecosystem.

Slide 9 is a summary of how we think about ecosystem and it is organized into four areas. Those being, of course, our cornerstone retail and B2C food businesses and our growing B2B food businesses more everyday, where we want to deliver additional value and services for our customers and our platforms and partners, where we add value to our customers and partners through building scalable retail platforms.

I will touch on some of the highlights on various aspects of our ecosystem on Slide 10. As you will know, when we come to B2B Food, we completed the acquisition of 65% strategic investments in PFD Food Services on the 28 of June, following ACCC approval.

This investment and partnership with the Smith family will provide us with exposure to the growing foodservice sector in Australia and form an important part of our growing B2B food segments. We also established a new business called Greenstock, upstream meat business and launched Wpay as a standalone retail payments business.

In May, we increased our stake in Quantium to 75% and are establishing Q-Retail, combining Quantium and Woolworths Group’s retail advanced analytics capabilities. Cartology, our retail media business also continued to perform strongly with growth across all advertising channels and by year-end, we had digital advertising screens rolled out to over 1,200 stores.

Moving to Slide 11 and the F2022 Group priorities. While we like to ensure that our Group priorities remain broadly consistent, we refined them annually to make sure they continue to evolve in line with market trends and customer expectations.

All of our F2022 priorities were initiated in F2021 and our focus in F2022 is to scale them effectively. I will now turn to Steve Harrison, who will present our financial results.

And I will then conclude the presentation with an update on our outlook for F2022. Over to you, Steve.

Thanks Brad, and good morning, everyone. I'll start today with the F2021 full-year Group results summary on Slide 14.

Group sales increased 5.7% from the prior year to $67.3 billion with Group EBIT before significant items increasing 13.7% on the prior year to $3.7 billion. NPAT before significant items increased by 22.9% to approximately $2 billion.

Group NPAT after significant items was $2.1 billion. On 23 of June, we updated the market on a number of significant items to be incurred in F2021, which resulted in a post-tax gain of $102 million.

These included estimated redundancy costs associated with the planned closure of our temperature-controlled facility at Minchinbury, the impairment costs for 13 Metro stores, transaction costs related to the demerger of Endeavour Group and the acquisition of PFD Food Services, and a net gain on Quantium with our previously held equity interest remeasured to its acquisition-date fair value. I will discuss the dividend later in the capital management section.

Turning to half two sales on Slide 15. Before we get into the financial performance by business, it's worth recapping on the significant volatility in trading we experienced in F2021, largely reflecting the ongoing impact of COVID and the cycling impact in our F2021 results compared to the prior year.

In Q4, New Zealand Food, BIG W and Endeavour Drinks all reported negative or lower comparable sales than the prior year, given the elevated sales in Q4 of F2020. Australian Food comp sales increased by 0.1% in Q4 due to stronger sales growth in June, as lockdowns, again began to have an impact.

Two-year average growth rates remain strong across all businesses. And this is important context for the next slide, which shows our EBIT by business.

Turning to Slide 16. In Australian Food, F2021 sales increased by 5.4% and EBIT increased by 9% following a strong first half with 10.6% sales growth and 13% EBIT growth.

In half two, EBIT increased by 4.5% to $1.1 billion on flat sales reflecting the impact of cycling COVID in the prior year. Growth was driven by gross margin improvement and lower COVID costs despite material growth in e-commerce and ongoing investment in digital initiatives in half.

New Zealand sales were negatively impacted by low market growth and cycling a strict lockdowns in half two last year. EBIT decreased by 4.6% in New Zealand dollars for the year impacted by negative sales with half two EBIT down 13.3%.

BIG W performance was a key highlight of F2021 with EBIT more than quadrupling to $172 million. Half two EBIT of $39 million was equivalent to the full-year EBIT in F2020.

Group costs for F2021 were $176 million, up 23.6% from $144 million the previous year. This included COVID-related costs of $28 million, additional risk and payroll remediation resources and higher insurance costs.

While we have presented Endeavour Group as a discontinued operation, it was part of the Woolworths Group for the entire financial year of F2021. A strong increase in Endeavour Group EBIT for F2021 and half two reflected the continuation of in-home consumption trends in drinks and cycling a period of closures in hotels in half two of F2020.

Turning to Slide 17 and covering off Endeavour Group demerger accounting implications. While we are pleased with the success to date of the demerger of Endeavour Group, unfortunately, the demerger has led to some complex accounting at year-end.

As mentioned, Endeavour Group is now recognized as a discontinued operation and its assets and liabilities are now classified as separately held for distribution in the presentation of the June 2021 balance sheet. Following the shareholder approval of the demerger in June, we were also required to recognize a demerger distribution liability of $7.9 billion in the year-end balance sheet based on the estimated fair value of Endeavour Group shares calculated using the VWAP for its first five days of trading.

While the demerger distribution liability resulted in a material reduction in net assets and equity at the end of F2021, we will book a gain on distribution of approximately $6.4 billion in Q1 of F2022 as the demerger was implemented on the first day of the new financial year. Turning to Slide 18 and covering off some of our key balance sheet metrics.

Average inventory days for continuing operations improved by 0.5 days from the prior year due to strong sales growth through the year and normalizing inventory levels. Group normalized ROFE increased by 143 basis points to 15.1% and was driven by increases in all business units aside from New Zealand Food, which was impacted by lower EBIT in F2021.

Moving to Slide 19 and our capital management framework. On this slide, we've included a recap of our capital management framework and called out some of the key highlights.

As you can see on this slide, we've continued to generate strong operating cash flow in F2021. This cash flow has been allocated primarily to dividends and investments in the current year.

We have also announced today an off-market buyback of $2 billion to return excess capital and franking credits to shareholders, which I'll cover shortly. Moving to Slide 20 and our cash flows.

Cash flow from operating activities before interest and tax increased 1.7% to $6.2 billion. Growth in EBITDA was somewhat offset by working capital movements, reflecting a normalization of inventories and payables relative to the prior year and the reduction of provisions following significant salaried team member remediation payments made in F2021.

Lower interest paid was due to lower average net debt and lower borrowing costs. Tax paid increased due to higher installments, reflecting higher profits and stamp duty associated with the Endeavour Group demerger.

Cash flow on investing activities increased 13.1% to $2.2 billion, and I'll talk about the increase in CapEx on the following slide. The increase in repayment of lease liabilities reflects the commencement of new leases and lease remeasurements.

Our cash realization ratio was 97% and below F2020 largely driven by the reduction in provisions from the payment of salaried team remediation costs during F2021. Moving to Slide 21 and covering off on our CapEx.

As a reminder of our capital classifications, sustaining CapEx includes areas of spend, including maintenance, safety, store renewals, IT and supply chain spend and investments in productivity initiatives to sustain and improve the efficiency of business. Growth CapEx refers to spend in areas like new stores, e-commerce, digital and other projects that are expected to drive higher sales growth and increased gross margins over time.

Operating CapEx for the year was $2 billion a little above the $1.8 billion to $1.9 billion we forecasted in F2021. This was due to increases in sustaining CapEx, particularly in IT, supply chain and renewals as well as growth CapEx driven by our increased focus on unlocking e-com capacity during the year and driving digital traffic.

We've also worked to identify how much we are spending on our sustainability initiatives to highlight our commitment to driving a better tomorrow. In F2021, we spent approximately $170 million on capital projects with strong sustainability benefits, including areas such as refrigeration, lighting, solar and HVAC.

F2022 operating CapEx is expected to be approximately $2 billion despite savings related to the Endeavour Group. The increase will be driven by investments in supply chain in particular our New South Wales supply chain projects, increasing e-com capacity, including the commencement of our automated customer fulfillment center in Auburn, New South Wales together with ongoing investments in digital initiatives as we look to support long-term growth of the business and drive sustainable long-term value for shareholders.

Moving to Slide 22. Today, the Board has approved the final dividend of $0.55 with the F2021 full-year dividend of $1.08, up 14.9% compared to F2020.

Endeavour Group is also expected to pay a dividend of $0.07 per share, reflecting its earnings for half two. Including the Endeavour Group half two dividends, the payout ratio represents approximately 74% of Group NPAT before significant items.

It should be noted that one of our goals in determining the F2021 dividend was to ensure that shareholders receive dividends from Woolworths and Endeavour Group that are broadly equal to the dividend that would have been expected if the demerger had not gone ahead. The Woolworths Group final dividend included approximately $0.04 per share to achieve this.

Turning to Slide 23 and our off-market buyback. As mentioned earlier, the Group today has announced an off-market buyback of $2 billion.

September 1 will be the last day that shares can be acquired on market to be eligible to participate and qualify for franking credit entitlement. The buyback is expected to release approximately $840 million of franking credits for our shareholders.

Further information is available in the buyback booklet also released today. Moving to Slide 24 covering funding and debt.

The Group’s sources of funding and liquidity remains strong with good access to both bank and capital markets debt. We ended F2021 with net debt excluding lease liabilities of $1.4 billion.

On the 28th of June, the first day of the new financial year, Endeavour Group repaid $1.7 billion of intercompany borrowings for the Group and Woolworths also deconsolidated the Endeavour Group’s cash of approximately $440 million. We remain committed to solid investment grade credit ratings and have significant headroom above the thresholds for our current ratings of BBB from S&P and Baa2 from Moody’s.

We intend to launch a debt capital markets transaction shortly with an estimated size of approximately $1.5 billion to secure long-term funding for the investments in Quantium and the acquisition of PFD and to lock in long-term debt at attractive interest rates. Turning to Slide 25 and closing with the brief update on Primary Connect.

MSRDC continues to increase throughput despite COVID disruptions over the past year, averaging 2.1 million cartons per week in Q4 with further increases in volumes expected in F2022. Melbourne Fresh DC opened ahead of schedule in August 2020.

The development of a new 20,000 square meter fresh distribution center in Oakland is progressing well with completion expected in 2022. In June, we announced a new 76,000 square meter fresh distribution center to be built at Wetherill Park in Sydney to consolidate the currently fragmented temperature-controlled network in New South Wales.

We also began work on our new Moorebank National distribution center, which is part of our overall ambient network project in New South Wales with the two DCs opening in 2024 and 2025, respectively. Thanks, everyone.

And I'll now hand it back to Brad.

Thanks, Steve. Turning to outlook.

We know that COVID will continue to have a profound impact in F2022, especially in the next few months and making any predictions about the year ahead is very difficult. What we do know is that our commitment to operating COVIDSafe remains our number one priority and our ability to respond quickly and effectively to disruptions is now just part of the way we operate.

The ongoing impact of COVID has led to strong sales growth of approximately 4.5% in the first eight weeks of F2022 in Australian Food, as in-home consumption has increased particularly in New South Wales. Two-year growth in New Zealand has continued to improve with some sales benefits from recent lockdowns included in those results.

COVID costs have also increased with $41 million of COVID costs in the first eight weeks of F2022 equivalent to 0.5% of sales. BIG W has been negatively impacted with the number of stores impacted by some form of restriction and sales declining by 15% for the first eight weeks.

As a result and given the outlook in the next few months, BIG W's EBIT is likely to be materially low in H1 of F2021. As Steve already mentioned, CapEx will be approximately $2 billion in F2022, predominantly driven by supply chain and e-commerce investments.

In summary, we are excited to be embarking on a new era for Woolworths Group and remain focused on our key strategic priorities in F2022. We are also focused on leveraging our core capabilities and platforms to grow our food and everyday needs ecosystem by expanding into complementary areas that deliver more value for our customers.

While we are excited by what the future holds, we are realistic about the challenges that lie ahead in the next few months as we work through driving vaccination rates and responding to the challenges and volatility of the Delta strain. I will now turn the call over to questions.

Good morning, everyone. The first question for me is on the outlook for CapEx.

I guess, $2 billion is a big number given it doesn't include Endeavour Drinks and it's almost twice your asset depreciation. Should we think about FY2022 as a peak year for CapEx?

Or is the investment likely to continue at a similar rate for the next few years?

Thanks, Michael, and a very good question. I'm sure Mr.

Errington was hoping he would get that before you, so you're ahead on that one. I’d like to turn to Steve to elaborate on where we are on capital.

So we can sort of preempt a few other questions that might come on this front. Over to you, Steve, to talk through what we see the capital profile looking like in F2022 and any thoughts you might have on the outlook more importantly.

Thanks, Brad, and nice to chat. Thanks for the question, Michael.

Look, it's something that we think a lot about in terms of the balance sheet settings and how we manage our capital and particularly how we allocate our capital as we lay out in our capital allocation framework, we look at both how do we sustain our business and how do we grow our business. The next couple of years in F2022, we've called out specifically, but we have some specific investments that are really about enabling the long-term growth of the business and also maintaining and hopefully growing our advantage.

And that’s in two areas, specifically, firstly, in supply chain. So as we announced this time a year-ago, our investment in Moorebank, that is expected to drive increased spend both next year and potentially in a couple of years thereafter, we'd be opening in 2024 and 2025.

We've also announced that consolidation of our fragmented temperature-controlled network in New South Wales into a new facility we built at Wetherill Park. So the way I think about that supply chain investment is really where at that point in the cycle where New South Wales, our most important state where we have our biggest market share, we need to reinvest back into the capacity for the next stage of growth and we think that those are investments that won't necessarily pay back in the next one to two years, but will set us up for the next stage of growth.

So certainly they are multi-year investments that we are making in the next two to three years. When it comes to e-com that’s the other place we'll be continuing to invest and you would have seen in our CapEx slide that we did step up our investment in e-commerce as we have been doing for a number of years, and actually that's holding pretty good stead right now if you think about the demand for e-commerce in this Delta world we're living in.

But we'll continue to invest in e-commerce capacity, both in putting more drives into our stores, enabling capacity in the stores to allow them to cater for when e-commerce represents up to 20% of our penetration, which we think will happen at some point in the future and we want to make sure that our store network is an advantage in future proof. And then the other thing we're doing is we're making that next investment capacity for e-commerce, and next step up in terms of our automation, we've obviously got the Takeoff units we're now going and building an automated CFC in Auburn.

So ultimately the areas where we've chosen to step up the investment into a conscious choice are things that we think will give us both capacity for long-term growth, but also give us advantage and protect the advantage that we have in e-commerce.

No, I wouldn't have thought, so given the supply chain and pipeline we have for the next couple of years.

Yes. Okay.

And then the question for me is around your margins in the Australian supermarket business, I know it's problematic trying to separate cost of goods sold from CODB, but if we sort of look at the CODB line and CODB margin, even with pretty healthy sales growth and COVID costs falling, those are a little bit of deleverage and the margin expansion came from gross margin. So I'd just be interested in whether you can continue to grow gross margin fast enough to offset that deleverage particularly in the context of my previous question in that I would expect D&A to start to tick up through the Australian Food business as well?

Thanks, Michael. And I think I may have expressed this before my view on the efficacy of GP and CODB, the way it's currently defined for our business.

I think it’s questionable on a go-forward basis. One of the reasons actually our CODB has gone up certainly in the second half was related to the e-commerce costs and us picking for e-commerce orders in our store, which is in the CODB, actually the net delivery costs that’s in the GP.

So you sort of – as our business changes, the way we measure things is something we're going to have to turn our minds to in the next couple of months. But again, let me expand on sort of what happened in the P&L, just to provide a context to what you've to say.

And I might also then get to Natalie Davis to elaborate more on my comments. On the GP line, it was a pleasing year, really primarily driven by our continued progress and improvement on the topic of stock loss.

And we've been working hard as you know is for many years and continued to progress very pleasingly through a whole range of initiative and there was a material benefits in the GP line for us, and also then some changes in mix of business. It’s actually a frozen category, in particular in the second half has started to grow quite strongly as has controlled category.

And we can come back and talk about the reasons there. And then in the CODB, the material growth in e-commerce has put a lot of pressure on to the business and making sure we pick and pack and dispatch the orders.

And you see that in the CODB line. The highest growth volume side within the last year was our personal shoppers and we have in the order of 25,000 personal shoppers in the business as I speak today and it became a material part of our business.

There's lots of things we're learning and working on there to improve efficiency of the way we write our team through the store. We've got picked lot and a whole range of very exciting initiatives, but its still work in progress.

So a large investment there. Also in addition, slow down in some of our productivity improvements.

One of our anxieties right now is a team that is tired and fatigued and a number of those understandably we had to slow down through the year and that was a very conscious choice and decision. And then of course, just in wage rates are going up.

So that sort of gives you a sense of where we are at. On the go forward, we do think of course, and our aspiration is to continue to improve the overall performance of the business.

And we see ranges of material opportunities in our GP line as well as in how we improve using technology to improve the things we do in CODB. But Natalie is anything you would specifically like to call out, in particular in the second half market, where we lacking apart from material COVID costs in F2020 as you would know.

Thanks, Brad. Yes.

I just like to emphasize that I do think we're constantly looking at our profits flow through and trying to make the right trade off. We do have a very good year on stock costs, and we now have stock costs underneath 2.5%, and we're really focused on maintaining that going forward.

And we see further GP upside in areas like tailored ranging that Brad called out also really using data. So we're working on what we're calling next-generation promo effectiveness, but really using data to help target our investments in promotions, so that’s maximum impact for our customers.

And we continue to see upside in CODB. We've called out some of the initiatives we're putting into store to leverage technology to make processes much simpler for us.

And I think action center was a really good example of this, where we effectively have created a number of different algorithms, but our team just get one set of alerts prioritized around what they need to do, whether it's a wasted markdown, whether it's replenishing the shelf, it's all in the one place. So we've got a – I think a long programmatic approach there to really try to remove paper from our stores and automate things and make things simpler, while we also invest in the future and clearly, e-com growth is a priority and leveraging our stores to provide that convenience that our customers are seeking is incredibly important for us.

So there are definitely opportunities there and we're just very conscious at the moment around the pressure in our stores on our team and just making sure that in the short-term we're looking after our team, which might mean that some of these productivity opportunities really are more of a focus in half two.

Hi, Brad. Hi, Natalie.

Can I follow-up on the cost question? When I look at the first half, your first half cost of doing business on first half increased excluding COVID costs by 5%, but when you look at the second half on second half, your cost of doing business excluding COVID costs increased by nearly 9%.

Now I know that you just explained well about the e-commerce and they accelerated, but there was a huge jump in e-commerce sales growth first half on first half, I think you went from about 4.4% sales penetration. You sizably stepped up in that first half up to 7.7, and the second half step up was there, but it wasn't a bigger step up in that second half.

I'm just wondering, are you investing ahead of the curve with your e-commerce because it just looks to me to be, I understand is responsive costs that they get a head costs if you know what I mean, and have you invested ahead of the curve for further acceleration in e-commerce in the second half relative to first half because there is a significant jump in that second half cost of doing business relative to the first half?

Thanks, David. Really good and important question.

Firstly, I think, if you just look at the second half and look at basically, flat sales profile for the second half, it's clear that all of our growth came through e-commerce and essentially there was some negative operating leverage in the stores if you look at store originated sales, and this is not uncommon to us sort of being something that was true across most retailers. So there's the issue of making e-commerce as possible as it should be.

There's also the issue that Natalie talk to and making sure that we use technology to simplify our stores to deal with the challenges of a negative operating leverage at a store level. And it will be an ongoing conversation, I think with Woolworths and virtually every other retailer in Australia in the next couple of years.

Secondly, to your point, David, we have continued to materially invest in an e-commerce capability and capacity, and this has stood us in very good stead in the last eight weeks in particular, in New South Wales given the lockdown. So you can see the numbers and we are committed to continue to invest ahead of the curve with our belief set that actually the more supply we add, the more it's taken up.

So we supply constraints more than consumer demand constraints in particular, in the time of course, of COVID. And so there's a whole range of investments there that we've been in upskilling the team, building more capabilities into WooliesX that Amanda can talk to, making our stores more e-commerce enabled in every case and so on.

So clearly, a very important part of what's going on there as well. And what I'd say about e-commerce what now for us is, and this will change on the go-forward again, getting capacity out there as being our key, actually making it efficient and effective is something that we still need to do a lot more work on.

We're aware of the opportunities, but when you're in the middle of – in these COVID challenges, the number one thing is, is getting the customer served, getting the product to the customer and there's quite a lot of engineering work that can be done on the back. As I said, how we write personal shoppers through store and get the right algorithm in place, and how we cube out tot.

We forward a lot of extra air in our tots and so on. But Steve – I'll turn to Steve first, if that's okay, David, just to give you sort of a financial explanation of what happened in H2 and then perhaps back to Amanda, first on e-commerce and then Natalie, anything you'd like to add at the backend.

But Steve, I know it's just useful for us to lay it out for everyone on the call, if that's okay. We first start with the financial side with you, Steve.

Thanks, Brad, and thanks for the question. Yes.

We looked at the executive type analysis you've been looking at in terms of that cost growth in the second half, and I think there's a couple – or a number of elements to it. The biggest one that we've pulled out is the cost associated with e-commerce and the peaking and the mix impact that that has.

There is a degree of additional costs that goes into our existing store network. So if you think about, we have flat growth in the second half, but we have – all of our growth came from our e-commerce ineffective for the stores, the store originated itself, albeit a lot of the e-commerce is peaked in the store effectively.

But at the same time, we continue to open new stores, we continue to see some inflation or things like rent, where we get to an over rent that links to elevated sales in the prior year interestingly enough. We continue to have some depreciation and timing impact.

If you think about the lockdown in Victoria that you personally had to live through, we weren't able to execute things like training or some of our productivity initiatives that then fell into the second half. So there is some timing that we would probably have distributed across the year.

And I think probably the other one that's worth calling out and Amanda may want to add some color on this. We have continued and consciously to invest in some of our digital capabilities and some of our ecosystem.

So we've continued to add functionality to our apps and our websites and enhancing those. We've continued to invest in digital traffic generation, which has supported, but fells into our stores, fells into e-commerce as well as supporting some of the growth that we've seen in cartology.

And we are also standing up some new businesses in our ecosystem that are embedded in those costs, I think like HealthyLife, Woolies at work, Wpay. And I think probably missed the other point, and it ties back to what Brad said right up front.

We do have a tired team. The reality is our team didn't take the levels of leave that we would typically have done.

And so there is a burden on our cost base throughout the year in terms of slightly higher levels of increasing that annual leave and long service leave provisions and what we would typically see.

Thanks, Steve. Anything you would like to add by way of color, and I'm sure I hope everyone knows Amanda is the Managing Director of WooliesX business, which has the digital and e-commerce partnerships with Woolworths Supermarkets.

Thanks, Brad. Look, I think it's been really well covered.

I’d just add a couple of key points, if I could. Just on e-commerce in particular, we are seeing when we compare H1 to H2 an ever improving performance when it comes to what we call out a directly attributable profit.

And so we are pleased with some of the productivity measures that are starting to flow through in terms of those logistics and the drop costs that we saw in certainly H2, which were an improvement on H1 also, in terms of our labor rate and just looking at the productivity, and then as Brad spoke to, we've got a number of initiatives underway around picking efficiency, particularly in our store, which is absolutely critical given the important role that our store network plays. The other comparison just when we think about H1 to H2 is important, and that is that in H2, we were carrying some additional costs from some of the two CFCs that actually really didn't land until very late in the first half.

So you'll see that as a distinct difference between the two and those CFCs are playing an absolutely critical role right now for us and we’ve really, really pleased with those investments, and frankly, those facilities are now running at almost full utilization as you could imagine in New South Wales in particular. So overall, I think, we're very pleased with the ever improving productivity out of e-com.

There is more work to do, of course, but I think that that's the key comparison, of course. When you look at H2 last year, e-commerce particularly in that March and April period was deeply disrupted in terms of offering our services because of the supply chain challenges we had.

And so those costs won't have been as overt in the base for the previous year when you compare it. So yes, a lot more work to do, but I'd say we're very pleased with the current trajectory in terms of ever-improving profitability coming out of e-com.

Thanks.

Thanks, Amanda. I hope David that she has provided some color to the question you asked.

Good morning, Brad, and thanks for the opportunity. I'd just like to have another shot at the investment protocol question, if I could.

I mean, I can understand you've – on the sharing of the – taking the business on a growth strategy that sort of comes through in a number of the initiatives. And I think we all understand with that sort of growth strategy, I mean the investment upfront is required and there's some impact on free cash flow.

But if I look sort of fairly simply at the numbers you sort of up the dividends or sort of free cash flow slightly negative this year. Next year about a 1.4 billion EBITDA drops out with Endeavour not being present, the CapEx profile doesn't change a lot.

So the implication is probably unless something else changes a lot on the profitability side that their business does go pretty significantly free cash flow negative. And that could continue for a couple of years with the investment profile that you've got in mind.

So I just wanted to sort of cross check with you to see that that is the sort of financial shape that we should be thinking about as we invest upfront and set this business on a growth trajectory. So I'd be interested in comments on that, please.

Thanks, Grant. And again, I'll let Steve talk to.

I mean, I think the big difference in previous years is not actually invest in the e-commerce and store. And we've been doing that for a while as you know, we might be changing the balance there, but we're getting to that peak period and what is more our long-dated capital investments around supply chain.

And for reasons everyone on this call, I think would understand we've – I've been trying to make sure we were comfortable with the performance trajectory, which we'll come back to an MSRDC before we move, but just given our capacity constraints in Sydney, it was just essential that we announced and thought of activating our Moorebank dual facilities, our National DC as well as our RDC, and then our new Fresh DC in Sydney as well and maybe. So that's what you see come through on top of that normal profile.

But Steve, do you want to just talk to the details of what it means in the cash flow sense with of course the usual sensitivities around providing guidance?

Yes. Thanks, Brad, will do.

So Grant just you sort of had any prior question on cash realization in the current year. Let me just quickly cover that off.

As you know, we typically target to have a cash realization ratio of 100 or better. This year we are slightly below at 97.

The key driver there is actually the timing of payments against the salaried remediation activities from the prior year. So we had over $250 million of payments in the current year.

But if you look to that cash realization ratio across the two year, I think we did 124 last year and 97 this year. So we typically targeted a 100% or better.

Just picking up Brad’s point, we don't want to give guidance on cash flow as we don't on earnings. But we will typically target that 100% cash realization ratio from operating activities there, that step up investment will put pressure on that in F2022 and is something that we need to manage.

That said, we also look at it in the context of the long-term and our goal is to create long-term shareholder value. And we think some of these investments are very much around creating long-term value and we believe that we do have the capacity on our balance sheet and we're well positioned against that credit metrics even after the buyback to be able to fund a little bit of additional capital, not a little bit, but a fair amount of additional capital around what are strategically important investments for us.

And we do believe that that will deliver long-term value.

Thanks, Grant.

Thanks. Good morning.

Just a question on the first eight weeks trading, obviously, very strong given what you're cycling in first quarter 2021 and even first quarter 2020 with issues. So just curious around online as a share of sales.

How does that compare to the 8.5%? And maybe if you could quantify that?

And any impact on availability, I'm just concerned around you've got 3,300 staff in isolation. I assume because they're in exposure stores, and we understand merchandisers are struggling to get into store.

I'm just curious around are you even there I say, missing out on sales because availability and gaps on shelf might become a problem, please?

Shaun, thanks for the question. Look, when you look at our growth in Australian Food of the 4.5% for the first eight weeks, 8.5% as you rightly point out on a two-year basis that is necessarily driven by e-commerce and we've literally doubled e-commerce capacity in New South Wales in the last probably 12 weeks.

So it's just an extraordinary effort by the team to put the capacity into the field, so to speak and leveraging on the investments we just talked about with – in particular, our CFC, which we commissioned in December last year, which has proven to be incredibly important in doing I think somewhere in the order of 17,000 orders a week as I speak. So it really has been understandable logical reasons and e-commerce story, but a very good mix, actually, interestingly enough between home delivery and direct-to-boot services.

So it's got nice balance, which we think is important. On availability, actually product availability has been not bad for us today, but there are a lot of stresses and strains as you rightly point out in the supply chain as we speak today.

And these are partly driven by the sector that we have a number of our team in our DCs in isolation. Actually, we've got a material number of them coming back to work today.

Thank goodness. And we're working very closely with New South Wales health to adjust how we treat close and casual contacts with a vaccinated workforce, and also where we do an antigen testing, and then we've got a very detailed track and trace process in our DCs.

So we're hoping we can address the issue, but there are some challenges right now, and I would expect those challenges to continue probably for the next seven to 14 days. What it means, right now we’re probably running in and out of stock rates in e-commerce on average of 5%, and we can easily substitute against that.

But how things play out, in particular, how we engage and how New South Wales helps pop and engages with us in the next week or so, we’ll indicate whether that goes up somewhat. Are we potentially losing sales, I would say so.

Based on actually e-commerce capacity more than availability, our customers at this point in time are willing to substitute product, but it can take two days or four days in some areas to get a delivery window right now. And one of the things I'm always conscious of when speaking to media wireless is we all have personal experiences with Woolworths.

And I'm sure all of you either directly or indirectly know what our delivery window performance is. A very important thing to reference for everyone on this call, either media or on the analysts side is we are saving capacity for our priority assist customers.

And this is critically important for us to make sure people who really need home delivery, get it first and get it in a predictable way and we've got 900,000 customers on our priority assist schedule. So we are actively adjusting and balancing as you might expect as we go forward.

So Brad, you said you doubled capacity in online, thanks for that. Would it be fair to say that you've got e-commerce double the share of where it was in the fourth quarter?

Or is it in the teens? Maybe if you could just sort of provide some…

Yes. You look at – it's not to be disingenuous, but it is constantly changing.

Our e-commerce penetration in New South Wales is going up materially, Shaun to be honest. On average across the country, it hasn't gone up quite as dramatically, but certainly New South Wales, it's probably, if not double going up very close to double because based on what I've just been saying.

And we will continue and working very hard between Natalie's team and Amanda's team to add more e-commerce capacity in the upcoming weeks into the field.

Good morning, Brad and team. Just on inflation and the outlook.

Obviously, you're cycling some pretty strong inflation. I can understand the numbers sort of remaining pretty negative at the moment.

But in terms of the outlook there's a lot of price increases coming from suppliers, there's challenges around global supply chain, and I mean at the same time we're seeing promotional activity bouncing back. Excluding Fruit & Veg and Tobacco, how are you seeing that basket – the overall cost of the basket or the overall inflation measures looking over the next year or two?

Do you think there's a backward pressure on those metrics at the moment?

Hi, Bryan. Thank you for the question.

I'll provide some context and ask Natalie to add additional color. And it will sort of be quite extensive in the lane here because I think this is a really important question to provide a full context.

Obviously you see in Q4 deflation, and that really is as much a product of what we're cycling in the previous areas as anything else we'll come back to some elements of it. So it's been incredibly challenging year to unpick all the moving pieces.

But in Q4, in F2020 was a period where we had to stop our promotional program and then we put it back in first online and then slowly back into a more full catalogue program. So you're seeing the cycling impact in Q4.

The question that you rightly point out what is the outlook going forward. And as always at Woolworths, we sort of look at the long-life categories, which is one you're asking about specifically separate to our first categories and then tobacco, which has generally been inflationary, but it will become less inflationary with the changes in the application of CPR to XRs in September.

So firstly, just on the first side, it has continued to be a tale of two halves there with meat prices continue to grow up. But we've had deflation in Fruit & Veg, in particular in fruits, [indiscernible] prices coming down and we expect and we'll see where meat goes.

It'll probably continue to be slightly inflationary. It looks like at least for the next half Fruit & Veg will be deflationary called out the right value, sit in there and avocados for those of you who interested in super fruits and there's material oversupply to avocados.

So we’ll continue to see deflation. On the long-life side, and Natalie will talk in more detail, but obviously just on the Indian side of our business hopefully everyone is aware of the material pressure right now in international freight rates and have gone up in the order of between 25% and 30%, depending on what ports we're looking at and what timeframe we're looking at.

This has been somewhat offset by exchange rate movements, but not totally. And the outlook on international freight rates is it doesn't look like it'll be coming down, potentially going up.

So there is pressure on international freight rates, never mind all the other pressure is on input costs as well as the disruption and number of our suppliers are finding their own supply chains and manufacturing assets and what it does to cost there. And so we are starting to see more cost increases come forward and we'll work through those on an individual case basis.

So you are starting to see certainly a lot more understandable engagement in that area. And on that issue, specifically, Natalie, I’ll ask you to provide a little bit more color if you don't mind.

Thanks, Brad. I think you've laid out the dynamics very clearly.

We are cycling that reduced number of promos probably for the next couple of months and that impact will begin to moderate. We are seeing a step up in long-life in terms of cost stuff by suppliers and that's being driven by freight costs in some instances, but also by commodity prices in other instances.

So as an example, vegetable oil prices have gone up and that's been reflected market-wide in terms of vegetable canola oil, but also in products that rely on those inputs such as frozen chips. So we do expect to see moderate inflation emerging over the course of the year and continued ongoing pressure on red meat prices in the short-term.

And as Brad said, Fruit & Veg business, there's a number of different dynamics in play there, but certainly the avocado season has been a bumper one and I'm sure straight into enjoying the avocados for as low as $1.50 or $1 in some instances.

That's great. If I could just follow-up very quickly.

Is it still rational in terms of the market reflecting these genuine price increases and do you think other players in the market are seeing similar pressures and if so, even passing those costs on as you would expect them to?

Bryan, I think again, to start – because I think it’s a key question for us on this matter. Yes, we have seen it has been relatively rationale.

And one of the big issues for us has been making sure our price indices continue to track where we want them to be. And that's been true for the whole of the second half of last year and then into this year.

So we are seeing a relatively rational industry and our price indices against our key competitors continue to be where we want them to be. But Natalie, again, I’ll pass over to you to add more color as you see…

Yes. I think we are seeing a rational markets and for us, it's very important that we balance the genuine cost of our suppliers with also the need of our customers to have value for their groceries, so we continue to balance those two dynamics out and we were very pleased with our overall price index and the value we're providing for customers.

Great. Thanks.

Thanks, Bryan.

Good morning, guys. Yes.

Just following up on Bryan's question on inflation. How long do you think it will take for the input cost to be reflected in pricing?

I know the grocery code has kind of 30 days that you need to respond to suppliers, but for how long do you think it will take for it to be reflected?

Look, Tom, great question. I don't think we can give you a definitive answer.

I mean, the way we measure it is with the official message, as you would know, sort of means that it's a more gradual slope that you get to. So reasonably would expect a very gradual process of moving back into inflation in long life items over the first half of this year and into early next year.

And that a lot of the numbers, by the way, was just caveat in the first half of the year just given all the challenges we have with Delta strain and therefore substitutions and trading into large pack sizes and all that. I think it'll still be a very noisy half for measuring us, but I think we'll see a much better version of it coming into H2.

But as I say, a lot of caveats on that if you don't mind.

Yes. Thanks, Brad.

Good morning, Brad. Good morning, Stephen.

I just wanted to pick up on the topic around the negative operating leverage in stores is sort of one of the inferences from the strong e-commerce growth you're getting in the costs that are coming through there. Can you just give us a sense on what costs the company is trying to reduce in-store related to store by sales?

And is the company rethinking store openings in supermarkets given e-commerce growth?

Thanks, Craig. I mean, I think firstly, the way we are trying to think about it is sort of in the network economic sense.

So how do we drive a better store outcome for customers and economically? And so we always try to balance what the store does to support e-commerce together with what it does to support a store originated sale.

So you need to look at them together. I was just making the point that actually, when you look at the store, we've also got the pressure of serving the e-commerce part of the business as well as the fact that the store originated – the store sales are going down.

But we try and look at them as one integrated unit, if you know what I mean, and we are probably different to some retailers in particular overseas is our belief that stores have an incredibly important part to play in e-commerce going forward, in particular as most e-commerce moves to either same day or on demand, and in some cases sub-60 minutes. So we are trying to recreate what we imagine our stores, where they meet all these different needs and work through all the different productivity initiatives on the e-commerce side as well as the store side.

If you then look at – we try to make our stores typical purpose, how we use data and technology to improve all of our processes in the store is the key. And that's really where the work and initiatives, we've got quite a lot of exciting initiatives underway that Natalie talked to.

And the real issue part is not whether they work, it's how we put the incentive and we scaled them up in the context of COVID. And so that is where our challenge lies.

But if you look at a store cost, it really does come down to – it really comes down to how you manage your team and the hours and the processes underneath that. The number one opportunity as always is getting the right team on the white day and giving them the white house to do the job.

And that's our biggest individual initiatives that we have underway going into F2022 and beyond, and then within that, really you've got to look at how you optimize your checkout processes and balancing between ACO's and [indiscernible] and the role that Scan&Go can play. And then it is really how you replenish the shelf and how you want to balance off what's happening there in using technology.

So I don't think there's an easy answer. So we can see an exciting group of initiatives and I'd say our smart store technologies are working very well in a normal course of business would probably shown to you whether it's one that Gregory Hills, which was our original one, two years ago, which is really delivering for us in particular or any of the other new ones, but we call it unfortunately.

And if we show them to you, you would see the fact that we've actually now got electronic shelf labels working for us and we're rolling them out to a number of our stores as we speak, and they not only of course take pressure off the ticketing process, but also they have picked lot of capability to help accelerate the online pick for the customer. We could show you our computer vision scanning of the shelves to help us manage refill.

Natalie has talked about action center and what's happening there, and number of other initiatives, including the automated temperature checking by Monica handheld devices and so on. So I think we feel optimistic that we can thread this needle, but it's just the caveat on COVID that's the challenge.

Okay. And just in terms of store openings, just to clarify…

Yes. Sorry, Craig, I went on too long there, apologies for that.

Look, Natalie, feel free to correct me. Our store opening hours are actually just driven by COVID right now.

So anything you seen with us adjusting store opening is not to save money or cost, or we think there's an efficiency plan there. It is really simply driven by how we think through COVID curfews given the stock pool for the customers and so on.

We don't see adjusting store opening hours as a material productivity plan for us, and Natalie feel free to correct me.

Yes. I think, Brad, the question was around new store openings and will we continue to open new stores.

I’m caught up in curfews.

Yes, because we're definitely still seeing a high return to our new store openings. And our new stores are also used to fulfill online orders, whether that's a direct to boot or delivery.

So we see the store network playing a very important role in our e-com offering going forward.

And Craig, sort of in the realm, we have now the 15 to 20, we feel that's the right number. You'll remember well, back in 2015, we got up to the 32 to 35 stores.

So we're kind of like where we are now. And as Natalie pointed out, actually our new stores are performing very well.

They'll very fit for purpose. And we've actually had a really good patch of store new store openings.

I should call them both sides of the Tasman include from June and it's July. Now we've got a lot more delays now, but that actually been a really high quality portfolio that's been delivered.

Thanks, Brad. Thanks, Natalie.

Brad, my question was on BIG W and I know there was question before on the supply chain and freight costs – rating freight costs are three, four times higher for general merchandise. So the question is really, first, are you seeing that and is that something we should be anticipating in terms of thinking about BIG W's results?

And then secondly, just actual inventory availability, given supply chain issues, so putting that the price might be going up. Can you actually get the stock at the moment?

Well, I think it's a great question. I'm going to throw it to Kathee Tesija to provide more color on it.

I just would make the point that the international freight costs are – there is a lot of pressure there. We are fortunate to have relative scale in the space and good long-term contracts and relationships with most of the international freight company.

So scale does give us some benefits on a go-forward basis. And actually the number one way to be leveraged and whatnot, it's just to get capacity to get products into Australia, given what happened in China last week.

And so we are anxious just more broadly on making sure we get all the products we need into the country for Christmas in Food and BIG W. But coming back to BIG W, specifically, obviously some challenges in transitioning to our new DCs in Perth and Melbourne that it puts bit of pressure on availability to our business.

And then you add that together with some of the challenges on getting the product landed on the stores, and there's a lot of juggling to be done in parallel with the supply chain pressure is given we've got mutually half our fleet either shut down right now, or only authorized to do essential selling in a in-store that is – are we having to work very dramatic through what products we actually want to bring into the country and how do we rethink our sales and inventory profile. But over to you Kath to add more color to that.

Thanks, Brad, and thanks Phil for the question. And you're absolutely right, global shipping in the GM market is in that more 30%, 40% predominantly, obviously based on this time last year when UK and U.S.

was closed, so we are seeing that much more competitive market, which is driving some costs through wasn't a surprise coming into the years. So the team have got some good productivity initiatives to offset what we knew would be coming through in this half.

I think playing to Brad's point, we've got good relationships at Port and prioritization and heavily prioritizing what our customer's needs are for this next half is what the team is working very hard on with based on prioritization at Port. That would be as you'd imagine, spring, summer, Halloween and Christmas.

We know in BIG W how important these customer banks are and what expect us to have a value promotionally-driven digital Christmas. And we can see already customers are searching for Christmas.

I think only two weeks ago, Christmas as a word, went to the number one search. So given our customers that ability to plan early to be able to budget to see what's coming through is a way we've changed our way of working and I would be comforted by some of the more smaller events that we've seen and for anyone on the line, who's got kids, Book Week Dress-Up was still as big this year as it has been any other year because customers are adopting to how they do those events, whether it's via Zoom, or whether is actually just being done at home to bring a bit of joy into that.

So we're very mindful of inventory. We're very mindful of the shipping.

As Brad said, we have transitioned through our DCs. We'll be going into this Christmas with a network that brings the product closer to the customer, which also therefore means we can bring more vessels into Port across Australia, which is what we are working through now to get the product that we need for our customers into the country and on sale for them to be able to plan and enjoy those special family events.

Phil, I should just – very seldom talk about New Zealand, but we're also very worried about the New Zealand given the NBN stock into New Zealand, and Spencer and his team are working very closely with our primary freight inbound logistics team on the international freight logistics team on that as well. So I think there are risks associated for every retailer in Australia and New Zealand on that space, but hopefully we’re relatively well positioned at this point in time.

Thanks. Actually, I had a pretty similar sort of follow-on question on BIG W.

The lockdowns in Sydney, Melbourne happened right during that sort of winter apparel clearance period. How are you thinking about sort of winter apparel clearing?

Is that accounted for in the guidance you can miss for the first time?

Thanks, Ross. Yes, and creates a clear impediment and team for taking early action on that one, so we've actually seem to have managed that relatively well, and it is reflected in a high level, I guess, in our commentary.

I don’t know Kath, you wanted to add to that.

I think as you said, Brad – thanks for the question, Ross. I think we're very pleased with how we've exited out of winter rather than waiting to see what if, so we're in a very strong position on winter clearance in all states.

As Brad mentioned in the release, 2,400 days impacted is pretty significant. I always look to a half glass full and while so underlying performance remains still very strong.

What's also encouraging is our e-commerce is penetrated up to 21% and actually customers are shopping deals through e-commerce, including apparel. So actually there has been some really good sell-through on weekends and weekday offers in that space, which means we're ready to launch spring/summer in the 100 stores that are open and trading very well, and to the 76 stores when we are able to open them to our customers.

Thank you.

Thanks, Ross.

Good morning, Brad and team. Just a question for me just around sort of how you think about the business over the next few years in terms of what's core and obviously Endeavour has demerged now, and you've launched a trial of the marketplace up in the New South Wales coast.

What do you guys say is sort of your core focus now? Is it food or would you think about looking at M&A, or going more aggressively into some of other categories and really expanding, I suppose, the BIG W type offer?

And specifically, they are, I suppose, interested Brad, if you're thinking about doing that organically or do you say M&A is a path for that as well?

Thanks, Ben. Obviously our focus right now to Christmas is all the issues we've talked about on COVID.

But our longer term focus is activating that food and everyday needs ecosystem articulated in the presentation and continuing to work through all the segments of that. If you think from a retail consumer back, we want to be quite focused on curating food and everyday needs products and services for our customers and leveraging everyday rewards to make sure we offer the right product to the right customer all with the caveat around privacy.

So we're not trying to be – the everything marketplace so to speak of Amazon, but very focused on food and everyday needs and everything that goes to do with that. And so that's a very deliberate strategy of ours, that’s deliberately manifest in the partnerships we are doing with Everyday Rewards and also in the additional categories we may grow into through our marketplace strategy.

So it's very curated 1P, 3P marketplace wrapped around more awards, somewhat monetized by Cartology and obviously the sales mix again. Now, as I said, it is fair to say, there will be some delays in particular in the first half on how we activate that strategy.

On the topic of M&A, it always hard to comment to be honest with you, then we can only control the organic things we can control. We'll continue, of course, to engage with others as opportunities come up.

But we've had a mindset of at least making sure we manage our own destiny. So the everyday market for those who haven't addressed in the Willingham new coastal area is up and running and we're learning a lot from it.

This will gradually activated across the rest of the country inside the everyday market as the consumer facing proposition called everyday market. But there is also excess opportunity to mold a seller capability and we could – as we scale that – plug that capability into BIG W for that matter into other verticals if we so choose.

So we kind of got to have a mindset and build that ourselves, and then look at other opportunities and balance them against the counterfactual. So I feel across a whole ecosystem strategy, what I feel good about is when you look at that slide, it's not a theoretical consulting construct.

Everything that we need to do is underway at the moment. And our only challenge is what we scale up and how we scale it up given as I say, short-term imperatives and priorities, and that whole ecosystem is the new core of Woolworths Group.

And our belief set is the total addressable market, there is material and it gives us a good growth profile from the next three to five years and beyond.

Good morning, guys. Just got a couple of questions online.

If I’m reading it properly, your online Voice of Customer looks like it's actually – the score is actually down on the fourth quarter of 2020. Just a bit surprised at that because I would have thought you were scrambling in fourth quarter 2020, and you had things more under control in fourth quarter 2021 given those sort of pre-current lockdowns, et cetera.

So is there anything to call out there?

I think it's a really great question, Richard and well picked up the topic. We actually talked about a lot inside Woolworths.

I'll give a high level summary, and then I'll ask Amanda to give some detail. Expectations of customers are changing all the time.

That would be my headline. Year ago they cut us some slack for unavailability of items or delivery predictability or speed, a year later customers aren't going to cut you the same amount of slack.

So expectations are just moving rapidly. And I think we've got to keep up with them and that's the major insight to us.

There's other bits and pieces that we've learned, and I'll let Amanda talk to those, but expectation sets of consumers in digital and e-commerce we set up, but it's been proven true are rapidly changing, and we need to continue to rapidly innovate to keep up with it, but I kind of pass to you Amanda for a little bit more color on those comparison.

Yes. Thanks Brad.

And you're right, your description is exactly the case that I think when we compared quarter four last year, there was this – in some way, I think we were calling it out as a high level of gratitude from many customers who were absolutely in need of particularly home delivery services. And so that's why there is that different year-on-year.

But when we look at Voice of Customer across the year overall, we would actually say that, overall we've been improving in terms of our experience and we're very pleased and I think we called this out in the document shared with our perfect order rates, for example, significant improvement there around in a complete basket on time deliveries and that's of course a really important part of customer experience. And so there has been this overall improvement, but there are patches for various different reasons and then usually associated with the release of new services.

And so in quarter four, we released a lot more new capacity for things like Delivery Now or two-hour service and understandably customers have very high expectations of two-hour delivery service. They're paying a premium for it in terms of the cost of that delivery.

And so as we launch these things and test and learn, there is inevitably a period where customers mark us down in terms of those Voice of Customer scores. And so you see that too.

So there's a very significant difference between how customer might rate us on direct-to-boot services, for example, versus a home delivery as a same day or a next day service and the introduction of services like the two-hour service. So there's a big mix shift in there overall.

And then of course, if we now just look at how we've been tracking in the last eight weeks when it comes to the Voice of Customer, well unfortunately, there has been an easing of the scores we're seeing come through. And again, that's just reflected in particularly those COVID hotspots, whether a big surges in volume and customers are not necessarily satisfied with waiting a couple of days for a home delivery slot et cetera.

And so it is a relatively volatile measure for us at the moment, but it's just reflecting the very volatile market conditions. But on the whole, I'd say we're in the – it's been trending overall on the improve COVID and new services aside.

Thanks, Amanda, and thanks Richard.

Hi, Brad. My question, given that that will be a bigger part of the Group going forward.

I was wondering we're hoping that if you could perhaps compare the consumer behavior in New Zealand versus Australia, are there any differences that you've been observing for the last 12 months? And then related to that, I've noticed that the online growth rates in New Zealand having been weaker than in Australia, and is that a function of the higher penetration rate in New Zealand or lesser investment in online, or maybe combination of both?

I missed your first, but I think I understand the question, Johannes. So I'll do a high level answer and then ask Spencer Sonn to provide some color.

New Zealand and Australia have been on different parts in relation to COVID over the last two years until two weeks ago, and I guess that's when we welcomed our New Zealand colleagues into the club, dealing with the hard lockdown. There was a short lockdown in Q4 of F2020, which obviously we've just been fighting and protected in F2021 results in New Zealand, but essentially outside of that, it's been a very different scenario in New Zealand and therefore the way consumers are behaved has been relatively different.

So that has changed unfortunately, for all the wrong reasons in the last couple of weeks and we started to see much more similarity. Specifically, on the topic of e-commerce, New Zealand has led the group in terms of e-commerce penetration and that has continued to grow.

And particularly if you take up the cycling of the impact of COVID in Q4 last year, and we see that accelerate even more so in the last eight weeks as New Zealand has started to the same lockdown. So we are starting to see a relatively similar trend lines and behaviors across both in more recent times.

In terms of the overall New Zealand economy, one thing that I've learned and we studied all these numbers is just the differences of tourism and immigration flows and what season they do or don't come into a country. And so New Zealand has been more impacted by lack of inflow of tourism actually over certain periods and that's reflected in the subdued growth rate we saw from New Zealand last year.

We started to cycle at all now though. And so that's positive for the business this year.

So there's quite a lot of moving factors there, but we don't think the average key is any left to shop e-commerce. And in fact, just as likely, and that's been all of our experiences and the rest of it as being just a function of where the economies have been through either with inflows of people into the country or where they're setting in relation to COVID lockdowns.

Spencer, I know you've been in New Zealand now only since February of this year. We've only seen you once given the various lockdowns, but any color you would like to add.

Yes. Thanks, Brad, and thanks for the question.

I mean, I think Brad covered it really well. Just at an overall level, we've certainly seen obviously, a challenge second half in real terms as we cycled through the high base of last year, but we certainly seen in the first number of weeks of this year an improved performance in the overall business up at 6% and within that, our e-com growth has continued to be strong with a growth of 20% on a base of 30% last year.

So whilst I think, as Brad said, it's been a leading light for the group. It's continued to grow, and we still believe there's significant growth ahead in our online operation.

And there's been investment voted towards that over the last number of years, which we are starting to see the benefit of – from a penetration point of view, obviously the last eight or so days have been unfortunate as we started just adjust to the lockdown that sprung on us sort of Wednesday of last week. But just prior to that, we were getting up to penetration levels of around 14% in certain weeks in our e-com business.

Our capacity within e-com, I think most of you will know we’re able to service most of our customers’ orders within – about 40% of our customers’ orders within the same day. That certainly hasn't been the case in the last number of days just given the massive demand that's being placed on our operation, which is starting to stabilize somewhat now as we get into a more, I guess, even rhythm dealing with what is now a new normal with the Delta outbreak in New Zealand.

But certainly from our perspective, very similar behavior across both sides of the Tasman and a strong e-com business for New Zealand in the next number of years. Thanks, Brad.

Thanks, Sonn.

Thank you very much. I’ve come on a little late.

So hopefully you haven’t addressed this. And I might ask two questions in one go because the first one you may need to look back to the first half.

In the result releases under Australian Food, both questions, you give EBIT growth, the first half was 13%, and then you've got a before significant items and after significant items in the full-year results. I'm just trying to figure out which is the comparable one with the first half, sorry, that's a relatively simple one, hopefully.

And then the second one is you have a metric now called plastic removed in tons, and I'm wondering whether that is a cumulative number or whether I should rate that as – you took out 2,100 tons last year, and you'd taken out an additional 2,500 tons this year, and what is the size of the price I guess is the ultimate question on that one? Thank you.

Thanks, Scott. I'll pass the question over to Steve Harrison to deal with.

Steve, if you could pretty straight forward answer that…

Yes. Thanks, Brad.

The half one EBIT versus half two, I would recommend you do your comparison before significant on – that's the best way to look at on trading performance of the business. And then in terms of the question on plastic, actually we've got on Page 28 of our Investor Presentation.

We've actually footnoted it. And so I'll read it to you just for clarity.

It's an annualized calculated value for each reporting period based on virgin plastic weight removed per unit times annualized sales volumes.

Scott, to your question of how much plastic we aspire to take out. That's a question we're working through at the moment, obviously we are quite clear on our aspirations on Scope 1 and Scope 2 emissions alone.

We are planning to revisit our aspirations there as well in March next year, when we revised all of our targets. We currently think what the leading-edge sustainability targets back in August, September last year, now a slightly out of date.

So a lot more work to be done on a target setting in the context of sustainability, and we've actually set up in advanced analytics team within our sustainability Chapter 2 to review and recalculate all of the targets. And we can't tell you what our ultimate aspiration is for plastic, but we do intend to hopefully have that number early next year, and we'll then revise all of our targets as well as how we measure progress against them.

Thank you, everyone for all of your interest in our business. I think it's fair to say we couldn't have presented to you a more complex series of accounts with changes in our portfolio, the impact of COVID and so on.

So really appreciate the nature of the questions asked today, and hopefully our answers help you understand more about our business. As we said at the end, we feel very optimistic about the long-term potential of the Group and the investments we are making, but the short-term priorities around dealing with Delta and the challenges will throw our way between now and late November.

Thanks very much. Have a good day.