Good morning, everyone, and welcome to the Woolworths Group half year results for financial year 2019. I'm joined in the room today by my fellow presenter, our Chief Financial Officer, David Marr.

Also joining us in the room are our heads of: Woolworths Supermarkets, Claire Peters; the Head of Endeavor Drinks, Steve Donohue; the Head of WooliesX, Amanda Bardwell; the Head of Big W, David Walker; and joining us on the phone from New Zealand is the Head of Woolworths New Zealand, Natalie Davis. I will begin today with a brief summary of key points from the half, followed by the progress we have made against our strategic priorities.

David will then present our financials before turning back to me to provide an update on our outlook. It was a challenging half across all of our businesses with sales impacted by subdued consumer demand in Q2 as well as crueler and wetter weather.

Despite this, trading over the Christmas period was generally positive, and our customer metrics remained strong, with a further strong underlying customer shift to online. For those of you who have the documents in front of you, Slide 4 has the key points from the half and I'll talk a little bit about those.

Our progress on getting customers to put us first in addition to being consistently good at the basics resulted in improvements in customer satisfaction in all of our businesses. In Woolworths Supermarkets, Voice of the Customer Net Promoter Score achieved record highs in December and store controllable Voice of the Customer scores improved relative to Q1 and the first half of last year.

In terms of sales, group sales from continuing operations increased by 2.3%, driven by positive Christmas trading and online growth of over 30%. In Australian Food, sales momentum improved in the second quarter, with comparable sales up 2.7%.

This was after a weaker Q1, which was impacted by the removal of single-use plastic bags and a competitor continuity program. Australian Food EBIT for the half increased by 4% due to lower cost of doing business growth as we cycled investment in the prior year and began to deliver against our simplification agenda.

Endeavor Drinks' results was below expectations with sales increasing by 1.8% and EBIT decreasing by 6.4% in the half. Now this doesn't include New Year's Eve and so for those of you who have an interest into the New Year's Eve adjusted numbers, our sales for the half would have increased by 2.5% and the EBIT would have still gone down but not by 6.4%, but by 4%.

A number of factors contributed to the lower results, including the timing of New Year's Eve as I just talked about, which was on a Monday night after the close of the half; inclement weather, especially around key events such as the Spring Carnival and key Christmas trading weeks; and a lower growth market. These factors particularly impacted Dan Murphy's, given that Dan is highly leveraged to events.

Steve Donohue has assumed the role of Interim Managing Director of Dan Murphy's and will continue to work with the Dan Murphy's team to position the business for the next horizon of growth. We have clear plans in place focused on localizing range and building -- rebuilding the discovery experience and being digitally led.

BIG W's comparable sales growth of 5% in Q2 and 3.8% of the half was the highlight. While the sales momentum is encouraging, the growth was driven by lower-margin toys and leisure categories and the higher-cost online channel.

Summer apparel was impacted by the slow start to the season, driving higher levels of clearance activity compared to the previous year in order to manage our stock levels. Big W's loss of $8 million is a small improvement on last year and the turnaround remains a work in progress.

Finally, in terms of the highlights, we expect the sale of our Petrol business to complete around the end of March, with foreign investment review board approval the only condition remaining on the sale. The current intention is that up to $1.7 billion of the proceeds will be returned to shareholders through capital management initiatives, including an off-market buyback.

Further details will be shared once the final decision has been made. I would also like to mention the progress we have made on our sustainability and community agenda over the half.

We have not provided waste diversion options in all of our supermarkets across Australia and are continuing to work on our plastic agenda, including providing soft plastic recycle options in most of our stores, and we've taken additional 150 tons of plastic out of our stores up, in particular, out of fruit and veg sections and then out of phasing out of the plastic straws. We have also worked very hard on our inclusion and diversity agenda, in particular, our indigenous and refugee employment, with a positive impact on more than 2,200 indigenous team members joining the business and over 80 refugees being placed in our Supermarket and Metro business.

Looking at the environment part of this agenda, we continue to progress on doing the right thing environmentally, in particular, in the area of energy. And we work very hard in reducing overall energy demand in the business, which has been very pleasingly manifested in very, very low growth in our CODB in this era.

But we're also looking at solar, and we have solar now in over 50 supermarkets, including our largest installation yet at Preston's in New South Wales, a store we opened in early December. On disaster relief and doing more for rural communities, we have -- I'd like to call out the partnership we have with Rural Aid; with Junior Landcare through donations from our Bag for Good; through the S.T.A.N.D.

up that we've had with The Salvation Army with our S.T.A.N.D. partnership, Standing Together Through Australian National Disasters.

And most recently, our announcement to phase out selling $1 milk and implementing a national-wide sustainable milk program. Not related to these, but also in closing on sustainability and community, I wanted to call out the 136,000 kids who have now participated in the Woolworths Fresh Food Kids Discovery Tours through one of our supermarkets.

For those of you have the document, I just wanted to turn to Slide 6, and you'll see in Slide 6 the progress against our Woolworths strategic priorities. And I won't talk through all of these but just highlight some of them and what, hopefully, you will get a sense of though as you look at them and we talk to the highlight is that we are continuing to methodically progress against these priorities and that was, of course, critically important in the half, given that sets us up to where we would like to be, not only in the second half, but going into F '20.

On customer first -- on the customer first and team first, the thing I really wanted to call out there was the implementation of our new EA for Woolworths Supermarkets does impact over 100,000 team members coming to effect in January of this year. It's been an enormous body of work, including by our team members working to that.

So it really has been an important highlight that will provide additional benefits to our team, which is very important to us. Of course, will cause us some productivity challenges, which I will talk to a bit later.

But I'd like to thank everyone who made this agreement possible, critically important for our team. The other thing I'd like to talk about in this section is the launch which we just had of our "I am here" partnership.

We're very focused in Woolworths on trying to holistically look at our team members and support them, not only in physical safety, which we made progress across in the half; financial well-being, which comes back to our EA; but also mental well-being. Mental well-being is a material issue in the context of Australia, and that is equally true about Woolworths.

And we've launched the "I am here" program to [indiscernible] in our business. And so it came out to be okay.

It's basically what we're trying to work with our team on. And over 5,000 of our team members within two weeks have already done mental well-being training.

Lastly on customer first, team first, I would just like to draw attention to the recent floods in Far North Queensland. It's easy to forget them, given how far away FNQ is, but it was brought apparently to mine and Claire Peter's attention when we traveled to Townsville a couple of weeks ago.

We have 30 stores in Townsville. We've got close to 2,000 team members who work for us up there.

It is a critically important part of our business, and it was amazing to see all the work our team and our customers were doing to stand that community back up. And we are grateful to be part of that process as well as, of course, our partnership with Salvation Army and S.T.A.N.D.

and the actions that have been taken by that partnership to do the right thing in that community. There's a long way to go up there and we, as per previous announcements, have committed to investing $20 million-plus into that community over the next 18 months as part of our contribution to it.

Moving from that to talking about connected personalized and convenient customer experiences. This is critically important to the group.

A clear highlight for us in the half was the growth in online in its various manifestations of over 30%. And it was critical to us and we're very pleased, not only with the growth, but the improved customer scores that we achieved over the half in digital.

And also the fact that we are starting to be a lot more thoughtful and forensic in the different services we provide for our customers. So we're not only doing next-day delivery, but same-day delivery.

We're working very hard on extending pick up, and improving our drive-up and drive-through experience, and have had really pleasing response to our on-demand services that we now have out there, both in food and in drinks. So really pleasing to see all that come together.

Also, I'd like to call out -- continued progress we make on Woolworths Rewards. And while the sale of our fuel business was critically important in a planned-out management sense, the partnership which we have on the back of Caltex to extend the Woolworths Rewards program to over an incremental 680 Caltex stores is very important as well.

It really drives up an engagement with the program. Moving on and just talking about our food businesses, our real focus and attention has been over the last 12 months and going forward to really differentiate our businesses in the minds of our consumers.

Historically, consumers have not seen a major difference in the major brands, and we think this is critically important for us to get the franchise on the issues that we want to stand for. And we have continued to progress that in the half.

As I say, we had very good customer scores throughout our business but the highlight for me was the consistency in our customer scores. We do want to be good every day.

Part of that, I want call out our Renewal program, which continues to evolve. We did 43 renewals during the half.

But also, within that, we continue to evolve what the Renewal program is, and we have now laid our next version of Marrickville Metros and Camberwell in Victoria, and Ascot in Brisbane and Bayfair in New Zealand. And we've also continued to fine tune our Metro model, which is part of Renewal for us.

We now have 34 branded Metro stores. And we landed three critically important stores in the last six months, Pitt Street Mall down in Sydney Metro.

We backed that up with Kings Cross in Christmas. And then we just opened Kirribilli, which is our smallest store yet, early in January.

So a lot evolution in the format which is key for us. But we've also worked very hard, of course, evolving our range, a lot more work to do there.

But we're really working on range and in particular, making -- getting the range right by area. Our international foods business, we've got a lot of work underway and that is starting to show really positive results.

We've done likewise on health, in affordable health, and investing in there. And are continuing to work very hard on value-added fresh, whether it's meals or other forms of value-added fresh.

So we think these are all key parts of our differentiation. Certainly last but not least is the Good Acts part of our food business and making sure that we actually engage at a community level and we are resonant at a community level.

And I've already talked about our Discovery Tours and Landcare and so I won't call out much more there. Moving on to drinks.

I've talked to the fact that we had a very challenging first half in drinks. The real issue in drinks is it's about the consumer is changing very quickly and that we need to continue to innovate our business to keep up with their changing needs.

And that is the real challenge. And it's a challenge for them where it is, going forward, it is still the much loved brand in Australia.

It is our highest-value brand in terms of consumerism. But in all parts of our drinks business, we need to innovate.

The key forms of innovation for our customers are continuing fragmentation of categories, the long tail, so to speak, is a big opportunity. Consumer moves through lighter more accessible styles, whether it's in an alcohol sense or a low sugar sense or whatever the case may be.

Accessibility is key. And then, critically important in this category, perhaps even more important than food is the whole topic of convenience and people wanting and wanting it.

Now, given it is a relatively bulky good to take to the home, it does particularly well with some form of delivery where the on-demand or traditional home delivery. So we continue to work.

BWS really led the charge for us with 50 -- over 500 BWSs now with on-demand home delivery. Jimmy Brings has been important for us and shown us what is possible, and that continues to grow, very pleasingly, as part of the BWS proposition.

And we've now, in the last six weeks, transferred a lot of that BWS thinking into Dan's with the launch of Dan's on-demand as well as in making our pick-up experience and 30-minute experience in Dan. So a lot of work done there.

Not getting the traction we would like right now in sales numbers, but will be a key part of our future. Moving to the portfolio and unlocking value in our portfolio.

I've talked about the sales momentum in BIG W, which was very pleasing in the half, but we are realistic, we are still losing money in the business and we now need to translate the sales growth into profit growth. In truth, the performance we got from the half was in line with our turnaround plan.

Unashamedly, we've always been focused on getting customer sales first and then delivering through to the bottom line. But now, that has to be our area of focus and building a sustainable business over the next 3 to 5 years.

It is why we are undertaking the store and network review. We think the timing is right as we stabilize this -- to do that as well as continue to refine our plan in terms of pricing and ranging in front our network to deliver on the bottom line.

Petrol, of course, we expect to hopefully get further approval and then move to the next stage, including standing up our food supply partnerships with Euro Garages and Caltex. And then, in terms of ALH, their Responsible Gaming agenda is a big one for us.

And we've actually continued to work on it very materially in the last year despite some of the press we've had out of New South Wales last week. Last but certainly not least are our end-to-end processes.

We live in a time of increased cost pressure in our business, whether it is in the cost of the products we buy or underlying inflation we see in wages amongst many other things and it's critically important, of course, that we deliver against our simplification agenda, which we call our Better for Customers and Simpler for Stores. We are continuing to progress that agenda and building momentum, whether it's having 1Store now in place and the productivity benefits we'll get from that as we go forward, the commissioning of MSRDC, which is underway and we expect to commission in the next while, or the broader simplification process that is rolling out under the Simpler for Stores moniker.

So good progress against the strategic agenda. In the context of a challenging half, we realize we still have a lot to do, of course, to translate the strategic agenda into the right set of results for our shareholders.

But I'm going to turn it over to David to talk through the financials, and come back to our outlook. Thank you.

And over to you, David

Thanks, Brad. Good morning, everyone.

I'll start on the investor slides, if that's okay, on Slide 9, which is the group and results summary for the half year 2019. And Petrol continues to be classified as a discontinued operation and so it's on the right-hand side in total group.

Just focusing on the left-hand side then on continuing ops. Sales from continuing ops of $30.6 billion was up 2.3%, with all businesses growing sales in the first half.

EBIT from continuing ops of $1.45 billion, up 1%, really driven by a 4% improvement in Australian Food and somewhat offset by the 6.4% reduction in Endeavor Drinks. NPAT for continuing ops was up 2.1% to $920 million, with EPS on a similar basis, up 0.9%.

Group NPAT, which does include discontinued operations on the right-hand side of $979 million, was up 1% for the year. I'll cover dividends and return on funds employed in a moment.

But turning to Slide 10, the EBIT breakdown by business. And Brad touched on most of these points.

EBIT was up in Australian Food about 4% to $937 million, with sales momentum improving in the second quarter to 2.8%. Endeavor was down 6.4% to $290 million, really driven by subdued sales and some investments that are already underway.

New Zealand declined by 2% in New Zealand dollars with the slowdown towards the end of the second quarter. The highlight there being underlying sales growth of over 40% in the second quarter.

BIG W, a loss of $8 million, a marginal improvement on the prior year. However, the sales was largely driven by lower-margin categories, hence, we haven't seen the conversion into improved profitability yet.

Hotels was down 1.5% on the prior year, and that's really because the prior year had a very strong sales and EBIT result, which benefited from a number of televised sporting events, which do make quite a material impact in the half. Central Overheads were flat at $72 million, and finally, Petrol, in the discontinued operations section, was down 12% due to lower fuel volumes impacted by the higher pump prices as well as higher competitor site openings.

On Slide 11, the balance sheet metrics. We've continued to make some improvement in average inventory days for continuing operations.

It improved again by a further 0.8 days to 39.5, with improvements in Australian Food, New Zealand Food and BIG W. Return on funds employed on the right-hand side of that slide for continuing operations improved marginally as higher EBIT and lower working capital adequately offset the higher CapEx investment.

And on a lease-adjusted return on funds employed basis, again, it improved ever so slightly at 3 basis points. Cash flow on Slide 12, which is obviously presented on a total group basis and therefore, includes discontinued operations.

Cash generated from operating activities before interest and tax was $2.5 billion, up 3.4%, really driven by the higher EBITDA for continuing operations of 3.1% as well as lower working capital. Interest and tax increased by 9.5% is really largely driven by cycling at a quarter -- tax refund in the prior year.

Outside of that, actually, interest continues to improve on lower debt. Cash used in investing activities increased by $300 million versus the prior year and that's largely reflective of the prior year, including the Home Improvement proceeds.

Cash dividends paid of $703 million reflect a higher dividend in the first -- sorry in the -- in F '18 for the final dividend, which included a $0.10 special dividend as well as a lower participation in the DRP. And you'll recall, we removed the discount following the first half dividend in the prior year.

So the participation in this DRP was materially lower than the prior year. Cash.

The free cash generated, therefore, after payment of dividends was $400 million -- $401 million in the period, with a cash realization ratio of 123%, which is in line with the prior year. This did benefit from favorable creditor payment timing point in New Zealand in December, which we would expect to reverse in the second half.

Turning to CapEx on Slide 13. Operating CapEx for the year -- sorry, for the half was $825 million, a 7.1% increase on the prior year, driven by planned increases in spend on store renewals predominantly, especially in Australia and New Zealand Food.

CapEx on renewals and refurbishments as a proportion of total operating CapEx was 43%, which is up about 5% versus the corresponding half. For the full year, we remain of the view that operating CapEx will be somewhere in the order of $1.7 billion to $1.8 billion, which is broadly in line with the prior year.

Turning to capital management on Slide 14. The board today approved a fully franked interim dividend of $0.45 per share, which is 4.7% up from the prior year.

This increase is higher than the growth in underlying earnings but broadly in line with our typical first half payout ratio, and we continue to target a 70% payout ratio for the full year. As Brad mentioned, we expect the sale of Petrol to complete around the end of March.

We've, today, stated our intention to return up to $1.7 billion to shareholders, which broadly reflects the net proceeds we expect from the sale of the Petrol business, and the exact timing of that capital return will be announced in due course. And finally, on this slide, fixed charge cover ratio, 2.7x for the half, with -- in line with the prior half and remaining quite strong.

Clearly did benefit from the seasonality of working capital in the half, and therefore, we would expect it to moderate slightly for the full year. And finally on Page 15, I wanted to provide a further update on the new lease accounting standard, which comes into effect from F '20.

You'll recall in August, we provided a range of the likely impact from the standard for the 2018 financial year, and we continue to refine our assumptions since then, given it's taking effect in effectively from the 1st of July. If we apply the new standard as of this first half, we would have recognized a lease liability of somewhere in the order of $14 billion to $15 billion with a corresponding lease asset of $11 billion to $12 billion.

The difference, excluding a net deferred tax asset, is broadly taken to retained earnings. The pro forma P&L impact, if it was taken as of the half would have been an EBIT increase of $340 million to $360 million, and a slight reduction of about $40 million to $50 million in PBT.

It's very important reminder that there is no cash flow impact from this change in accounting standard. And obviously, the impact over the life of the lease on the P&L is also neutral.

Thank you. I'll now hand you back to Brad.

Thank you, David. Just for those of you with the slide presentation, Slide 38, turning to the outlook.

We expect the more subdued consumer environment to continue in -- through the rest of the half. However, it would be fair to say that trading to date in the second half has improved on Q2, primarily due to the more settled weather we have experienced in most of Australia carried off in all of Australia.

You'll recall previous comments from Townsville. So we had to [indiscernible].

Our focus in the second half will be to continue to identify opportunities to simplify our business through improved productivity as well as continue to invest in areas that will drive long-term success with disciplined [indiscernible] are obviously a key component of this. In terms of Australian Food, we expect the market to remain challenging for Australian Food, including ongoing input cost pressures such as livestock.

Our new enterprise agreements took effect in January providing the improved benefits to team members but will result in higher costs, with the full impact to be felt from H '20 -- from the F '20 year. We are continuing to build momentum in our Simpler for Stores productivity program, and we are focused on improving stock loss after a relatively poor first seven months.

We remain confident in our plans for '19 and '20 to deliver top line growth and return on our recent investments. In New Zealand Food, the team remains focused on building on our new brand platform of We Can Help With That, and improving our fresh and health food offers as well as continuing to innovate the customer digital experience, and importantly, realizing the financial benefits from these investments.

Endeavor Drinks, as I talked about earlier, needs to evolve its offer to meet rapidly changing customer expectations, and to capitalize on its market-leading position and resonance, in particular, the Dan Murphy's brand has with our customers. We have strong plans in place to ramp up digital, deliver it on range services and discovery.

And we expect to make good progress over the course of H2, but expect our overall EBIT for F '19 to be below prior year. Despite improvement in sales momentum in BIG W, it remains a work in progress.

We continue to expect a reduction in losses in F '19, subject to no further deterioration in trading conditions. However, we are not satisfied with the speed of translation of improved sales into profit.

And given this, we are reviewing our store and DC network, and further details will be provided over the next 4 to 6 weeks. I will now hand back to the operator to open the line for questions.

Just on the CapEx. I noticed it was up 17% in the half.

Can you just confirm where you'll be slowing spend in the second half. And whether your CapEx forecast includes any potential capital charge from the resolution of those BIG W sites?

Rob, let me just talk more detail and let David talk to the specifics. One of things we have been working on as a group is getting better balance in our CapEx spend over the course of the year.

And really, of course, what we really aspire to do is spend as much as we can upfront to get benefits in front, in particular, in the topic of our store renewals. And so you'll see some progress in that regard as you look at the overall number.

In terms of the specifics, David, do you want to comment on where we expect to land the year?

Yes. Just -- thanks, Rob.

And to back up Brad's point, so we've had our fastest start in spend for the first half, but we don't expect our spend for the year to be broadly different -- or any significantly different, at least, to the prior year. Certainly, at an operating CapEx level, which is the line we really focus on, Rob, the caveat obviously being around property, the timing of property acquisitions, in part, opportunistic or development spend and certainly, sales.

That even at a group net CapEx level, we would not expect material difference to the prior year. And there's no account taken of -- anything in relation to BIG W.

Certainly, as we talked about, we're still working through it.

And just on that, so could there be a scenario where he come to agreement with your landlords about the PV of outstanding rent and as kind of a one-off capital charge to take get out of a bunch of stores? Is that what you're thinking?

We're not going to go into the detail, Rob, because we're working through all of our options in relation to BIG W, the network stores and distribution centers, et cetera. We'll come back in the next 4 to 6 weeks with a clear outline of what that looks like.

Okay. And then just secondly.

Your gross margin's flat in Australian Supermarkets, your main competitor. So a little bit of a lift yesterday.

You still got deflation coming through the system, even allowing for a bit of a bounce in fresh. What is holding you guys back from starting to lift prices?

You're obviously the incumbent in the sector and you do have a competitor that's going through a bit of a rebase. Why are you not sort of pushing price a bit more aggressively?

Rob, thank you for the question. Firstly, I should just call out that as we talked about in the outlook that one of our challenges on the GP line, our course spreading through wasn't there, it started when we didn't really progress our agenda year-on-year but went back with it ever so slightly.

So -- and we know we've got a lot of opportunity, a lot of work still to do in stock loss, we've got to be quite careful of how we do it, of course in the context of the customer experience. But that's a big issue for us.

On the topic of price, look it is -- we evaluate every decision on its merit, as you might imagine. But affordability is key to our business and making sure we continue to hold our own position as delivering on various keys.

So customers now recognize we're delivering value. We just got to be very cautious in ensuring -- that's been a hard one, a hard four to get there.

We just got to be very careful that we don't undo it in any untoward way. That said, you are seeing where legitimate input cost increases come through, a lift in shop prices.

And as I said, we'll continue to evaluate these issues on a case-by-case basis.

First question for me is on liquor. Obviously, there are some timing issues there and maybe some cyclical factors around the consumer.

But I think it's fair to say it was worse than what most of us were expecting. So I just wanted to talk through that in a little bit more detail, and specifically whether the big box Dan Murphy's format still has the pull that it used to.

And maybe you could compare and contrast the performance of BWS to Dan Murphy's, to help us out a little bit.

Yes. Look, Michael, thank you for the question.

In general, we're seeing a real demand for convenience across all of our businesses. And it manifests, of course, in various ways: The solution we provide in the store, how we lay out the store and make it convenient just to get your everyday needs; and then, in the growth of home delivery or pick up or underlying sales.

The demand for convenience is there, and it only continues to grow. Interestingly enough, in the history of time, you will remember this, one of the things that has made Dan Murphy's the market leading business it is, is that if you've got a car, it's very convenient 90 -- 90%-plus stores are standalone with a good carpark out front that you can drive, park at and put two cases of wine and whatever the case may be, in your car.

But as convenience changes to being more 2U top options, we do need to work on that for Dan Murphy's and are working on that. So Dan Murphy's is not a big box by the definitions of any big box you may see on the scenes or some of the big boxes you may see in department stores and warehousing.

But it does need to become more convenient. And being more convenient will require to ramp up its home delivery, on-demand and pick-up services.

And that is a key part of what we're doing. Now the good thing about Dan Murphy's is if you think about, in the jargon of the day, the forward deployed inventory.

It is convenient to the vast majority of Australians if we can provide that convenient experience around it. And if we can, it should get back to the specific way we expect from it.

Okay. And does that mean that BWS performed much better during this period than Dan Murphy's?

Yes. Certainly -- and in two ways, one is the attached BWSs to the supermarkets as we get transaction growth in the supermarkets, obviously, the BWS Elephant and vice versa.

So that was very clear. Secondly, having BWS now as an active part of the Woolworths Rewards program has really helped them, and we're getting much better at personalizing office for BWS in that program.

And thirdly, we are feeling very positive about the new BWS format, which again if you enter Marrickville Metro, which I know you've been to your CME, the version -- one of the -- we've seen they could -- real resonance with customers. And as we roll those out we've seen some really pleasing performance on the back end of it.

Okay. And then the second question for me is on Australian Supermarkets.

I mean you've touched on stock loss. And I know there's some sort of blurring between cost of goods sold and CODB.

But the numbers suggest it was a very good performance on costs. Is this reflective of what we see going forward?

Or is the EVA going to swing things significantly the other way? And I guess, what I'm trying to understand is in a difficult environment, what sort of same-store sales growth do you need to achieve to continue to expand margin?

Yes. Look, it is a tale of two halves for us in Australian Food or Woolworths Supermarkets.

We didn't make progress on CODB in the first half. There's been a lot of work, as you know, going on in the background.

So our response, you see, are Simpler for Stores and our energy agendas, landing us some traction out of that. Very importantly of course, we're also starting to cycle investments we have made historically that we know we aren't as material in the incremental sense going forward, in particular, our digital investments.

And what is actionable continue to invest but not at the same way that's a quantum -- and from a store training investments we had. So we're cycling investment we are getting -- [indiscernible] to make some progress on productivity.

As regard though into the second half and into F '20, we will clearly need to keep focus on our productivity agenda given the increased wage pressure, which we will have in our business on the back of our new EA. And those plans have progressed and building momentum, but that will be our challenge, of course, going forward, which is the standard retail challenge of how do we offset wage inflation with productivity.

Brad, I've only got one question. It's going to be a bit hard but it's going to be blunt.

In this first half when you look at your earnings, if you combine your discontinued businesses in Petrol, which you have to because you still own it, your EBIT growth was zero. So you grew EBIT by zero.

The group's EBIT was zero. Now I know that the weather was cruel, can the mobile cross the road, give some plastic toys and you're probably a couple of ends in Bondi Beach and all the rest of it.

There was always, always excuses. But the end of the day, you guys -- so 10 years now, have been spending CapEx at around 2x depreciation.

And your EBIT growth is just not there. Now the worry that I've got, and what I want to throw at you is that you've highlighted that we're in an evolution of retail.

You basically said Dan Murphy needs a refit. BIG W, you're looking at throwing more money at.

It hasn't turn a dollar in about five years. You're basically saying you need to be more convenient.

I don't know if you saw what Steven Cain said yesterday, but Steven basically portrayed a very bearish outlook toward retail in food, particularly in the next 3 or 4 years because of this change and poor consumer. The consumer is doing a task, et cetera, et cetera.

Now that's a big statement. My question to you is why do you spend so much CapEx still?

Why do you still spend 2x CapEx, all these storing yields that you're doing when the move is toward convenience? I mean at the end of the day, you're spending all this money, and there's no EBIT growth.

Yet, this EBIT growth today is zero. And the second half is going to be tough and full year '20 is going to be tough because you've got the increased cost.

So I know it's a hard question but the CapEx is just completely out of control and has been for -- I've been banging on about this for 10 years, at least. You just spend too much CapEx.

So how are you going to be able to generate a return for shareholders in this changing world, a tougher world, a tougher consumer, evolving world? How are you going to get this so that we can actually get some money back at shareholders?

David, I think it's a fair question. So thank you for it.

Look, I would debate we saw potential business for certain views of the future and whether you should include it or not, we debate given the deal we did for the reasons you see somewhere in the numbers. But your point is all correct.

And it is a point we talk about a lot, as an ExCo and as a board, that generating the right return for our shareholder needs to be the focus and we need to do more on that going forward. So we resolved from this issue.

And you're right to challenge us on it. And you could have done some more, importantly, I believe, you had a bit of formula, if you don't mind me saying.

But the real issue I would say to you on this is we are materially progressed on our investment to change inside Woolworths and it has been going on for three years, and we will see it cycle off next year. Not to the extent maybe you may want, but we are certainly well progressed through it.

So if I just look at the trying to get our IT systems into the 21st century, we've got the last bolt locked in place for us right now with the JDA. But essentially, we have upgraded our IT systems virtually in total by the end of this year.

And that's reflected in the CapEx and the depreciation is income through. We've been working very hard on our supply chain network.

We clearly are not there yet, but again, that is well progressed with what we're doing not only on the MSRDC but our new replacement of our chilled distribution, a network, which we're doing forward, going forward with Americold. So we've done that.

The story in new program, we've now touched 50% of all stores in Woolworths in the three years since I've been involved as the Group CEO. So we have touched a lot of them.

Those are the stores that are really holding up best for us. So clearly, we've very well progressed into managing the store.

I think you should be continuing to challenge us. And that's the right question.

The only thing I would say is we are well progressed in all of these agendas. We've got to get the dividend off them.

We are starting to, but clearly that's the focus in second half of '19 and in '20.

You can recognize our frustration now, can't you, Brad? You can see that.

And can you give us an idea as to how long it will be, this CapEx that you're going through, when will the pressure start to ease that we can actually start to see CapEx, say, being like depreciation and then the cash just keeps pouring out? When can we get to that stage?

Or do...

David, I mean, we don't really provide an outlook. I can tell you, though, that it does step down in next year into F '20, in particular, as we cycle out of the material IT investments that we've had underway.

So it does cycle down. We are sensitive to the issue.

We're working through it, but I don't know, David, if you wanted to add say anything.

Hi, David. I guess probably just a couple of other quick points to add.

We did say very clearly, a couple of years ago, we had a three year -- specific three year catch-up period that Brad's mentioned. And we are in the third year of that three years.

So we would expect some level of moderation from '20 as Brad just said. On the flip side, if you're just doing the comparison between CapEx and D&A, you've obviously got a look at operating CapEx because -- to get the right comparison.

Our D&A is increasing, and so that gap is closing. I said at the full year result, we expect the D&A to increase by roughly 10% double digit for the year.

I think it was about 8.5% in the first half. It was 11%, I think, in food.

It will be double digit in the -- for the full year. So that gap is moderating, and our CapEx -- gap is closing, I should say, and our CapEx will start to moderate from '20.

Within that CapEx number are some very material investments that are multiyear investments. And so we -- for example, MSRDC, several hundred million dollars of investment as you'll know, it's only just being commissioned now.

So of course we need to get a benefit for that. I'm just saying, as of point in time, we haven't yet got any benefit off it because we're just now are starting to commission that.

So -- but we do expect that the gap between the two to continue to moderate.

Just a question regarding the EBA and, Paul, you may have quantified this. But what is the dollar uplift you're expecting in your cost?

I think you've highlighted first half '20 as a full half of that. If you can just talk a bit about what that is from the dollar uplifts that you'll have in labor cost in food, please.

Shaun, look we haven't quantified what it is. So they're -- actually, it's quite technically hard to do so anyway.

But it's, obviously, it's a step-up. But -- so we haven't quantified or called it out.

It steps up in the second half of F '19. But then there's another step-up in '20, given that sort of a two components, new team members and existing team members.

And so the new team member on the penalty rates have moved now, and then the existing team members who move in '20. So there are two steps in it.

We need to focus on our productivity agenda to cover it. And that is certainly our plan going forward, and we need to really work very hard on that for '20 in particular.

And so do you believe you can cover it?

Shaun, we certainly have materially covered it, it's our aspiration, absolutely. And we've been working on this the last couple of years to the question David had on how we use technology and things like that to help us cover it.

So it is certainly our aspiration in the context of the next 18 months.

Great. And just in terms of BIG W, I think you highlighted the first half '19 result was in line with your expectations.

But what has changed to require the review? And is it the breakeven's less likely to be achieved in the -- and hence you need to sort of make changes to your current store network guide, the closures or possibly more likely rent reductions?

Is that kind of -- I'm just curious what is going on in your outlook for the business that's actually causing you to sort of see this change because you've highlighted the first half '19 is actually in line with your plan.

So it is not in line with our expectations but it was in line with the turnaround plan. Our expectations are higher than the plan, as David walked on those.

So we wanted and would've -- and we expect our shareholders would've also wanted us to be in a proper position in the first have given all the challenges you have in the second half. So the original plan is tracking through, but not in line with expectations in truth, and it's something we're all working on, on changing.

In terms of where we are, though, now that we have got some momentum and we started to see the resonance and we're starting to be much clearer around what we think the future will evolve, it is a prudent time for us not only to be tightening the plan in a trading sense, and so, obviously, in the price indices and promotional effectiveness and getting our soft goods sourcing whilst taking SKUs out of store, which we still got -- done quite a bit of. We need to do a lot more.

So we've got that. But it is also prudent, in particular, in the world of digital and online and now that we've got a much broad beat on -- to just stand back and make sure that asset footprint is for -- the purpose as we go into the future.

So that's what's driving us. The timing is right to do it.

It has two components, trading and a sort of more broader structure component. But as you would expect, that's the kind of thing we should be doing right now in our journey.

I'm intrigued to hear the news flow on keeping on Dan Murphy. So there has been a debate for a while in the industry about whether or not Endeavor's getting too big and needs to actually grow the market as opposed to growing its share in the market.

So are you seeing the CV trends coming through particularly with the more exposed business model too convenient in Dan Murphy's? So I'm just wondering with Steve Donohue's addition to the team, I'm just wondering how we can expect the strategy to change for Endeavor, but Dan Murphy's, in particular, and whether or not any range rationalization or indeed store rationalization's going to be part of that.

Thank you, Andrew. So it's not a complex question to answer.

What I can say, and I'll say something and Steve, if you'd like to add, please do. We all do much more range curation.

That is fair to say one range -- we used to have the biggest range, the net range, meet the needs of most of the markets in which we operate. That is no longer the case.

So you will see a lot more active range curation by store. And so that is a very important part of the agenda.

Store closures are not part of the agenda, Andrew, given the value of the classes and the fact that it's a very strong, profitable business. However, some of the stores will pivot more to being hub top store to help meet the needs of our growing -- our online business.

So we will be a lot more deliberate of how we may transform some stores to being as much about online as about being physical stores, and the team are working through that. In terms of growing the market, clearly, it's about trading up.

The big issue we've got, the big issue to Dan, as Steve has rightly pointed out as we've been talking this morning is one, we've got to get more innovation into the wine business. And it's critically important to the liquor industry in Australia.

And we've got to play a role in helping on that innovation.

I think just to add a little bit of color, the only thing I would add is that the -- for the calendar year 2018, the total market for wine that's reported, grew by about 2.5%. But that slowed markedly in the December quarter to almost flat, only a 0.2% growth.

And Dan Murphy's obviously has a very large exposure to that category. And that's why we've also got this responsibility to engage customers in the interesting range of wines that we can bring to them.

So there'll be some trimming but a lot more additions to the Dan Murphy's range and much more curation in stores as Brad said.

Okay. And just my second question, I'd like to ask a few more about Australia.

But I'll just turn to New Zealand. You've now spent at least three quarters -- sorry, three half year periods reinvesting aggressively in that business.

And there hasn't been a huge change in terms of the customer metrics, though it certainly moved in the right direction. I'm just wondering what kind of market impact you've seen whether you're happy with that.

And when do you see it actually paying off for you like with -- to a degree in the Australian Food division?

I think it's the right challenge, Andrew. Just technically -- and this last half was the annualization of the investments we have made in particular, with what we call CountdownX and what we've been trying to do in fruit & veg.

So you've sort of seen the annualization. We said we were going to invest and then we started but it took a while to annualize the investments we've made.

Very importantly also to call out that the two hard growth online businesses for us have been BIG W and New Zealand with New Zealand generating growth in the first half of over 40% in online. And so that has put some -- we think it helps us strategically, going forward, but it has put additional cost pressure into that business.

And we need to work hard on underlying process to make sure that, that business is profit-accretive. But as I said, the underlying metrics are improving but we do need to now start seeing it fall to the bottom line.

And that is a challenge for Natalie Davis, who's our new Head of -- Managing Director of New Zealand and also started in Metro same time as Steve in June. And that's certainly the merits of what the focus needs to be in the second half.

My question's on liquor as well. So things like cutting business pressure was -- were the primary driver in the first half, and obviously, your second half outlook getting much better.

Just wanted to sort of get clarification around where you've been investing, so where those controllable investments have been. And how that is phasing over the next sort of 12 months versus inflations, some of the full running costs that you called out.

So some of those uncontrollables versus controllables and how we expect that to play through the margin over the next 6 to 12 months.

Yes. Thanks, Bryan.

Look, part of what you see at the CODB for Endeavor is mix related. So BWS, obviously, runs at a higher GP, higher CODB, it being a convenience business, so that slows the growth.

You've seen some mix impact in the CODB and when you look at the aggregate numbers. However, we have clearly, in the last couple of months, been investing in Dan Murphy's.

And those investments, we need to start the dividend from in the second half of March FY '20. So we put one adviser back into the -- our most important 34 flagship stores, recruitment, training process to get those into the business.

We've been doing a lot of work in more Dan Murphy's and getting the program right. And it's a program that actually has huge resonance but isn't really delivering personalized office with -- to the expectations of us or customers.

So we've been starting to invest in that, in getting that right. We've also been invest back into the team, in store, in training and engagement and product knowledge.

So there are a number of investments in the first half that we should start benefiting from going forward. In terms of the outlook, look, as you know we don't give outlook, but we do have some work to do, which is why we called out that we don't expect the business to be ahead year-on-year at an EBIT level, just given the timing of getting all these into Dan's and of course, also working on the board of productivity agenda.

Right. Okay so just to confirm then, those investments, those controllable investments you've made in Dan Murphy's are rolling off in the second half?

Or would that, say, annualize in the second half and then roll off next year?

Annualizing the second half in truth and then roll out.

Yes, okay.

It's not a -- the narrative for our business is not a -- it's not a business that needs to be turned around or whatever. It is a very successful business that we now need to reshape it and reset it for the future.

So it's a very different scenario. We're not sitting on an old -- more of a store network with refrigeration issues or we're not uncompetitive on price.

Actually we've never been more competitive on price. Our issue is getting our customers to know that.

So we're not in a bad place structurally but just getting changed, Dan just takes lead in the late half.

Yes, yes, okay. And can I just get a clarification on the gross margin -- sorry, stock loss impact on gross margin.

I think in the first half '18, you called out 2.8% stock loss level. You said it went -- moved -- unfavorably for you slightly.

Can you give us the basis point move or a level just so -- just to help with our modeling of gross margins, please?

Thank you, Bryan. I had a number in my mind, but then the team were telling me a separate number.

But I was going to say, 10 basis points. So we moved backwards by 10 basis points in the first half on stock loss.

And we've got a plan to improve and we still have a plan to improve, of course, going forward. Actually, when -- the change with the sales in the first quarter, that's caused a bit of deleverage, but that's not the real reason we are where we are.

We've got to do a lot more work on how we manage our stores. And that's the key issue for us.

We've got to work -- continue to work on fresh. And we've been working very hard to turn meat and how we put the right sales to space range as -- a lot of sales to space inside our meat cabinets.

So there's a lot of work underway. We know what the issues are.

They all are addressable. And the team are working very hard on them in the second half.

Brad, yesterday, Coles expressed the view that the profit pool for retail in Australia had structurally forewarned. It's to be -- overhead for some time.

I'm just wondering what your thoughts are on that sort of thinking.

Well, Woolworths' a different journey. Grant, this is my third year anniversary as the Group CEO of Woolworths and my fourth year of being in supermarkets.

Our supermarkets compression on my time over that period, maybe we're in different parts of our journey, but we see opportunity. But we've go to work hard for those opportunities, and there's nothing -- there's never been anything to give me an insight in retail and that's particularly true going forward.

So we see really positive excitement in what we can do through automation and process improvements on our overall cost structure. We've got a lot of investments that we are slowly coming to fruition.

And we need to deliver on in that regard. We've seen ability to pull through to improve GP through mixed management and doing a lot more value-added activities in fresh, and we think that will be very important for us.

We're clearly not where we would like to be in stock loss but we need to get there in a sustainable way. So the -- at 3%, when we know best practices, is well north of that is an opportunity.

We're waiting further promotions that are not profitable. We know that we can and should reposition a lot of those and repurpose them into more one-to-one promotions and deliver more one-to-one value in those through.

We just need to look to the process of doing that. Our biggest GP hits in the first half, just technically, was meat.

And the material input cost we've had is we slowly transitioned our meat business model and we've moved to, really, cash-ready across most of our [indiscernible]. It's something we've been working on for three years.

Actually at Heathwood, ahead of progress up in Brisbane. We know that if we can just get through that, we can hopefully stabilize that business.

But that was our biggest cost. We also know what's in the context of us being cash-ready that we can put, on the shelf, a lot of product on the shelf through sharp range in packaging and are quite -- we've got a euphemistic way for claw-back, I forgot what it is.

Field fresh.

Field fresh. So we remain optimistic, actually, but it's hard work.

Always is. And -- but we can see enough things to be positive about in the next two years.

So you've invested heavily to-date in automation. Do you believe that over the next several years, you'd be able to open up a structural cost today to remedy to Coles and remedy to some of the independents in food?

And at what point do you think do you need to start to think about automation in B2C?

Look, I can't comment on where the competitors are. I can just say we see enormous opportunities to use data and forms of digital, including automation, to dramatically improve our business.

So -- and they are there and we're investing in them and we're excited by them. For the obvious reasons, we're trying to take 35,000 products and problem solve to get them to 1,000 different locations in Australia in the right amount for the right day.

So it lends itself to that. As I said, we are well progressed.

I'm particularly excited by what we will do with JDA and getting more telegrams into stores where we get the sales space ratios right in a much simpler way. What we're doing with demand forecast given much more machine perspective, demand forecasting.

So it's not only automation. It is the broader use of digital and data.

And we are progressed. We still, of course, have more work to do, but we do think it is the key.

I don't have the benefits in early January of, again, to connect with like-minded retailers in the U.S. and we're all on this similar journey.

We saw them to be much more forceful in how we share learnings and experiences with like-minded retailers on that journey. That includes your last point on automation in the context of small VCs or customer performance centers as we call them or dark source as they have been called, [indiscernible] opportunity.

What has happened with [indiscernible] and the OSP platform deals that we've seen across the globe is that it has really unlocked a whole ton of investment into this area and there will be amazing opportunities that come out of it. When and how we should do it is something that is on top of our minds right now, but clearly, it will all be possible.

It will be about where you want to be on that innovation curve. Do you want to be early or in the middle of the pack?

So I'm sorry, a long rambling answer to a simple question.

You've talked a lot obviously today about consumers seeking more convenience and the role that online plays on this particular front. Can you talk, within Supermarkets, for instance, just how big is online now for Supermarkets?

How fast is it growing? And then ultimately, where that sort of -- is coming or impacting on your EBIT margin?

I mean, I assume it's -- continues to be a drag, but what's your sort of prognosis for how that might play out over the coming couple of years?

Sure. Thanks, Richard.

We just observed, by the way, we've got as much growth potential in our existing stores, including Supermarkets, to meet convenience needs for customers as we have through our online or digital channels. There's a lot of opportunity for us in value-add and what we do inside our stores and doing more solution selling in all of our businesses, particularly in Woolworths [indiscernible], a team are working on that.

Penetration of online in Supermarkets, at the moment, I think is 3.5% for the first half, and it is clearly growing very quickly. What is most interesting about the growth is that I think somewhere around 70% of the growth in the first half was in the form of pickup, not in home delivery.

Pickup is a more profit-accretive business for us than home delivery, although both, as I say, are dollar-profitable for us at the moment. So it has been more pickup than home delivery.

We do know that when people pickup, they also do pickup three incremental items at store, so that is really valuable to us if we think about how we do in-store convenience as well. In store -- in terms of our online business, we're on the run rate to be at [indiscernible], but as a group, just over $2 billion for the year.

The interesting thing about that is not the size of the number, but increasingly we are improving the underlying productivity of our online business. So we have enormous amounts of work going on, on how we optimize [indiscernible] in a store to make sure we're picking the right sequence for the right coop out of that volume in the store.

We are working even though we don't have an automated customer content on the processes in those, so there's a lot of work going on there. There's a lot of work going on, on the topic of stock loss, if I may come back to it, in the food business.

And online business can run a stock loss proposition at best practice of about 50 basis points. So if you can just do that, that's actually 250 basis points.

It will take us a very long time to do that, but you can challenge me on that going forward. That could materially challenge -- change the underlying economics of it.

So it's in our business right now. It is dollar profit-accretive, but margin-dilutive in the percentage sense.

Our challenge is to now continue to improve that business so that our productivity improvement more than offsets the growth in it and it starts becoming accretive into the EBIT line, and it can be. As I say, if you can have an online business that generates sub-50 bps, basis points, in stock loss certainly for the CFC portion of it and you can be much more forceful on mix management but you can, by the way, personalize that digital experience, there is a part to it actually being non-dilutive, but that will take us a few years to achieve.

Understood. Very clear.

Now, can I just about BIG W, just the performance of that brand across the fleet? Obviously, you're starting to get a sales sort of moving in the right direction.

Are there any things you can talk to with regards to, for instance, I'm thinking store type. So -- and also, I guess, I've got one half consuming from the convenience angle again.

So with BIG Ws in a neighborhood sent away by the close buyer or alongside a supermarket, are they doing any better or worse than a BIG W that's in a larger shopping center, for instance? Is there any sort of way you can add a little bit of color in terms of the performance of BIG W?

Look, Richard, it is a topic that we're looking at the moment. So I prefer to defer the commentary until we come back through our network review in 4 to 6 weeks for [indiscernible] obvious reasons.

Just the first question for me is just -- I'm just trying to understand the December quarter comp because I don't know if it was just the ABS numbers, but if you look at the ABS numbers, it looks like supermarket industry averages up around 4.3%. We're obviously seeing Coles comp, which is, often, you guys come in around mid-2s.

Can you just talk to how you saw share trends over the period? Do you think that market growth is wrong?

And how we should be thinking about the rate of market growth and the way you're positioned around share? And also following up David's question around returns with CapEx.

Thanks, Ben. Look, obviously we think it was a more challenging quarter than you see from there.

And if we realign our combination of [indiscernible] to give us those reads and are very, very different to that. And for the half, as I said, the second half started in a more positive fashion, certainly in the first half.

So -- and then if you look at in the context of what we saw and resources of [indiscernible], what we saw in the second quarter actually was we generated growth across the whole of Australia and we generated market share growth across the whole of Australia. It was a very consistent quarter for us.

I mean, it was in the back of, clearly, a very challenging quarter in Q1. So we -- I don't want to get ahead of ourselves, but it was a very consistent by state and it was very consistent by category in stores.

So all of our categories actually are generating growth. So it's just a very consistent performance.

That's why I called out consistently during the -- that was really the highlight to me. There were no -- there were a few small outliers, but no [indiscernible] outliers in a substantive sense, so very consistent growth by state, growth by category.

And then in the quarter, if you look at our renewal store specifically, Ben, the renewal stores actually performed very strongly. So the new format really did perform strongly.

I would call out that our upgrade stores, which is sort of like renewals, performed okay. They weren't bad, but they performed okay and it is a topic that we are now thinking about in the second half of how we spend those monies.

And so we're less certain with our current upgrade strategies. Why -- we still think we need to do it, but we are rethinking that, certainly with the renewal stores performed well.

And I would call out that our new stores performed fantastically well. Actually, we just opened a lot of great stores where there was [indiscernible] store in Preston that came out of the ground very strongly or Hope Island or whatever the case may be.

So our renewal format, with the new format, when we take the new format into a new store, we get particularly pleasing growth.

Great. And just -- and second one for me just around cost.

I appreciate your cash cost growth for food was pretty well-controlled, around 1% for the half. But just interested in exploring how aggressively you're pushing cost as a focus across the business.

And a couple of areas like the admin expenses also up 8% year-on-year to just under $1.9 billion. And then secondly, just from the [indiscernible] always be challenging, but you guys are probably sitting a lot heavier above still in terms of cost, there's a number of people, et cetera, et cetera.

What -- how aggressively are you pushing cost as a focus within the business? And then could you talk about admin cost line as well, please?

Look, I mean, David might be able to speak to this to some extent, but obviously we've got a lot pressure through depreciation amortization for the conversations we just had. So that is causing us quite a lot of cost pressure that you would see there.

But David, I don't know if you want to add anything?

Yes. Just looking at, I mean, in isolation, Ben, because there has been some movement of supply chain costs out of our branch and into admin, so that 8% actually is 5% on a normalized basis.

The biggest increase in that, as we've touched on, is D&A. So D&A ran it -- within admin, at about 11%.

So then if I come back to the store, it's not the cost issue [indiscernible], but it is process improvement that leads to productivity that leads to us taking cost out of our business. We are clear that we have more opportunity than, if we do external benchmarks and we can see what those opportunities are.

The key question for us is making sure we extract them sustainably and not at the expense of our customers. It would be fair to say, in Q1, with the challenges we had with single-use plastic bags and then the competitor continuity program, that we were cautious in that regard and we didn't fully leverage the productivity benefits that's available to us through one store or at one point in particular and the benefit we could get in [indiscernible].

So we have taken unashamedly, of course, this approach to some of those, but we continue to progress the agenda. We are very aware of the benchmarks.

We just got to be careful in the balance. We're still growing very strongly on weekends.

We've got to be very careful that we don't compromise that weekend experience despite the lift we're seeing in penalty rates throughout EA. So we've just got work our way through it.

Just got a quick clarifying one on the EBA. So is it two steps to this?

Firstly, everyone gets an increase in January. And then secondly, in July, the penalty rate increase goes through.

Is that correct?

Tom, let me try to answer this. And I might -- and it is -- EA, as I've come to understand, [indiscernible] EA, but an enterprise agreement, is surprisingly complex.

What came into effect in January are the new penalty rates we have. And so they're applying particular to weekend.

Depending on what happens, particularly some of these rates will wind off in later years in line with the work commission [indiscernible] from last year. Now that will depend on the politics of the day, but they go up this year and then they will -- it is actually a wind back in future years, which, if it stayed in place, clearly would be beneficial to us.

So the new penalty rates came in as well as the base rate for new people who joined Woolworths. We also paid to our existing team members a one-off cash bonus on the -- as the EBA or the EA came on foot.

For our existing team members, they don't -- the new base rate does not apply to them, but they get a salary -- or wage increase, sorry, in normal in line with everyone else effective 1 July, so that's where the incremental cost comes from. It's for our existing team members who get a lift in their base rate.

I hope that all makes sense.

Yes. And so just thinking about it like, the January penalty rate increase, like given the base rate, like how should we think about just in the timing of [indiscernible]?

Well, yes, the penalty rate is more material than the base rate. If you pull that up, EA, which I'm sure you probably can, you will see how it works for our existing team members.

But it is a penalty rate clearly because it is all where the growth hours are for our customers who shop in our business.

Brad, I wanted to ask you that technology first. And I appreciate hopefully you know the broader steps you're taking on technology.

So you're in the process of commissioning your MSRDC. You mentioned you're coming to the end of the software upgrade with JDA.

How do you think about the milestones, the key milestones for improving processes and therefore, efficiency and therefore cost internally? And what are the kind of key initiatives you're looking at over the next 2 to 3 years?

And then, is it -- are we right just to focus on, I guess, particularly cost of doing business, which, for the first time, you edged -- first time in a while you edged down this half year? I know it's going to be muddied a little bit by wage and acceleration of wage increases for the next 18 months or so, but as an outsider, what should we be looking for in terms of milestone for delivery on that -- on your broader technology initiatives, please?

Yes, look, thank you, Scott. We obviously have a whole series of milestones in our business to deliver the key pieces of technology and to make sure we get the benefits in line with the original investment case.

And over there, I mean, ultimately, of course, it will -- should manifest in EBIT and in net cash generation by our business are the two things which we are focused on and our long-term incentives are lined up with. But I mean, sure, you can look at [indiscernible], some of the benefits which I'll just talk to in a moment will come through to GP.

Now, there's a lot of focus on MSRDC. And [indiscernible] and given what's going on in the industry, we certainly understand why that's the case, but actually our most important program right now in the technology set is JDA.

And so our new warehouse management system that we just rolled out to our third warehouse. It's our new transportation management system, which means we can more clearly coordinate our -- and get more back load [indiscernible] in our current truck fleet.

It is our new space management system, which generates, despite [indiscernible], each one of our stores, including our liquor business. And it is our new forecast and then processes, which will do more automated forecasting for promotions, which we don't do at the store level right now going forward.

So these are very, very important and very critical productivity and performance enhancers for our business. In the case of supply chain, clearly, that will come through the cost out, but for a number of the others, just getting the right [indiscernible] cost generated per store, it will come through a better uplift as well as a stop-loss and there's a well of opportunity there with stop-loss for us in ways -- a portion of that as well as just getting GP mix right, that we get the right mix into the store.

And we can see it today for the categories where we manually customize, we can see performance. So I wouldn't underestimate JDA relatively to the MSRDC.

On the MSRDC specifically, we are all focused and -- on making sure we effectively commission it. Program has based himself and done in Melbourne and so that's effective.

Dan is our head of supply chain. And you understand the profile it has and we are in that process as we speak.

I was down there with the CEO of [indiscernible] two weeks ago going through it with him. And with the team, we're certainly, the boulders effectively complete.

The process itself is working. It's how we scale it up, that's the key issue and getting the right sequence [indiscernible] and extracting the items from the [indiscernible].

So that will be important, but it's not [indiscernible] insignificant [indiscernible] JDA. And then the other key issue for us though is another piece we don't talk to nearly as much, but it's the whole way we do rostering.

What BEA does is make you focus on rostering [indiscernible]. We effectively yield about 65% yield where we put the right hours in the store in the right time of the day or day of the week.

And so we never get to a roster where we yield 100, but essentially about 35% of our hours are not put, to me right now, into our business. Unlocking that is very complex, but we have been investing materially in upgrading [indiscernible].

And we're on version 8.02a or something like that for those of you who have the technology [indiscernible], but it's the current interface into success factors and then into the work that's been done by Claire and her team on the front-end portion of that, that is key. So that to me is arguably getting an effective roster in our business, our most important cost productivity initiative for the group.

Part of that, we're also reworking all of the store standards and we have been doing that for the last six months. And then, outside of all of that is, of course, the key issue for us is sort of the source program, which, again, leverages technology, but in a much more micro way.

It's small pieces of technology used in the business, whether it's temperature control, whether it's just simple ways that contractors can sign in and out of our business using existing technology, whatever the case may be. So you got to measure ourselves [indiscernible] overall performance.

There is a big program. There's lots of milestones, lots of pressure in the group.

The proof will be in the pudding, I suppose.

Okay. Great.

And then my second question was around liquor. Could you just comment -- there's been a lot written [indiscernible] and a lot of investment banks are getting very excited that you closed your Petrol business [indiscernible] looking for the next one, but can you just comment on how far you see the liquor division go?

Sorry, Scott. On the liquor division, can you just repeat the question?

[Indiscernible].

So we are very clear on our Petrol proceeds to cause them back to our shareholders. We simply already are on the permission space to do a major step out acquisition at this stage of our journey.

On liquor, when you look at our business, we've got some really important work to do on BIG W and it is on our minds, but essentially we are a foods and drinks business. As you would be aware, 550 of BWSs are attached to supermarkets and they work very symbiotic together.

The same is true inside our metro stores. We have very similar systems and processes.

So it is a key part of our business. We obviously want to get it back to the growth rates we've traditionally experienced in that business.

I just had a question to explore, the supermarket cost growth, which was up a couple of percent, of which about half was depreciation, so the -- from a cash cost sense, it went up 1% less than trading area growth. So don't -- you have mentioned a lot of things around cycling previous investments, but I wouldn't have thought they have gone down.

So that growth rate seemed to us very low. Maybe if you could talk about going forward, is the way to think about your cost growth, putting away -- putting to one side the EPA issue, sort of trading area plus a couple of percent underlying inflation, is that still a logical way to think about it?

Or are there some really big material cost savings that are going to change that dynamic?

To the previous question, you can certainly paint versions of the future where the technologies we're seeing, you can see step function improvements, but they are a few years out -- technology is increasingly commercial technology and things like that major step functions ultimately on costs. But at this stage, they are pretty far out there and so there's still some challenges in how you scale them up.

In the context of our business, as I have mentioned, we are now cycling these investments, and one of them was digital. And not only we're cycling them, but we're becoming better in the underlying cost of that part of our business.

So you're sort of getting a double benefit that comes out of our investments we've put into store, so that's why you see the performance and some of the productivity and things that are coming through going forward. In terms of the outlook, given the EA, it's fair to say we've got to keep really focused on productivity to deliver the historical model of our CODB growing slower than our sales.

So it is a lot of work to be done there, an extension of this conversation on sort of the technology-based smart source solution of the future.

I had a question on the supermarket format. Just in regards to adjusting the ranging -- on the digital stores to the local demographics, just wondering if that work can be scaled in any way?

Just to me, it seems time-intensive and given that a lot of stores are exposed to different demographics. And how far does that add cost to your CODB?

Yes. Look, Johannes, that's why JDA is so important to us.

And [indiscernible], which we are now running and we started adding more categories. You do need to use machine of an approach to do it effectively.

So we are starting to cross our business and that includes the liquor business on this where essentially with our knowledge now of customers in each one of our communities in which we operate through our various rewards program as well as our new tools, we will do a much more effective job of optimizing our range by store. People get very caught up, and I'm just as passionate as the next person, on the long-tail range in food, particularly helpful good for your product, but the real action and the real prize is just taking our existing range, getting the right version of it to the existing store, getting the right number of phasings at our stores, that will be -- is a much bigger prize than putting in a unique SKU into the range, which causes some issues in supply chain given some of our constraints upstream.

So I think it's an enormously exciting opportunity. You do need JDA or some form of JDA-based system to do it effectively for you.

Otherwise, you just can't. We run, for those of you who are interested, I think somewhere in the order of 560,000 planograms inside our Supermarket business.

And actually just trying to tailor those at a store level, you can just see what the challenge is. So we think we'll be writing somewhere in the order of 1 million planograms over the next 24 months, but that requires the use of machine learning [indiscernible] JDA.

Thank you. It's been a very far-ranging call.

I'd like to come back to, I think, to David's comment at the beginning. We are very realistic on this result.

We do feel we are progressing our plans and our transformation, but we know that we've got a lot more to do and we're very realistic about that. And I look forward to updating you at the end of Q3.

As I said on our media call, while we look forward to updating there and on our roadshow, the best way to understand our business is come and shop at our shops and speak to our team, and I think that's the best way to do it. So hopefully, I'll see you in store.

Thank you very much.