Thank you for standing by, and welcome to the Adairs Limited release of the H1 FY 2022 results call. All participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. If you wish to ask a question, you will need to press the Star key followed by the number one on your telephone keypad. I would now like to hand the conference over to Mr. Mark Ronan, Managing Director and CEO. Please go ahead. Good morning, everyone, and welcome to the Adairs H1 2022 results call. Joining me this morning on the call is Ash Gardner, our CFO, and Jamie Adamson, our Head of Investor Relations. The H1 of FY 2022 saw Adairs take deliberate steps towards establishing a multi-brand homewares group aimed at the middle market consumer. This is a customer who's generally more engaged with and has a higher spending capacity in the Australian market. When I think about the H1, Adairs continued to execute on its growth strategy through the opening of two new stores and upsizing of four stores over the half, resulting in Adairs' gross lettable area increasing by 3.8%. The continued growth in the Linen Lovers membership base, despite the impact of store closures, with the membership base now on track to exceed 1 million members this half. The commencement of operations in the new National Distribution Centre, which is at the center of Adairs' integrated supply chain strategy. At Mocka, the finalization of the earn-out and appointment of a CEO was a significant step towards us building the management capability to fulfill our growth aspirations for the brand. Mocka launched a number of new products over the half with good success, and the team are well-placed to continue to build upon this into the future. Finally, the acquisition of Focus on Furniture, which adds a highly profitable vertical retail furniture business with strong growth levers and complements the group through their extensive furniture product and supply chain capabilities. Across our portfolio of brands, the group is well-positioned to deliver not only great homewares and furniture product, but build out a better experience to our broad customer base. As a homeware specialist, the group can now look to leverage the collective strength of our brands to accelerate the delivery of each individual brand's growth strategy while exploiting the capability and synergies that exist across the group. While we delivered on our strategic objectives, there is no denying that the financial results for the half were impacted by a number of challenges, largely one-off and generally outside of the immediate control of the individual brand. These can be broken down into the following four categories. Let's start with government-mandated store closures. There is no doubt that the closure of the Adairs stores for approximately 30% of trading days over the H1 impacted the sales performance. We continue to see customers enjoy shopping in store, in particular for homewares, which has been supported by the drive back to store post any lockdown. While Adairs' online and call-and-collect offerings mitigated the sales impact of the stores being closed, this was not enough to fully make up for the full impact of these lost sales. As we had previously advised, we have estimated this to be circa AUD 35 million sales lost and a AUD 15 million EBIT impact for the half. The EBIT impact was greater as we continued to keep the stores open for call-and-collect sales over this period, maintaining the employment of our team, and have not received the same level of rental rebates. I'll move to some of the supply chain challenges over the half. All brands made the decision to invest in inventory and look to land stock earlier, given the global supply chain challenges facing all businesses. This was largely successful and is clearly evident in the closing inventory figure, which we expect to maintain at these higher-than-normal levels to enable us to better manage the execution of our in-season merchandise plans while shipping and supplier issues remain. Unfortunately, while we executed this strategy well, COVID-19 had a significant impact on our domestic supply chain operations. The most significant factor was the impact COVID cases and isolation periods had on D.C. labor availability across our DCs, our 3PL partner DCs, and our transport providers. This led to a disappointing customer experience for both online orders and in-store stock levels as dispatch delays were compounded by our delivery partner challenges, resulting in longer lead times for customers and store replenishment. While these issues are now largely resolved, both Adairs and Mocka are working through the options available to them to create more agility and flexibility in their delivery partners to help mitigate the impact to customers going forward. The national D.C. transition also impacted the H1. Construction of the Adairs National Distribution Centre in Melbourne was completed in early August 2021, approximately three months later than originally planned due to COVID-related construction delays. Inventory from three of the four Adairs warehouses, or around 45% of SKUs, was transferred to the National Distribution Centre, and operations commenced in September. However, due to escalating COVID risk at the time, we elected to pause the transition and retain the Moorabbin warehouse operations until the end of FY 2022. Challenges in our domestic supply chain I discussed earlier would have been much worse had we not made this decision. While this has resulted in higher distribution center costs, it was a necessary and successful risk mitigation strategy given the uncertainty associated with COVID-19. These higher costs will continue for the balance of FY 2022 as we finalize the transition to the National Distribution Centre in the H2. I'm excited by the opportunity that the National Distribution Centre provides Adairs with, and it remains a key component of Adairs' integrated supply chain strategy that will better enable customers to shop Adairs how, where, and when they choose. The new facility has the capacity and flexibility to support business growth well into the future across all channels and will see improved stock flow, online fulfillment, stock availability, and service levels for both customers and stores during peak trading periods. Finally, to the gross margin compression. FY 2021 saw limited stock availability as a result of COVID closures in Q4 of FY 2020, seeing significant gross margin improvement over this period. Our expectation was that we would always have to reinvest some of this as inventory levels across the categories return to more traditional levels, and depth of promotion increased across the market. At Adairs, the team successfully managed to maintain a lower depth of promotion and reduced number of storewide sale days. However, this was somewhat offset by the larger than anticipated increase in shipping costs and supplier cost price increases. This saw the Adairs brand hold on to approximately 50% of the gross margin gain on pre-COVID levels, as we have discussed in previous trading updates. At Mocka, the team managed their inventory levels across the season well, and with the furniture category continuing to see lower inventory levels in market, we were able to maintain a lower depth of promotion and improve initial margin on our new products. This enabled Mocka to hold on to nearly 70% of the gross margin gain over the season. Due to a change in mix of product and increased local shipping charges, we did see an increase in the average cost to fulfill an order at Mocka that impact our overall gross profit. However, when I look at the half, I remain pleased with the gross margin results achieved by the businesses. With both brands maintaining an improvement in gross margin over the H1 of FY 2020. This shows the team continued to focus on the gross margin rate and ensured we continued to build out a highly desirable and profitable product range across our brands. Of the issues that impacted the financial performance over the H1, the gross margin compression will be ongoing based on a more normal trading environment. While the additional costs related to continuing to operate two large distribution centers will only continue for the H2 of FY 2022. When I think about the H1 financial results, I see them as being a very good result given the COVID-19 impact, and largely in line with our expectations. I'll now hand over to Ash, who will walk through the results in a little more detail. Thanks, Mark, and good morning, everyone. As Mark has outlined, our H1 of FY 2022 results were impacted by COVID issues. Most notably, the stores closed for extensive periods in our two biggest states, being Victoria and New South Wales, and supply chain disruptions, both offshore and locally that affected stock availability and delivery times, and all at a high cost. Underlying EBIT for the half of AUD 33 million was well down on last year as a result of these COVID disruptions, and reduced level of stimulus in the economy more broadly. On page two of our results presentation, we've provided an estimate of the impact that COVID disruptions had on our financial results. The closures of Adairs stores throughout the half, with approximately 31% of trading days lost, so an estimated net loss of sales within the Adairs business of AUD 35 million and an EBIT impact of approximately AUD 15 million. Had it not been for our strong online business and the click and collect service operated throughout this period, the loss of sales would have been far greater. We also chose to retain and continue to pay our store teams during this period to ensure they stay connected with our business and will be available to serve our customers when stores reopened prior to Christmas. While this was successful in retaining our team, it did result in a higher store wages cost during the half. In addition, we continue to negotiate mutually acceptable terms with our landlords for rental concessions during the periods of store closure, and these we recognize in the results as they are agreed. During the half, we did recognize approximately AUD 900,000 of COVID-related rent abatements, compared to approximately AUD 2.2 million the same period last year. As I said, further abatements will be recognized in H2 as these discussions are concluded. In addition to the store closures, local warehousing costs within the Adairs business were substantially higher than planned as a result of the risk management decisions Mark mentioned earlier. Choosing to retain one of the Adairs warehouses increased costs by approximately AUD 2.5 million during the half, but meant we spread our exposure to COVID risk and undoubtedly enabled us to avoid further major disruptions during the period. Mocka has also experienced issues with its local supply chain partners in Q2, which led to delivery delays, order cancellations, and a reduction in the planned promotional activity leading into the peak Christmas trading period of November for Mocka, which we chose to do to ensure customer orders could be delivered prior to Christmas. While all these issues had an impact on the group's results in the half, they are temporary. Our stores are now open, the domestic supply chain issues are largely resolved, and all businesses are developing further risk mitigation plans to be better positioned to manage these issues if they recur. The Adairs National D.C. is operational, and the transition of the remaining Adairs warehouse inventory is underway and will be completed over the coming months, leading to cost savings in FY 2023 and beyond. I'll now turn briefly to the detail of the results. Total sales for the group of AUD 229 million were down 5.7% on the record results of FY 2021, but remain well ahead of FY 2020, with online sales across the group now contributing more than 42% of total sales. Gross margins stepped back to 62.1% due to the increased contribution from Mocka, higher import costs and increased promotional activity within Adairs now that the business has more normal levels of inventory. The Adairs gross margin result was largely in line with where we expected, with approximately half of the gains made in FY 2021 retained and margin remaining 320 basis points above FY 2020. To recap, our costs were elevated in the H1 due to the store closures and the decision to pay, continue to pay our store teams, lower rental abatements during the periods of store closures, higher warehousing costs in Adairs to manage COVID risk, resulting in higher actual costs and reduced efficiency in the new national D.C. Our ongoing increased investment in people to support our growth objectives in both Adairs and Mocka continued during the period. Focus on Furniture joined the business from 1 December 2021 and contributed AUD 2.9 million of EBIT from sales of AUD 12.5 million. While its results are only for a month, this was pleasing and ahead of our plan. The group balance sheet at the end of December is in a good position. The new finance facility obtained to fund the acquisition of Focus resulted in net debt of approximately AUD 90 million. The new AUD 45 million dollar funding facility expires in January 2025, and has the same terms as the existing AUD 90 million dollar facility, which remains available until July 2023. As Mark has mentioned, inventory levels throughout the period are higher across both Adairs and Mocka, but reflect our decision to bring forward purchases to reduce the risk of supply chain disruptions and improve our ability to manage the marketing plan. Cash flow was affected by this rebuild in inventory, but is expected to normalize now that stock levels have been reestablished. An interim dividend of AUD 0.08 per share was announced, which is in line with our dividend policy. In response to feedback from shareholders, we've also activated the dividend reinvestment plan, which will be available from the interim dividend. The record date for the interim dividend will be the 22nd of March, with payment of the dividend on the 14th of April. For those shareholders who wish to participate in the DRP, election forms must be submitted by the 23rd of March. Back to you, Mark. Thanks, Ash. On slide 8, we look at the strength of our business model, which has delivered across COVID, and we expect to drive our future growth. Across all brands in the group, we have a similar mindset. We are growing businesses that put the customer at the center of everything we do. This starts with a strong brand backed by vertically integrated product development capabilities. By developing and sourcing products through our vertical supply chain, we not only offer our customers an on-trend exclusive product, but we can also offer superior value for money. Our customer and product mindset allows us to leverage this strength to deliver an improved customer experience. With teams across the business that have strong product knowledge, enabling them to deliver an in-store or online experience that helps the customer make the right choices in their purchase journey. With the addition of Focus, we now have a portfolio of brands that enables us to fully target the middle market segment of the large furniture and furnishings market in Australia. This is a terrific platform for growth as we have three brands, all targeting slightly different co-consumers or purchase journeys in their segment. By utilizing the strengths of each brand, we can deliver an overall improved customer experience. As we have noted many times before, the strength of this business model are significant and from a financial perspective, deliver stronger omnichannel penetration and the ability to target all customers across the omnichannel model, higher gross margins through controlling the complete product life cycle, improve customer loyalty, and therefore, lower cost of customer acquisition, and strong cash generation and EBIT margins. We are very confident in the business model and see strong growth levers in each of the brands. At Adairs, we see the growth coming from the continued execution of our underlying strategies. It all starts with product, and we continue to deliver and see opportunities across the range for further expansion. This has been more difficult with borders closed. As these start to open up, as is now happening, I'm excited by the opportunity we have here. This will be supported by the ongoing growth in store floor space, or as we refer to as gross lettable area, as we continue to open new stores and upsize existing stores to support the underlying range expansion strategy. Our Linen Lovers loyalty program also remains a key strategic asset, and over the coming years, we will continue to invest in this program so that it builds its place in the Australian loyalty program market. All of this combined with our digital strategy, which continues to deliver strong results. As we build out our loyalty program, it allows us to offer a more personalized approach, which will support our ability to deliver ongoing omnichannel growth. At Mocka, the growth again will be driven by our range expansion strategy. With lots of opportunity, we're seeing strong success across our furniture category, with new looks performing well. This gives us great confidence that there are significant opportunities for us to build upon our range, which will also support our ongoing brand awareness strategy. No doubt there is still considerable opportunity in brand awareness for Mocka, with strong upside in Australia coming from more consumers finding the brand. With ongoing investment in team and capability, we have a strong foundation now to build upon and look forward to seeing the results of this over the coming years. At Focus, the largest opportunity for growth is our proposed store rollout program. With 23 stores in the portfolio today, we will look to increase this to more than 50 over the coming three-five years. Focus has good brand awareness in Victoria, and we will support the national rollout of stores with a strong awareness campaign to ensure Focus becomes a nationally recognized furniture retailer. Within the store environment, there's a great opportunity for us to leverage the collective strength of the group to enhance the Focus in-store experience, both from a visual merchandising and customer point of view. We expect to commence trials of a new Focus store fit-out in the next six months. As a relatively immature digital business, Focus has great opportunity to grow its online channel as well. We know the customer likes to interact with the product as part of a purchase journey. However, our digital presence does and will continue to play a strong part in that journey. The more accessible we make the product from a digital sense, the easier the customer journey becomes, which will deliver strong digital growth. With all brands having multiple growth levers, I'm very pleased with where the group sits and the opportunities in front of us. If I move to the trading update over the first seven weeks of the H2, it is best to consider this on a brand-by-brand basis. Adairs has seen a decline in store traffic with this moving to online over this period. There is no doubt that COVID-19 continues to impact customers with like-for-like store sales down 7.5%, being offset by online sales up 9.7%. Overall, Adairs like-for-like sales are down 2.9% against FY 2021, but have maintained significant two-year growth with sales up nearly 20% against FY 2020 on a like-for-like basis. Mocka has achieved good sales growth over this period, with sales up 14.8% against FY 2021 and nearly 78% against FY 2022. This is a good result against a strong trading period last year. Focus has seen sales decline 7.3% like for like over the first seven weeks against FY 2021. However, it remains well up on FY 2020, and more importantly is ahead of our investment base case. The gross margin for the group over this period has moderated in line with our H1 result against FY 2021. However, as Ash mentions, it remains well up on FY 2020. All brands have good in-country stock positions and are well positioned to manage the execution of their merchandise plans over the H2. This will be supported by the store rollout at Adairs, with up to two new stores and four-six upsized stores expected across the half. At Focus, we expect to deliver a new look store and have commenced work on building out the new store pipeline. However, we anticipate any new stores will be in the H1 of FY 2023. Before I finish, I'd like to thank a few people. Firstly, I'd like to thank our customers. There is no doubt that supply chain issues did not allow us to meet their expectations over the half, and for those impacted, we are sorry for the inconvenience we have caused you. We hope that you give us the opportunity to inspire and delight you in the future with the product and service levels you expect from our brands. I'd also like to thank our team across all brands. The last six months have been a challenging period as COVID has impacted us, and in a lot of instances, also impacted our business partners. Our teams collectively are passionate about our customers and this continues to shine through despite ongoing challenges and changes as a result of COVID-19. I'd like to thank all team members across Australia and New Zealand for their hard work and dedication. I remain confident that with this great team, we are well placed to take advantage of the opportunities in front of us and deliver shareholders ongoing profitable growth. I will now hand over for questions. The first question comes from Apoorv Sehgal from UBS. Please go ahead. Morning, Mark, Ash, and Jamie. Just my first question. Could you give me color on February trading versus January? Just trying to understand that now with sort of COVID case numbers easing, is that translating into improved consumer sentiment and demand maybe in the last sort of two or three weeks? Look, I would say we're seeing similar results across the seven weeks, to be honest with you. We've seen a slight improvement in store traffic in the last couple of weeks, but obviously it's a different trading period for us, given January is a sale period in the category. It's hard to compare in any normal year, January versus February trading results. We are starting to see that consumer come back into store. However, not yet at the levels that we would say is up on last year or in particular up on FY 2020. Okay, thanks for that. And my other question was just on the chart on slide two, where you show that waterfall bridge thing, AUD 48.9 million of EBIT excluding Focus after you add back the impact of those store closures and COVID-related costs. Is that sort of a reasonable indicator for what the H2 2022 earnings might look like? Are there any pluses and minuses for the H2 that we should be considering potentially around some of those operating costs? Well, I think the first one is that the D.C. costs that we talked about, they continue through the H2, so you wouldn't be adding those six months versus three months worth of costs. Not directly, there will be a reasonable amount there. Then there's, you know, I guess just general view on where you think, from a macro perspective, you know, the consumer and the market will be. The purpose of providing it was sort of to allow you to rebase for the full year and obviously expectations around next year. One final question, please. Just on the new D.C., I think in the past you've talked about an AUD 3.5 million annual benefit, which is sort of meant to be kicking in from like H2 2022. Is that something pushed back now to FY 2023, just given some of those COVID difficulties? Yeah. It's probably take us six months in FY 2023 to get it fully up to speed. Is that fair, Ash? Yeah. We'll see the elimination of the extra D.C. costs first and then obviously working through to realize those efficiency gains. Got it. That's clear. Thanks, guys. Thank you. Your next question comes from Wilson Wong from Jarden. Please go ahead. Hi there. I just want to get a bit more color just on your comment of good stock levels across the board. Can you just give us some, basically some color just around the outlook over the next few months? Well, I mean, good stock levels means that as I sit in market, I'm not sitting here thinking that we don't have the inventory to deliver what we expect to do over the H2. We've continued the approach to bring inventory in early, and we haven't wound that back yet. Therefore, we're currently sitting on, you know, almost more stock than we've ever sat on as a group. If you think about the color around that just means that from our perspective, we don't see global supply chain issues impacting our H2 results subject to it not falling in a hole from here. That puts us in a position to actually execute our merchandise plans, execute the marketing plans that sit around that across all brands. What I like to think, and what we've seen obviously with also D.C. operations and the reducing COVID cases out there generally, and the improving sort of rules around isolation, is certainly making operational challenges less than they were over the, I guess, the Q2 in particular, and even into the January sort of month, we found it more challenging finding teams to operate our DCs than it had been. You know, where we sit today is, Wilsons, I think we're in a good position to actually have far more control over the H2 result, and the impacts of the other supply chain impacts domestically is certainly back in a place where we are, you know, back to where we'd expect to be delivering online orders and the like to our customers. Our store replenishment model was much improved, and we're seeing inventory levels in store get back to where we'd expect them to be, largely. All of those issues have sort of continued into January and February, but are now getting towards the end of that period. Such that where we sit today, I feel very confident that we now control the large, I guess, control the outcome from here and have put ourselves in a position to do that, subject to, you know, any further COVID-19 disruptions, which the one thing I've sort of learned along the way is, don't get too far ahead of myself because it seems to come at you from left field every now and again, and you've gotta move accordingly. You know, good inventory levels, stores getting back to where we'd expect them to be, online delivery time frames with the exception of some of our bulky goods product getting back to where we'd expect them to be. You know, we're now where we'd like to be, and we've got the opportunity now to execute on those merchandise plans and marketing plans over the half. Sure. Just clarifying, I guess on the gross margin front, so you held 50% of Adairs, 70% of Mocka. In terms of the benefit, through COVID, what do you sort of expect that sort of retention be sort of going forward? Yeah, I mean, I'd like to think that Adairs is at the level that we'd expect it to be. Remembering that H2 is always lower than H1, given the prevalence of bedding product and the greater proportion of sales it generally takes in the H2. You know, if I think about that on a go-forward basis, we were always wanting to maintain a large part of that gross margin increase. Now, the challenge we've got at the moment is obviously increasing cost prices from suppliers. I think that's one thing we're seeing how that impacts us over the half and are obviously working with our supplier base with that. I expect that we will look to pass on a level of that to consumers over this half. I think we'll see generally some more broad retail price increases over the half, rather than us wearing all of those cost price increases. That'll be a balanced and measured approach as we normally do. Yes, I'd think Adairs should hold its spot. I think Mocka probably operates at similar levels to H1, although we continue to see rising supply chain costs, and in particular, as we've always mentioned, the Mocka product being bulkier and of a probably slightly lesser value does impact the cost of global shipping does have a larger impact on our margins. Again, there we're playing around with retail price increases to look to hold on to that. I think you should be able to take broadly the margins achieved in H1 and apply them towards the H2 results across most of the brands or all of the brands. Sure. That's helpful. Just my other question is just around, I guess, that increased cost of doing business. How do you sort of see that sort of normalizing H2 in FY 2023? I guess just breaking it down to higher wages to support the lockdown, assuming that will normalize. I guess the other variable as well, just around the investment in marketing and digital. I guess, can you just give us a bit more sort of detail just around that? Yeah, I think you're right. I'd like to think that, you know, stores open, that takes away a bit. As Ash mentioned, as we go into FY 2023, we should be operating with a 1 D.C., so that will also take a level of those costs out. Digital and marketing, look, we always aim to maintain that investment. We grow that investment largely in line with sales. We are seeing, obviously, as with many out there, the cost of marketing in that space is growing. We're working on how we become more efficient, more effective, utilize the Linen Lovers program. We're probably looking at Adairs largely being in line. We'd be likely to make a larger investment in something like Mocka. Focus obviously starts at a very low level. We think we've got good upside on any investment in the marketing costs in Focus. Overall, I wouldn't expect us to sit here and say that there'll be a significantly large step up that we'd be sitting here calling out that is a big CODB change in the H2 or into FY 2023, when we actually, you know, our plan on all of that is always to make sure that's a measured investment and that we're getting good return on that investment as we look forward. Thanks. That's helpful. Thank you. Once again, if you wish to ask a question, please press star one on your telephone and wait for your name to be announced. The next question comes from John Hynd from Wilsons. Please go ahead. Well, good morning, Mark and Ash. Thanks for taking my question. Just actually firstly, perhaps a housekeeping question. Can you let us know what the gross margin, like using slide three as a reference, what would the gross margin and gross profit have been if you included Focus? And can you just explain why you removed it given it settled in December? We chose to remove it because it was one month. It was from a period perspective, immaterial, and we wanted to try and retain a level of consistency and continuity for the two businesses that we have been reporting on over the last couple of years. I think we'll include it for H2, 'cause obviously it will be material. We'll come back to you on the answer to your question, because I don't have it right here. Page 17 will have it in the reconciliation of the results. Yeah. I just haven't had a chance to break it out. Okay, cool. I guess while we're on Mocka, just a little bit more color on, you know, what happened there operationally. I understand you had some issues with a freight provider. What's being learned within that business? I suppose with Focus, I mean, is that exposed to similar risks that they might have similar issues, and I guess what controls are being put in place to avoid it in the future? Yeah. Mocka, to be brutally honest, you know, we're really let down by a delivery partner over the half with poor communication from that delivery partner in relation to the challenges they were facing. You know, they continued to purport that they were delivering items, but in fact, they were struggling with drivers and capability to move product around Australia. We're actually holding a lot of our orders in their distribution centers, which obviously led to a large number of customers being let down and us having to work through how we actually got that stock to them 'cause they were unable to do that. We had to get that stock back. We had to find a new delivery partner and then had to get that through the network, which obviously impacted our ability to run a traditional sort of merchandise and marketing campaign, as there was no way we could be out there promoting new items and promoting campaigns whilst we had a number of customer orders in the thousands being held up by these guys not delivering. I think if you think about it, John, the piece that's taken from that is largely that we had two delivery partners, and we were able to lean heavily on the other delivery partner over that period, and they did a great job for us. Unfortunately, their network's not able to take all of our items, which meant that we still had to find a secondary delivery partner. When we think about going forward, and that's what I mentioned there, is both brands, Adairs and Mocka are actively looking at ways to make sure that we have a multi-pronged delivery partner approach that allows us to move more easily between them and also spread the work between those delivery partners when they were all being impacted at the same time. It would have been far easier if we could have switched that on earlier. You know, as we come into peak trading in FY 2023, if you think about that Q2 FY 2023, we know that we will have those capacities and capabilities implemented across the group. It impacted Focus significantly. Well, I mean, Mocka significantly, sorry. If I move to Focus, well, Focus largely control their own destiny in that space. It's a would I say that they have no exposure to it? That would be probably not accurate 'cause equally we're still exposed to how many couriers and networks are in the in our channels. But they had more control over it and it's one of the things that we'll continue to look to how we think about leveraging the collective group supply chain capabilities to make sure that as we approach those key periods of time, we also know what ability sits within our group to shuffle things around versus just being reliant on a brand by brand basis. I don't see here today thinking Focus is anywhere near as exposed as Mocka was. Equally, it's a different delivery experience. If you think about the Focus delivery experience, it's largely pre-booked. Someone needs to be home. You're delivering very, you know, relatively large pieces of furniture here. One of the problems we had at Mocka was getting exposure to that problem early enough, i.e., we ship it, but then we sort of expect that to be delivered at the other end versus having a very good delivery in full and on time approach, which will be put in place and has been put in place with our delivery partners going forward. You know, I'm not concerned about Focus. We'll have to build out the capability of Focus. If you think about one of the pieces of our national store rollout, we need a national distribution model that goes along with that. If you think about Focus today, we don't deliver anything to Perth. If you try and buy anything online in Perth, it's not available to acquire. Therefore, you know, one of the things that we know, and why that store rollout program probably is a little slower in years one and two of our Focus acquisition and speeds up from there is, it's not as easy as going and opening a store in Far North Queensland or something like that. We need to make sure the delivery partner network is around that for that last mile. The guys are well aware of that, and that's the work we're going through now as we work through that rollout plan. Thanks. The margins were pretty significantly impacted. How much do you think the delivery issues, or perhaps I don't know if you were discounting product or giving away, how much did that impact margins, do you think, in the period? How long does that issue continue for in the H2? You know, do I need to think about in my numbers for the H2 as well? No, I don't think you need to think about it in your numbers for the H2. It was largely an event that we managed to mitigate by Christmas. But it did impact ours, obviously, as we've called out in slide two or three there, the impact on us to really drive sales over that trading period as opposed to necessarily margin in that period. I wouldn't think about that you need to factor it in going forward, John. Okay, cool. Just last one from me. Still on Mocka. You talk about adding a physical presence on slide nine. What does that consist of and what's the timing around that, please? Yeah. I mean, obviously we are omnichannel proponents. We believe in a store and digital experience. I think it would be a different experience in Mocka than it will be in Adairs or Focus. However, I think our initial plans in FY 2023, if you think about it, is to obviously we've invested heavily in our team and capability, and we expect that will largely deliver through the digital channel through FY 2023 before we start to put a series of stores on the ground in FY 2024 and beyond. Nothing in the short term, but I think we will see a level of showrooming as we would think about it or more flagship style stores as opposed to a you know, 60 or 70 store network for Mocka. Equally, one of the things we'll think about is how we leverage obviously our overall brand portfolio or store portfolio to think about where's the right places for those, how do they integrate or feed off of the traffic that's created by the Adairs and Focus brands in the future as part of that flagship or showrooming type concept rollout. But for FY 2023, we're pretty much looking at Mocka as business as usual. And if we did anything, it'd be more on a test and learn and trial basis before anything occurs more permanently in FY 2024 and beyond. Great. Thanks very much, Mark. Thanks. Thank you. Your next question comes from Apoorv Sehgal from UBS. Please go ahead. Thanks for taking a follow-up question. Just a general question, Mark. Just on Omicron's impact in the trading update. Obviously you mentioned how consumer sentiment on store sales was a bit softer. What about for online sales? Do you think the rise in case numbers was an impact to the online sales? Or was it potentially a benefit with more people arguably staying home? I would say it's a benefit. Yeah, I think we largely saw, you know, potential channel shift in there, which continues to support our approach to having a strong store network and obviously a strong digital presence. That concept of I think we saw an element of consumer or customer decide to shop online as opposed to shop in store over that period. Equally, I think the other thing that supported that a bit more was we saw the online delivery performance across our group and I think more broadly even the distribution network give people more confidence that online was a good way to shop. Whereas in December, I think we probably saw the opposite with people concerned about getting deliveries before Christmas and the like that supported those store sales in the December month. You know, I think it has had some impact. I think it's probably in my opinion, it's benefited online and impacted stores over that January, February period. Yep, that makes sense. Just a quick final question. Just on the Focus, H2 2022 sales being down 7% year-on-year. Is that sort of close enough to a like-for-like sales number as well? Yeah. Yeah. Yeah. Cool. The direction of online and stores are similar. Yep. Thank you. Your next question comes from Aryan Norozi from Barrenjoey. Please go ahead. Hi, guys. Just the first one from me around how do we think about the cost of the D.C. and warehousing COVID issues unwinding over the next 12 months? Apologies if this has been asked. I've just got on. If I think about your warehousing disruption, you were AUD 2.5 million this half. There was AUD 1.4 million carrier disruption. I think in the past, you said about AUD 3.5 million, AUD 2.5 million-AUD 3.5 million in supply chain savings from duplicate D.C. How do we build that bridge? Should we expect these cost pressures that you flagged to continue into the H2 of 2022? In FY 2023, would we expect the AUD 3.5 million of supply chain savings and the cost you've outlined today unwind, so you get a AUD 6 million benefit? Thanks. I think there's two parts to the answer. The costs that we're incurring at the moment for running the extra D.C. will continue through this half. That AUD 2.5 million, which is roughly three months worth of costs in page one, will carry through. It won't be an extra AUD 5 million, but it'll be sort of a reasonable portion of that, sort of around AUD 4 million. That's just cost increase. As we move into FY 2023, those costs will come out, and we'll start chasing the efficiencies that we get from having everything under one roof. I think, you know, getting that AUD 3.5 million will start to sort of come through back end of or in the H2 of FY 2023, 'cause we really, you know, we need to get everything settled and start leveraging scale and learning everything else. So it's there, but it'll be delayed. The short-term savings of removing the duplicate warehouses will be realized through FY 2023. The Mocka supply chain disruption costs, you know, they should be behind us. So they shouldn't recur. They really related to the Q2 delays that were caused by the supply chain partner that Mark talked about earlier. Okay. The buildup, again, apologies if the buildup in deferred income that has to do with the Mocka supply chain issues. Has that been unwound in January as of today? The increased deferred income is more to do with Focus. Yeah, that's perfect. I know customer reviews are dangerous to look at because you're probably biased towards people who are angry with you. But, I mean, to what extent do you think the last price issue, delivery delays, supply chain issues had an impact on customer perception? Do you think it's impaired the brand in the short term? Just could you give us an idea around how customers and your loyal customers are reacting to this though? Yeah. There's no doubt it impacted us in the short term. You know, we then adjusted our approach accordingly across that period. Now that we're back in a position to be able to meet our customers' expectations, you know, we'll aim to rebuild that confidence over this half. You know, I think the beauty of the Adairs business in particular is that the length of time that a lot of customers have shopped with us. We definitely have the ability to win their trust back versus lose it immediately. Interestingly, even as we were talking to the Mocka customers impacted by the supply chain delays, the vast majority of them, when you got them on the phone and you talk to them, were understanding, disappointed, but understanding of it largely being outside of our control. I think the team have done a good job in trying to maintain the relationship with customers. There's no doubt that I think it had a larger impact on new customers wanting to shop the brand versus potentially existing customers across both Adairs and Mocka during that period of time where supply chain disruptions were impacting that customer sentiment. I agree with you that we need to. As a group, we're very much focused on how we win back that trust, and that will be a part of our marketing campaign over this half. Obviously the first thing we wanted to do was make sure that we had got all of those customers their orders so that we put ourselves back to a ground zero sort of basis and could work forward from there. It's something that we are very focused on across the brand to make sure that we rebuild that reputation and trust with those customers. I think the beauty is that, as I said, as we've spoken to customers across Mocka and Adairs, the exclusive nature of our product has meant that the vast majority of them have said, "No, no, I want the product. I'm happy to wait. I just, you know, wish you were better at communicating," and the like along the way. We've taken some lessons out of that as well, to make sure that we put ourselves in a better position should we end up with supply chain disruptions due to COVID-19 or anything else to better communicate and chat through to those customers to give them a more informed view of where their order is along the way. It's definitely a piece of work that we're well and truly focused on. Perfect. That's great. Thank you. Thank you. Your next question comes from Mark Wade from CLSA. Please go ahead. Good morning to you. Apologies if you've covered this. Just starting with Mark, has your view changed at all on the importance customers place on the home and their values and attitudes and some form of normality returns? Is your expectation that shifted or those values will still hold? I think those values will still hold, Mark. I think we'll find some periods of time where customers are keen to do some other things. You know, there's no doubt that international borders opening and those sorts of things will probably lead to a period where customers are looking to travel again, a selection of them. Equally, I think, you know, even just getting a more normal operating environment, restaurants, et cetera, is probably seeing people start to think about where some of that discretionary spend goes. I'm still a firm believer in once you start this process, and all of my customer research tells me this in talking to new customers of Adairs, new customers of Mocka, that once they start the process of investing in their home and thinking about it more with that mindset that you know really is somewhere that they want to look great, to entertain their friends, just give themselves a really nice sanctuary for themselves even, that they continue that process over the years to come. We continue to see that in our customer research and our customer sort of reporting. With those two things in mind, I haven't changed my view. I think for us, it's all about making sure we continue to meet and deliver those needs. As I said earlier in the, you know, the addition of Focus also gives us another strong element that we can put in front of those customers. You know, I think the customer is still there. I think the consumer is still keen on this category. I think for us it's all about execution, which is where I like it to be. If we execute well, we'll perform well. That's the confidence I have in the team that we can do that ongoing. Mm-hmm. Fair enough. Thank you. Again, on your long-term view on the Focus business, I mean, it's performed well ahead of some of those more conservative expectations laid out when you acquired it on sales and profitability. Has that shifted at all? No, I haven't shifted my view on where Focus gets to. I think we've all got to be conscious of the environment that it was trading in along with everyone else over FY 2021 and the like. You know, I'm always a bit more conservative, I think, in my mindset and, you know, where do we wanna get that business to and what can it do? I'm excited by the brand. I'm excited by the business and the team. You know, the store rollout opportunity is big. You know, I think there's a real opportunity for us to have a strong performing furniture retailer, you know, AUD 200 million or AUD 300 million in turnover in a relatively quick period of time as we start that store rollout approach. I haven't changed my view, but I was probably more bullish on my view to begin with. I'm probably feeling more confident that view will come to pass as we roll forward. Mm-hmm. Okay. Thanks so much. No worries, Mark. Thank you. There are no further questions at this time. I'll now hand back to Mr. Ronan for closing remarks. I'd just like to thank everyone for joining us on the call today. Obviously we look forward to H2 2022 and the ability for us to go out and deliver in a more normal trading environment and operating environment, more to speak. I look forward to reporting on the outcomes of those as we move through the half. Thanks, everyone. Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.