Thank you for standing by, and welcome to the Coles Group First Half 2023 Results Announcement. 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 1 on your telephone keypad. I would now like to hand the conference over to Mr. Steven Cain, CEO. Please go ahead. Okay. Thank you, and good morning, everyone from the Coles Melbourne Store Support Center for our half year results for FY 2023. I wish to acknowledge the traditional custodians of this land on which we meet today, the Wurundjeri peoples of the Kulin Nation. We acknowledge their strength and resilience and pay our respects to their elders past, present, and emerging. Joining me on the call this morning is our Chairman, who would like to say a few words before we begin our formal presentation, and Leah Weckert, our CEO-elect. I've also got Matt Swindells, our Chief Operating Officer and Sustainability. We've got Ben Hassing, who is our E-commerce Chief, and we've got Darren Blackhurst, who is our Liquor Chief. We've got a fair squad, and of course, we've got Charlie Elias, our Chief Financial Officer, right next to me here as well. Without any further ado, I might hand over to you, James, to say a few words. Thank you very much, Steven, and good morning, everyone. Today is a really important day in the history of Coles. As you will all be aware, earlier this morning, we advised the stock exchange that after five years of leading Coles as Managing Director and Chief Executive, Steven will be retiring. From the 1st of May, Leah Weckert will be appointed as the next Chief Executive of this great Australian company. Let me just start by saying what an outstanding job Steven has done as leader over a time of unprecedented change and progress for this business. Steven was first appointed in early 2018 when the Coles Group was a wholly owned division of Wesfarmers. When Steven commenced as Chief Executive later that year, he led the company through its demerger and the establishment of Coles as a major Australian ASX-listed company. Since that time, we have seen extraordinary progress in the development of Coles, its team, its business, and through some very tough, challenging COVID years. Steven brought his detailed understanding of the retail industry to develop a clear and differentiated strategy for Coles, which has very clearly underpinned our development since that time. We have seen the parallel creation of a world-class leadership team under Steven, which has driven the successful growth of the business in what is the most progressive and competitive marketplace. Some of the highlights during Steven's leadership have included the commitments made to new technology to improve our long-term business efficiency, perhaps best illustrated by the forthcoming opening of our first world-leading automated distribution center in Queensland. Also by the expansion of our business and customer engagement, as illustrated in the growth of our online Supermarkets and Liquor businesses, and by our ranking as one of the most trusted consumer brands in Australia. We've also shown significant progress in meeting new targets in our sustainability initiatives and in furthering our community engagement. All of this has been achieved whilst building a strong financial position and creating attractive returns for shareholders. However, the true success of business is reflected in its capacity to build a strong team which generates its own leadership succession when the time comes. This is the fortunate position which we have at Coles, and I am delighted on behalf of the board to announce that the next era of leadership will be established by Leah Weckert as Managing Director and Chief Executive. I am sure that Leah will be very well-known to you, I think it is worth recalling the breadth of her experience since joining Coles in 2011. With a background in engineering, science, and business, Leah joined Coles from McKinsey, and since that time has held leadership roles across merchandise strategy and innovation, supermarket store operations, people and culture, and subsequently in her role as Group Chief Financial Officer through demerger and beyond, and more recently as Chief Executive, Commercial and Express. Leah has a business and leadership reputation throughout the Coles business, which makes her the ideal appointment to succeed Steven when she takes on the role from the beginning of May. The board is delighted that the strength of the business established over the last five years by Steven will continue to be dynamically progressed under Leah Weckert's leadership over the period ahead. Thank you. I will now pass back to Steven. Thanks, James, for those kind words, which I've written down in my little book here. That's very kind of you. Thank you also for the support that you and the rest of the board have given us and me in particular, over the last five years. The insights and resilience have been extraordinary. It's been a privilege to lead Coles and the team here for the benefit of all stakeholders through demerger, bushfires, COVID, floods, and the current situation, the new normal, and still be able to execute our strategy of growing long-term shareholder value and being one of Australia's most trusted consumer brands. Leah, congratulations on being my successor in May and becoming the first woman to lead this great company. I wish you and the team continued success. Do you wanna add a few words and I'll do the rest? Thank you, Steven, thank you for those kind words. I'm honored to be appointed as the next CEO of Coles. There's a really exciting future ahead as we continue to execute the strategy, and I'm looking forward to working with the team on delivering it. I'd also like to just take the chance to thank both the board and Steven for their support. I'll hand back to you. Thank you. Back to business. For those of you who've got the deck in front of you, we're starting on slide four, which is the first half highlights. We made good progress again on executing our strategy in the last six months, with group sales revenue up around 4% and EBIT, up around 10%. Both of these measures are on a continuing operations basis, which excludes Coles Express. These were achieved despite cycling COVID-19 lockdowns and the ongoing supply chain disruptions experienced during the half from residual COVID-19 and flood impacts. I'll talk more to this in a minute. Once again, our team has shown amazing resilience and care in responding with essential food and drinks for the local communities impacted by the floods in New South Wales and Victoria. For our customers, we remain one of Australia's most trusted brands and delivered trusted value through our various value campaigns. We have the most extensive owned brand range in Australia, and this was recognized with more than 350 awards in Supermarkets and Liquor. Our Smarter Selling program is more important than ever, and we delivered benefits of approximately AUD 100 million in the half and are on track to deliver the AUD 1 billion we targeted four years ago. We achieved a key milestone at our first automated distribution center in Queensland, with handover from Witron now complete and the site receiving inbound inventories. I'll have more to say on Witron a little bit later on. For our shareholders, the Coles board declared a fully franked interim dividend of AUD 0.36 per share, which is 9% up on the prior year. Finally, early in the half, we announced the sale of our Coles Express business to Viva Energy for AUD 300 million, allowing us to focus on our omni-channel Supermarket and Liquor business. With ACCC and FIRB approvals now in place, we expect that deal to complete in the fourth quarter of FY 2023. Moving on to slide five, which are the financial highlights. With Coles Express being classified as a discontinued operation and focusing on measures on a continuing basis, sales hit AUD 20.8 billion, and on a three-year basis, sales revenue increased by almost 14%. EBIT hit AUD 1.1 billion, which is 20% up on a three-year basis if we look through the COVID experience. Net profit after tax increased by 11% to AUD 616 million. Gross operating capital expenditure was AUD 623 million. Operating cash flow was AUD 2 billion, and cash realization a strong 108%. We have maintained a very strong and flexible balance sheet with a net debt position of AUD 362 million. Finally, from a safety point of view, I am very pleased to say we continue to make progress with our TRIFR, improving 8% on the second half of FY 2022. Moving on to slide six, which is all about supply chain resilience. As I mentioned, many of our suppliers are facing ongoing challenges from worker, pallet, and raw material shortages, which is impacting our availability. DIFOT in the first half was well below pre-COVID levels, and from a first half perspective was the lowest we've seen. We've seen worse in half twos in the past when we've been impacted by COVID. In terms of, you know, everybody thinking that there is recovery around, there's plenty of pain in the supply chain which we need to deal with. Obviously, some of the COVID knock-ons have impacted things like bottled water and pet food, different reasons there, but bottled water, packaging and pallet issues, and dry pet food. Again, a number of issues, but a lot of it is down to worker shortages in rural locations where pet food factories are located. We talked about this in the last sets of results, but what we've seen is fresh produce supplies impacted by the floods in New South Wales and Queensland. We've seen the knock-on impact of people buying frozen foods for that, in terms of transferring out to products that aren't available or because they may have been better value at the, at the time. The floods have also significantly impacted our rail network across Australia, and particularly to WA and Far North Queensland. All up in the half, more than 100 days of disruption. That does not account for the time to replenish inventory to normal trading levels, which can often be the same time again. The supply to WA and Far North Queensland is something that we and the country need to work on improving if the weather continues to be unpredictable and severe. The chicken and egg story, which you may have seen part of over the weekend and at the back of last week. What we are seeing is obviously chicken becoming more popular over time as the most or best value meat protein. We've obviously seen people moving into free-range eggs from caged eggs, we were very much leading the charge in that regard. What we're seeing in Australia is reduced bird productivity and fertility, which along with the consumer demand, is impacting availability in some of those key categories. We faced supply challenges many times before, particularly during COVID, but improving the resilience of both the Coles supply chain and the national food supply chain is really important. Obviously, that will result in better customer satisfaction for us and obviously a sales opportunity as well. I'll now take you through some of the achievements in terms of inspiring customers on slide nine. We know how important it is to be trusted, we were once again recognized as one of Australia's most trusted brands in the December 2022 Roy Morgan Net Trust rankings. We delivered trusted value through the Locked and Dropped & Locked value campaigns, which focused on lowering the cost of living with more than 1,500 prices locked and prices reduced on a further 500 products. We have, as a result of its success, extended the Dropped & Locked campaign, with more than 300 items dropped and locked until after Easter. We've also expanded our popular Coles Finest Certified carbon-neutral beef range to customers in New South Wales, Tasmania, and South Australia. Our Flybuys partnership goes from strength to strength. It's never been more important from a customer perspective. We introduced Flybuys member pricing in the half. We digitized the Coles Express fuel dockets, and we offered greater personalized value through individually tailored offers, which resulted in greater membership overall and greater usage of Flybuys as customers seek better value. In e-commerce, we expanded our Supermarket's immediacy offer through Rapid Click & Collect, where a customer can now order to pick up in under 60 minutes. We launched our unified website, and with our app, customers can now have a fully native experience in the app, completing a shop without any web redirects, making it easy for customers to shop anytime, anyhow, anywhere. Finally, we accelerated investment in our retail media platform, which we rebranded as Coles 360, focusing on technology and talent. This business is dedicated to helping FMCG companies create sustainable growth through more meaningful connections between customers and their favorite brands. We believe Coles 360 can become a trusted media provider in the Australian market. Onto the next strategic pillar, Smarter Selling on slide 10. As we mentioned earlier, we've delivered about AUD 100 million of efficiencies in the half, with a third going into the grants from cost of doing business. Key initiatives in the half included continued rollout of TACOs, which are Trolley Assisted Check Outs. Hopefully, many people on this call have had the benefit of using those. I certainly have. We've had continued energy reductions through the implementation of demand-based heating, ventilation, and cooling in 120 stores. We continue to roll out proper protection measures to tackle theft in stores such as trolley wheel locks and the installation of front entry gates. Hopefully, none of you have experienced those things in store. I have spoken about dynamic markdowns before, we've now rolled this into the bakery department following successful deployment in fresh produce, meat, and dairy. You'll be glad to hear that with the Smarter Selling program due to conclude this financial year, planning for Smarter Selling 2 is well advanced. We saw other efficiencies in the business through the rollout of fresh produce easy ordering to almost 300 stores, enabling improved availability and freshness for customers through AI technology. In terms of our optimized store strategy, 10 new supermarkets were opened during the half and 15 supermarkets renewed. Including our latest innovation store at Southland, which hopefully many of you had the opportunity to see, including the fresh herb garden, [stom plastic], which is great. In Liquor, we saw 16 new Liquor store openings and 128 renewals, including the very popular Black and White into 112 stores. On to our final strategic pillar, Win Together on slide 11. I am pleased to report our sustainability achievements across many streams of work in the business. Firstly, starting with Safer Choices. We've now introduced a safety index to capture lead and lag indicators. This along with a continued focus on critical risks, including manual handling, fleet safety, and mental well-being, contributed to the 8% improvement in TRIFR. We strive to be a great place to work and to foster an inclusive and supportive environment. During the half, we launched our First Nations team member network committee to help shape Indigenous engagement at Coles. We also delivered five Indigenous Cultural Immersion programs across the Northern Territory in Broome in West Australia, where our Coles managers spent time on country meeting Indigenous leaders, immersing themselves in local culture, traditions, native ingredients and food, and gaining a deeper understanding of some of the challenges facing Indigenous Australians. The program also provided the opportunity for Coles leaders to reflect on what Coles can do to be a more inclusive workplace and a workplace of choice for indigenous team members. Pleasingly, in our October 2022 team myPulse survey, My Safe Pulse survey rather, we recorded our highest employee engagement score, a 1% improvement on the prior survey in May 2022. Coles customers also contributed more than AUD 1.8 million through the Coles SecondBite Christmas Appeal, supporting disadvantaged families and community organizations with much needed food. Finally, we know that we are a team that is better together, working with all of our stakeholders to bring about positive change. Our community partnerships are a large part of this. We ranked number one for the third year in a row in the GivingLarge report for contributing the largest percentage of profit to the community amongst Australia's leading organizations in 2022. We were also ranked number five in the World Benchmarking Alliance's corporate human rights benchmark, and the number one supermarket globally in recognition of our commitment to the protection and promotion of human rights across our operations and supply chains, an extremely important focus for our business and our team. Moving on to our transformation projects. First, an update on our automated distribution centers on slide 12. As we've mentioned, I'm pleased that we've taken hold of our Witron automated DC in Redbank, Queensland. We have site leadership and we have inventory arriving on site. I'm expecting to open this particular Witron facility on April 27th, subject to everything going well. I have to say, a few of us have been multiple times. This is a site to behold. It's the largest automated DC in the Southern Hemisphere, and we look forward to being able to take you around that facility in due course. As we look at our automation projects, I'm more confident than ever that they were the right investment for Coles at the right time. That's particularly so in the face of increasing wage costs across the nation and globally. At our Witron site in Kemps Creek, New South Wales, the external building works are complete and Witron is installing its automation with a view that that will be completed in the third quarter of FY 2024. Just to remind you of the benefits of Witron. It's a safer work environment because there's less manual handling. There's reduced lead time because we've got a lot of our slower-moving ambient products in these DCs than we have today. That means it gets to stores faster. These sites consolidate five of our existing DCs into two and operate at two-thirds of the cost. A big efficiency play and long-term strategic advantage from a cost to serve perspective. Moving on to our two automated CFCs. I'm pleased to say that the OSP, or Ocado Smart Platform, integration with our own e-commerce systems, which we've talked about in the past, as well as the digital customer experience and fulfillment are progressing well, as is our development of our ranges for the future. In partnership with Ocado, we're making progress in the development of both our New South Wales and Victorian centers. The fit out of these facilities, especially the hive and grid, are unique in Australia, requiring complex construction management work systems to be developed and implemented. As advised by James at the 2022 AGM, there has been a construction delay at the New South Wales site. An assessment is ongoing to determine what further impact there may be on schedule commissioning. Based on information from Ocado, we are working towards the Victorian CFC being commissioned ahead of the New South Wales one, with an incremental ramp-up period commencing mid-2024 as previously advised, and the New South Wales CFC now in the second half of FY 2024. The revised timeline is not currently expected to have a material impact on Coles' estimated total capital expenditure of the project. The good news is that our Truganina sites here in Melbourne is that recruitment is underway, key leadership is in place, and the first spoke has been identified in Dandenong and construction has commenced. In Sydney, the management team were in place, training is underway, and the first spoke has been identified in Alexandra, and Alexandria, rather, and agreements are in place. Just to recap on the benefits of these two Ocado CFCs, we will be able to deliver the best by far, delivered in full on time metric in Australia with an extended range. That delivered in full on time is the number one pain point for customers in e-commerce. Some of our fresh range products will have a guaranteed shelf life for the first time. There are obviously operating efficiencies from the automation, and we'll be able to access new catchments that we don't serve today through the hub and spoke model. We're all looking forward to seeing those on the ground. Moving on to our strategy tracker on slide 14. I've talked to safety. In terms of MPS, our Supermarkets and Liquor declined during the half, with Supermarkets impacted by supplier availability challenges and of course, rising supplier cost prices. While Liquor was mainly impacted by product availability. Pleasingly, Liquor MPS improved in the latter part of the second quarter during the important Christmas and New Year period. Gross retail sales growth was in line with the first half ABS market growth of 5.6% despite the availability challenges we faced. Smarter Selling remains on track and EBIT growth, as I've said, was around 10% and cash realization of 108. Now with that, I might hand over to Charlie to take you through the financials in a bit more detail before returning at the end with an outlook statement. Charlie. Great. Thank you, Steven. Good morning, everyone. I'm now on slide 16, which shows our group results. I'll firstly talk to the results on a continuing operations basis. If you look at sales revenue, it increased by 3.9% to over AUD 20.8 billion. EBIT increased by 9.9%. EBIT was positively impacted by the Smarter Selling benefits of approximately AUD 100 million and a net reduction in direct COVID-19 costs, with approximately AUD 20 million incurred in this half compared to approximately AUD 150 million in the prior corresponding period. This helped offset underlying cost inflation and impacts from availability and the supply chain challenges that Steven mentioned earlier, whilst also reinvesting in the business. Net profit after tax also increased by 11.4%, with basic earnings per share increased by 11.6% to AUD 0.463. On a continuing and discontinued operations basis that is included in the Coles Express segment results. Net profit after tax is 17.1% and basic EPS increased by 17.2% to AUD 0.483. As Steven Cain mentioned, the board declared a fully franked interim dividend of AUD 0.36 per share, a 9.1% increase on the prior corresponding period. If we turn to the segment financials on the next slide, we've presented these to separate continuing and discontinued operations to reflect the agreement that we entered into to sell the Coles Express business to Viva Energy. Supermarket sales increased by 4.6% year-over-year and were 13.6% on a three-year basis, driven by strong trade plans across the half, particularly the locked and dropped unlocked value campaigns. Solid trading over Christmas period and the customer continuity programs such as the glassware campaign, also supported the solid sales. Supermarkets EBIT increased by 10.6% to AUD 991 million with the higher sales, the Smarter Selling benefits, the lower COVID-19 costs offsetting underlying cost inflation, continued investments in digital and e-com and operating costs in relation to the Witron and Ocado transformation programs. On a three-year basis, the Supermarket EBIT increased by 25.6%, with EBIT margin expanding by over 50 basis points over the three-year period. In Liquor, revenue declined by 2.4%, increased 15.4% on a three-year basis. In the half, the business cycled approximately 15 weeks of COVID-19 related on-prem closures and restrictions in the prior corresponding period in Victoria, New South Wales and the ACT. If you exclude these lockdowns, sales revenue growth was positive. Liquor EBIT declined by 19.2% to AUD 80 million, largely driven by lower sales revenue across the fixed cost base of the business, increases in store team member REM relative to the prior year, following the Fair Work decision. Coupled with this, the increase paid to team members earlier compared to when it was in prior years. Transformation costs were also incurred, including the Liquor renewal and format development program. Steven has already mentioned the 128 store renewals in the half, as well as investments in e-com and core IT systems. Turning to discontinued operations, Express revenue increased by 5% year-on-year, and 6% on three-year basis as the business cycled lower fuel volumes and the store sales in the prior corresponding period as a result of the COVID-19 lockdowns. Sales growth was again driven by the food-to-go category, particularly hot, fast food and coffee, partly offset by continuing decline in tobacco sales. On the 21st of September, when the Express business was recognized on the balance sheet as a asset held for sales, D&A of the assets ceased from that date. As such, there was AUD 36 million of notional depreciation and amortization that would have been recognized had the business not been held for sale. Taking that into account on an underlying basis, EBIT increased to AUD 25 million. The other segment which comprises corporate costs, property earnings, and Coles' 50% share in Flybuys JV, recorded net cost of AUD 13 million for the half. Other was positively impacted by a net increase in property sales during the period. If I turn to the operating cash flow on slide 18. Operating cash flow, excluding interest and tax, was AUD 2 billion with a cash realization of 108%. This was driven by a reduction in working capital, reflecting the high trade payables consistent with the seasonal Christmas and New Year trading activity, as well as the timing of year-end payments. This was particularly offset by increased inventory as a result of the cost price increases and increased stock holdings to provide additional support over the Christmas trade. Lower cash open provisions largely reflect the reduction in employee entitlement provisions, which has partly offset the working capital movement. If we go to the capital expenditure slide on slide 19, gross operating CapEx on an accrued basis was AUD 623 million, an increase of AUD 205 million compared to the prior corresponding period. CapEx was again focused on growth and efficiency initiatives, and I'll take you through that in a little bit more detail. Firstly, within Supermarkets, CapEx increased due to investments in Big One and Ocado transformation projects, and Steven's already provided an update on those. We have incurred approximately AUD 900 million of the planned AUD 1.37 billion CapEx to date. In addition to these growth and efficiency initiatives, CapEx was also incurred in relation to new stores and renewals, with 10 supermarkets open and 15 supermarkets renewed in the half. Other efficiency-related CapEx include investments in service transformation, including the trolley-assisted checkouts or TACOs and the fresh produce easy ordering program. In Liquor, CapEx increased during the half, driven by new store openings and renewals, with 16 new Liquor stores and 128 renewals, as well as investments in the IT systems. We continue to optimize the property portfolio, with net property capital expenditure reducing by AUD 35 million compared to the prior period. This was driven by higher property investments in the half, resulting in a net property inflow of AUD 69 million. If we turn to the balance sheet, as at the 1st of January, we reported negative working capital of AUD 1,000,000,007, capital employed of AUD 11.5 billion, and net assets of AUD 3.4 billion. We have maintained a strong balance sheet with investment-grade metrics, which will provide flexibility for future growth. Starting with working capital, which improved by AUD 124 million compared to the prior period. As I previously mentioned, this was due to higher trade payables consistent with the seasonal and New Year trade and the timing of year-end payments, partly offset by inventory price, the inventory price increases and increased stock holdings. Total net assets improved to AUD 3.4 billion, most notably for movements in property, plant, and equipment and equity investments, which increased by AUD 328 million compared to the prior period. The net increase from the recognition of assets held for sale and associated liabilities reflected from Express discontinued operations and property assets. Net debt, excluding lease liabilities of AUD 362 million, was AUD 144 million lower compared to the full year net debt position. I'll talk more about this in the next slide. We retain our existing annual dividend payout ratio to target 80%-90%, franked to the maximum extent possible. The Coles Board has declared a fully franked interim dividend of AUD 0.36 per share, which has a payment date of the 30th of March 2023. We have extended our debt maturity profile and continue to maintain access to our diverse funding sources. We do not have any material debt maturing until FY 2025. Finally, on credit ratings, we remain committed to a solid investment grade ratings with S&P and Moody's, which provides us again with flexibility to invest in further growth. I'll now turn to slide 32, which I know many of you would know or recognize the slide from prior presentations. As Steven said, there are still challenges that we are facing, but I believe we are extremely well positioned to navigate the current macroeconomic environment. We do have actions in place to respond. We discussed these points at the full year and provide an update here. Firstly, on rising cost of living pressures our customers are facing. We are seeing customer behaviors shifting to more value-oriented choices, as a result of higher inflation and with interest rates and their costs of energy increasing. Another factor here is that there's a potential shift of in-home consumption from food services in a high inflationary environment. Our response has not changed. We continue to invest in trusted value for our customers through an extensive exclusive to Coles range of more than 6,000 products and more than 1,700 Exclusive Liquor Brand products. We'll continue to deliver value campaigns in Supermarkets, Drop the Lot, and Flybuys member pricing, and lower prices for longer in Liquor. For those that still want restaurant quality food at home, our Coles Finest products offers an affordable alternative to eating out. Regarding our cost to serve, our Smarter Selling programs continue to help offset cost increases and allows us to invest in the business. As Steven said, planning for the next phase, Smarter Selling 2.0, is well advanced. We have renewable energy agreements and hedging programs in place to offset rising energy costs and making further investment in proper protection measures to tackle in store. Finally, before I hand it back to Steven, on COVID-19, I'll call it the C-COVID hangover, as there are still impacts on the business. We've continued focusing on managing absenteeism through flexible rostering and team mix optimization, and believe we are well-positioned to benefit from increased population growth and immigration. I'll hand it back to Steven, to take us through the outlook before we get into Q&A. Thanks, Charlie Elias. In the current quarter, pleasingly, Supermarkets volume returned to growth from mid-January. We're obviously still experiencing supplier input cost pressures, particularly in the packaged goods area, and that's a lot to do with wages and energy. However, inflation is expected to moderate from the peak in Q2 throughout the balance of this year, particularly in related to anything that comes from the farm. We're currently seeing that there's quite a bit of produce now in deflation. We're expecting that more customers will be value-conscious as cost of living pressures rise, particularly the fixed rate mortgages coming off and in energy prices. We've got the largest own brand portfolio in Australia, Drop the Lot prices, and Australia's favorite loyalty program, Flybuys, and are well-positioned to meet the diverse requirements of our customer base. In Liquor, we expect earnings to return to growth in the second half as we exit COVID cycling and focus on building sales momentum, partially assisted by the February excise increase and of course continuing to drive the ELB program. Our Smarter Selling program in the second half will continue to offset inflationary cost pressures, headwinds in markdowns and stock loss as a result of increasing theft, and allow us to reinvest in the business. In other costs, we still expect to see a net increase of approximately AUD 10 million for the full year compared to FY 2022, including corporate costs and property sales. With our Redbank automated DC beginning to ramp up in the fourth quarter of FY 2023 and the phasing of the CFCs, we now expect implementation operating expenditures to be approximately AUD 120 million for FY 2023. We previously advised AUD 140 million. Capital expenditure is unchanged in the range of AUD 1.2 billion-AUD 1.4 billion, including the four automation projects. Depreciation and amortization is now expected to be approximately AUD 1.55 billion for the full year for continuing operations, with AUD 35 million for the Express discontinued operations. We previously advised AUD 1.7 billion, which assumed no Express divestment. We're well-positioned, and we've got some clear tailwinds with the opportunity to improve availability, population growth, which we can all see, I think, on the streets of Australia, and in the universities and in the cafes and restaurants so on. We will see a moderation in hospitality, which will benefit the Supermarket business as well. You won't like this one, finally, we are set up for an excellent Easter with the widest range of sweet and savory hot cross buns and the launch of Coles Finest Lamb, which uses new technology to ensure it is the tenderest and tastiest around. In Liquor, we continue to build our successful low and no alcohol ranges, including our ELB tinnies, ultra-low alcohol beer with award-winning, brackets, and in our RTD range, our Naked Life non-alcoholic classic G&T and margarita. Thank you for listening. I'll now hand back to the operator for Q&A. Thank you. Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you're on a speakerphone, please pick up the handset to ask your question. Your first question comes from David Errington with Bank of America. Please go ahead. Morning, Steve. Morning, Charlie. Congratulations, Leah. I'm really pleased for you. First woman CEO of Coles. That's a terrific outcome and a great achievement. Congratulations. Steve, I'd like to please go to page six of your presentation, and this slide shows how much the supply chain is being impacted, which you've given quite a bit of conversation to. As financial analysts, what really interests me is the latency in productivity improvement in terms of financial performance that is at your disposal once we can get back into normal conditions. Maybe you can, or you or Matt can go into a bit of detail as to who's wearing the cost of this. 'Cause I imagine, you know, very fast supply chains, Supermarkets, very fast-moving supply chains. 80% availability must be a massive drag to someone, whether the suppliers are wearing it. I can't believe that you're not wearing those costs in your supply chain. What can we expect going forward in terms of latent improvement? Is it just availability? Is it costs? If you could go into that would be really appreciated, because I think that is a really key metric in supply chains, not only for Coles but also suppliers as well. Yeah. Good morning and thanks, David. Yeah, no, we all share your views on this one, which is there's, you know, benefits to be had in sales. Obviously, we've definitely missed some sales over the last six months and in P7, and we've still got a long way to go. It's fair to say that the whole industry is wearing the costs at the moment, but it has been very start-stop, which is always costly. You know, when I reflect back on the last 10 halves at Coles, there's only been 1 half in 10 where we've had what I would describe as a normal operating atmosphere. Part of this, you have to stand back from and say, "Is this just the new normal?" And what do we control and have influence on? Then there's things like rail networks, where clearly you're also in the hands of state and federal governments as well. There's no easy fix to what we're experiencing, but there's clearly opportunity from more efficient supply chains and higher sales. Matt, do you wanna have a crack at this first and? Yeah, sure. ...maybe, see if Leah's got anything to- Sure. to add. Thank you. Thanks for the question, David. It is highly disruptive for the teams all the way through the supply chain, both for Coles or any retailer and the supplier, so you're right in your evaluation. The teams in the center have to spend a materially larger proportion of their time on just getting product to our customers. There's an opportunity cost of what you're focused on. There's then the cost of transport disruption itself, so when the rail line goes out, we will divert to road, and clearly that comes at a more premium price. The distances from the Eastern Seaboard to Western Australia are material. Mm-hmm. You've got the cost at the other end of the supply chain, which is either in the distribution centers that have to extend hours to receive products or the store team members that have to extend some of their windows for receiving loads and replenishing. The priority has to remain on keeping the supply chain safe and keeping availability as the number one priority for customers. Ordinarily, we would probably have two or three of these events in a year, mainly across to Western Australia, maybe the odd cyclone through far north Queensland. I think the point here is that if anyone expected availability to return to normals post-COVID, and that was induced by mainly panic buying rather than supply chain disruption, it's not happening. Our customers and our team members are still frustrated with availability issues, but the root cause of those are now more widespread and more complex. I think because of that, it's going to take a little bit longer to unwind as the end-to-end supply chains recover. It's not been helped by the natural elements of flood and fires and cyclones that have come through, so it's a multitude of impacts. The only thing I'd add to that is that, as Steven Cain said, it is felt by the whole industry. Well, most of those factors that Matt Swindells just outlined that are relevant to Coles also impact our suppliers as well. Yeah. As a follow-up, and I'll finish after this one. Bringing on a highly automated DC, I mean, it looks like everything's gone according to plan in terms of the construction. Does it concern you, Matt, Leah, that you're bringing on an automated DC with disruptions still likely to be there? Do you think that the plant will be okay to handle, you know, such a low availability? No, I think, I think, David, it gives us more resilience in the, in the locations. If I think about Queensland, we're currently shipping products out of New South Wales from our Eastern Creek National Distribution Center up into stores throughout Queensland. Having Redbank, the Witron facility open, brings that inventory closer to the consumer. As we think now about supply chain resilience, having a facility that's got twice the volume on half the footprint means we can extend the range and include some really smart algorithms around safety stock. We should get a better outcome. Does it fix all of the problems that we would encounter when our inbound fulfillment levels are low? No. It certainly gives us a better opportunity. Okay. Thank you. Thanks for your answers. Again, well done, Leah. Congratulations. Thanks, David. The next question comes from Adrian Lemme with Citi. Please go ahead. Hi, Steven. Congrats on the result. Congrats to Leah on your appointment. We're hearing of consumers' shopping patterns returning to some level of pre-COVID patterns in terms of less work from home and relatively weaker regional performance. I'd expect this is benefiting Coles, but can you talk to what you're seeing, please, perhaps in terms of foot traffic and other metrics? Yeah. Good morning, Adrian. Thanks for the thanks for the question. We did say last time out that we were seeing local shopping unwinding, and that was certainly the case when it came to foot traffic and looking across the various store cohorts. When we look at, you know, the per-percentage of sales that are in each of the cohorts now versus pre-COVID, they're getting to a very... They're not quite there, but they're getting back to a very similar level. The main difference is there's a slight-Increase in neighborhood versus pre-COVID. City center stores are not quite where they were beforehand. I think I... In the first wave of COVID, I think I always, I mentioned World Square as being our biggest transaction store in the country that's based in Sydney there. I think it sort of maxed out before COVID at 80,000-odd transactions per week. At the peak of COVID, it got down to just over 40,000 transactions a week and back to high 60s on the back of, you know, more people going to CBD and also students returning as well. CBD is not quite back to where we were beforehand. A little bit of stickiness in neighborhood, but shopping centers are definitely back in business. Really, you know, our sales would have been, as I hope you appreciate, they'd have been much better had we had availability in some of these categories. Why that's important is, obviously a lot of the specialists that are out there, you know, the fruit and veg guys and the, and the butchers and so on, they're obviously buying. When these products are in short supply, they're obviously buying them in much smaller quantities than we are. Obviously, we have the highest ethical sourcing standards in the industry. So the combination of us requiring large volumes and ethically sourced means that when supply is tight, we do get impacted, which is obviously something we need to think about and improve on over time. That's why, you probably, you know, don't see all of that sort of local shift happening. In terms of the feet that create the local shift, that's definitely happening. Transactions in the half and in the quarter and currently are up significantly on prior year. Thanks very much for that color, Steve. That's very helpful. Could I just sneak in one follow-up, just on in terms of the value range products that Coles has. Are you seeing it make an outsized contribution to the performance, particularly in the second quarter versus the first quarter, given the cost-conscious consumer at the moment? Thanks. We're definitely seeing strong growth in own brands. That was in both the second quarter, and we've seen it continue into the, into the third quarter. Within that, there's a couple of trends that are occurring. One is if you took meat, for example, we're seeing customers move from more expensive cuts, like a steak, into less expensive cuts like mince or a gravy beef type of cut. The second thing is in the core grocery areas, we are seeing really strong growth there in areas like pasta and rice, oils, where we're seeing own brand perform particularly strongly and trade out of proprietary. That's probably the sort of the key ones that we're seeing that are indicating that, you know, some customers are definitely moving to value. Thanks very much, Leah. Next question comes from Michael Simotas with Jefferies. Please go ahead. Good morning, everyone. We've got a firearm, so let me know if you can't hear me. Well done, Steve, on a great job since the demerger, and congratulations, Leah. Steve, I'm just interested in the timing of you stepping down. You've been through a few tough years. It looks like there's a light at the end of the tunnel. You've got a few major investments underway. I thought you might have wanted to stick around to see the fruits of some of those investments. Maybe you could just talk us through your rationale, please? Yeah. I'm gonna hand over to the Chairman first, you may have gathered by now I don't like lights at the end of the tunnel. I like it quite hard and. Anyway, yeah. Michael, it's James Graham. I think it's interesting, as I reflect back, it's almost exactly five years ago to the day that I sat down with Steven when he was about to be appointed to the position of managing director of Coles, and talked to Steven about really what was the time horizon that he would have in mind in taking on this very substantial role. Steven said to me, and I remember it very clearly, he said, "James, this will be my last executive role. I really think five years is gonna be the right timeframe because I wanna then be left with some time to do other bits and pieces in my life." The, I mean, whilst these things are always under review, you know, we've kind of had that as our indicative template. The great thing is, as I said earlier, is that under Steven's leadership, you know, the executive team that drive this business has been put together and is a really strong and deep team, and they've worked together as a really strong leadership team. You, you know, many of the, if not all of the leadership team. I think it's quite clear to everyone that Leah is a standout in terms of the experience that she's had. Her, the breadth of commercial perspective that she has. The reputation she's created inside Coles. Coles is a very busy business. In fact, I don't think I've almost, across the whole time of my involvement, I've never found Coles other than extremely busy dealing with a great set of opportunities for how to grow and develop the business for the future. It's no surprise to me that at any point of time, there are gonna be lots of new opportunities, lots of great things that can be seen to be next in line and around the corner. It's a really good time. Steven's achieved what he set out to achieve, and I think for those who've been following, you know, ever since, what was it? The middle of 2019 where the whole clarity of the strategy was laid out and the growth of success against all of that in the intervening period has really been affirmation of the commitment that Steven made and gave right from the outset. I think it's we're put in great position for the next era, but it's also fantastic that we've been able to achieve the success for shareholders, community, customers, team members, that's so demonstrable that has taken place over these last five years. Thanks, James. Just to add, Michael, I mean, I know I don't look it, but I'm 60 next year. I won't wait for you to respond on that one, but I have actually been waiting for this moment for about 35 years, and eventually head into retirement and, you know, I'd like a bit of time off before thinking about what next from a, you know, a non-executive point of view, but that's not really what I'm focused on today. I've still got a couple of months left as CEO, and I wanna make sure that we give Leah a really smooth transition into her being the CEO. We're in great shape with the projects and they're all at a fairly advanced stage. Leah was sat beside me the day we signed Witron. She was sat beside me the day we signed Ocado, I don't think there's anything I know about those projects that she doesn't. On all of them, Matt leads Witron himself, and then Ben and Charlie are very much on Ocado as well. We have an excellent team. We have excellent relationships with both of those companies, and we spend a lot of time internationally with them to make sure that this is a success. However, they're not short-term programs, and they're certainly not, you know, switch it on and you get to 100% within 24 hours. These machines take, you know, some time to get to full optimization, and you're really talking about a couple of years to achieve that. Most importantly, the benefits of these two projects, whether it's about the efficiency of Witron or the customer offer at Ocado, they will benefit Coles for the next 10 or 15 years. These are very, very long-term contracts, and by the time they've all been finished, I wouldn't be surprised if there's been some further change, you know, at Coles. That's the nature of big, long-term contracts in business. I have to say my five years has felt a bit more like seven or eight, to be honest. It's not been what I thought I was signing up to five years ago. As I mentioned earlier, I think we've had one quiet half in 10, since I arrived. I'm certainly looking forward to a break. I'll be cheering on from the sidelines and, I'm hoping that I will be one of the first, lucky Ocado Coles customers, here in Melbourne. Thanks for the comments. Just another quick question, if I can, on the move into positive volume growth in January. That's nice to see. What do you think's driving that, given inflation's still elevated, restaurant spend doesn't seem to be letting up yet, and stock availability is still a drag? Well, a couple of things that we called out. If we look last year, this next few months was the peak of the rail derailment in WA, which I think, Matt, was the longest ever outage, wasn't it? 200 kilometers washed out. Yeah. 200 kilometers of the rail track disappeared. The roads were down for a period. You know, that's the biggest disruption that WA has ever seen. You know, our availability at the peak of that in WA was quite significant. You know, it's fair to say that we probably hold less stock over there than others, which is obviously something we're thinking about and reviewing. It does impact the way we range and so on. It, it impacts us the most. We've got that as a benefit, as well as just general disruption last year. Again, the way we source meat, as I've talked to you about, in terms of high volume, but ethically sourced, if one of those factories goes down, which a few of them did during Omicron, then it severely impacts our supply. We're benefiting from the fact that, I think all of our meat factories are in good... I'm touching wood here, but all of our factories are in good form. Obviously, chicken's a little bit different, but on the red meat side, we're in a very good spot at the moment. We've got some natural benefits there. What we are seeing is, you know, the underlying business is very strong and, you know, foot flow is good. People are returning to- Shopping centers and people want value and, you know, we think we've got the best value out there, if people are looking for shopping on a budget. Okay, great. Thank you. The next question comes from Shaun Cousins of UBS. Please go ahead. Thanks. Good morning, and congrats, Leah. Maybe for James, just I've got two questions, one on the CEO change and one on implementation costs. James, could you describe the CEO change process that you went through, and did Coles consider external and other internal candidates, please? Thanks, Shaun. First of all, let me just say, you know, we're a very large employer of people. Over every... During every year, we keep a pretty close eye on not only what's going on with the team members inside Coles, but we keep a pretty close eye on what's going on in Australia and globally on people who may be of interest to us. Every year, we would have a formal session with Steven and our people and culture committee, looking at the depth of our management talent, looking at the succession opportunities for all of the key leadership positions to ensure that we were well prepared for the future and to ensure that in the event that some anticipated or unfortunate incident was to occur, that we were really in strong position going forward. As we moved closer towards the end of the service five-year time horizon, the board thought that they should do a review, and so we actually had an independent party do a global review for us of everyone in retailing who potentially could be considered as a person who might be able to succeed Steven Cain. We did that because we wanted to make sure that, in appointing the next leader, we're appointing the best person available that we could identify for Coles for its future success. We went through that exercise, and as I... As you would have detected from my earlier comments, the board's assessment in terms of Leah and her capacity to really lead and really continue to make a difference for the growth of Coles was the standout compared with what we came down to the sort of a narrower group of other external persons who, in the alternative, could have been considered. We had that work done for us by one of the leading global participants in that industry. Okay, great. Thanks, James. Maybe for Charlie, your implementation costs were extraordinarily low in the first half 2023. I think you guided to, you know, pre-D&A was some AUD 115 million, and you only, if we think of that first half, second half, maybe if it was to be even, that would imply some AUD 57 million, and you only incurred AUD 17 million. Arguably the difference there, based on what we knew previously, is AUD 40 million, of which drove all of your beat relative to consensus EBITDA. Can you maybe talk about what is the split now of the new guidance of AUD 120 million between OpEx and D&A? You know, why is it so second half skewed? Because it just looks like it very much flatters the first half result that you've delivered in Supermarkets, please. Yeah, Shaun. Shaun, really, really, really good question. Firstly, I don't think we guided in terms of a 50/50 split. We had no other option to choose. Yeah. Sorry. Pardon me. That's where I think people were going. In the absence of that, you didn't provide anything. That's true. That was the basis. I don't think it was unreasonable. Yeah. Shaun, the split was the project implementation costs were about AUD 115 million is what we guided and AUD 25 in relation to depreciation. Yes. Total impact was about AUD 100 million with AUD 140 million. We did spend AUD 17 million in the first half, and we do expect to spend the balance in the second half. We did call out, though, that obviously when you move into the second half, and as we are incurring at the moment, Witron is actually in a ramp-up phase, right? You are incurring things like double running costs. The depreciation is absolutely only a second half phenomena because we effectively took possession, if you like, that facility, when you do recognize the D&A in January. It was always gonna be second half skewed because of the ramp-up, the depreciation going into the second half. We do expect the total now inclusive of depreciation to be AUD 120 million. Gotcha. The way we think about that then is it should still be AUD 25 million D&A, but it's actually the implementation OpEx there, which now has come down from AUD 115 million to AUD 95 million. Is that how we should think about that? Yeah. Yeah. Approximately. Okay. Thank you very much. Thanks, Charlie. All right. Thanks, James. The next question comes from Ross Curran with Macquarie. Please go ahead. Hi, team. Just first, I was wondering about wage negotiations. You know, we're seeing quite a bit of pressure on wages over in New Zealand. Can you talk us through how the negotiations with the unions are going, for your Australian business at the moment? Yes. Well, the good news is we've completed, you know, a number of EBAs recently in the distribution space. One EBA that we will be conducting is obviously the Supermarkets one. That will be, you know, during the course of this year. Matt, is there anything else? I don't think so. I think we've got a good track record of working in partnership with our team members in the supply chain to get the right outcomes for them. The last six months, off the top of my head, I think we've closed out about three EBAs, and our third parties have done another two, so we're in a good space- Yeah. just a quick comment. Is that answer your question, Ross? Well, so we should be thinking sort of mid-single-digit increases. Is that, is that sort of what we're to expect for the next two to three years? Well, that's a good question, but one we probably don't entirely have the answer for at the moment. I mean, some of this, you know, there's obviously an EBA process to go through where you go through what's, you know, what are the benefits for the employees and what are the productivity benefits that might, you know, come to Coles and those type of things. There's also the Fair Work number that gets passed down that will always have some sort of influence on people. Where, you know, the minimum wage is there relative to where we are and, you know, we're above the minimum wage. Obviously, we look forward to concluding the next EBA. Yeah. Steven, I think it's worth reminding, I think the first half result did include the fact that the Fair Work outcome or decision last year or last half was 4.6%. That is reflected in the actual result for the half. Thanks. Can I also just ask around the comments around stock loss and theft? You know, as we move to put these TACOs in, can you just talk us through how you're actually protecting inventory? Sorry, Ross, what was that? Protecting inventory. How we protect the inventory. Oh, yeah. Yeah. All right. Yeah. Matt's looking ready for action here. Go on, Matt. There are a number of ways, and what I would point out is that when we have customers go through assisted checkouts, and we've broadly moved over the last probably two decades from zero up to a large proportion of our customers now go through some form of self-service. The product recognition that a customer can execute at a checkout knowing the products that are in the baskets are the ones that they've selected is pretty high. I wouldn't always assume that self-checkout has a loss in the traditional sense of theft. There is a higher level of product recognition. We are seeing elevated theft in Coles. It's also been seen with our contacts in the industry through Australia, and it's also been seen overseas. This is one of those post-COVID trends that's definitely playing out. We've invested more in both team member training. We would like to over-service our, all of our customers first, but also make sure that everybody is capable and able of diffusing potential difficult situations with customers 'cause team member safety is clearly paramount. In addition, Steven said this in his opening comments, we ran a program that we call Target Hardening over the last two years that's shown some of our bigger stock loss improvements. We're going back around that. There's new technology out there, whether that's trolley stops or whether that's smart gates. This really uses artificial intelligence and smarter technology to detect whether or not a customer has gone through a normal process or whether someone perhaps has forgotten to pay, and we can have an intervention with the team member and correct that. There's a number of technology solutions that we're rolling out alongside team member training. Great. Thank you very much. The next question comes from Tom Kierath with Barrenjoey. Please go ahead. Morning, guys. Just a question on the gross margin expansion in the Supermarket business. I think you called out one of the drivers as being lower COVID costs, I think about AUD 130 million. Can you give us the split of that between GM and CODB, please? Yeah. In terms of if we look at gross margin, there was actually lower COVID costs through the period. I don't think we've specifically split that out historically, but it is a meaningful portion, especially in relation to supply chain. If you recall, our supply chain costs are in gross margin and therefore that's where it manifests itself sort of mainly. There are other things that other drivers in gross margin, not just the cycling of COVID costs, but certainly sort of Smarter Selling benefits that we've just spoken about in terms of the initiatives. Mm. There's also elements around what we normally do day in, day out with our ranging and strategic sourcing sort of activities. We've, you know, we've seen those as sort of positive impacts on gross margin, but some of the other impacts include waste and markdowns and obviously stock loss that we've just spoken about. Is it like the majority of the 130, like over 100% or? Just trying to get. Oh, no. We'd have to look at the. underlying gross margin moves Yeah, look, in terms of gross profit, essentially, if we sort of look at a split, probably, 40%+ of the COVID costs were in GP, in the supply chain. Oh, cool. Thanks. Thanks. Just the second one, the Liquor business looks like it's doing pretty well, especially relative to Endeavour. I see that you've done a heap of renewals. Can you just talk us through what the impact you're seeing, post refurb or renewal and then kind of how far that program is through? Thanks. Thanks, Tom. Darren, do you wanna take that one? Yeah. I mean, we've been ramping up the Liquorland Black and White renewal program. We're now up to about 370, 371 stores now that we've converted. It's performing really well. It's resonating well with customers. Like I said last time, it's not just a change of color. We've been working through arranging particularly local and ELB representation in the shops. To give you an idea of that, at Southland, it's got sort of almost approaching sort of 400 local lines in now, which has materially changed the shape of the sales in that shop. We're seeing good conversion rates improvement from Coles supermarket shops. You know, that's helping us drive the business. Okay. Tom, does that answer the question? Yeah. Yeah, that's great. Thanks, guys. The next question comes from Craig Woolford with MST Marquee. Please go ahead. Hi, Steven, and congratulations, Leah, on the promotion. Great to see. Just with the inflation comments that you provided, it seems 'cause you said inflation's moderating from a peak, but then your commentary towards the end of the presentation seemed to suggest it was largely associated with produce. Can you give us a sense of whether you think we've seen the peak in packaged grocery inflation? Yeah. Good, good morning, Craig. Leah, do you wanna take that one? Sure. Hi, Craig. How are you going? Thanks for the kind words. I mean, if we look at the half, we did see the inflation step up quarter on quarter, and we had the two counteracting effects happening. Packaged increased quarter on quarter, that was really driven by the CPIs that we're seeing coming through in the grocery space, but also the farm gate price for milk, which impacts dairy, which we include in the package number. You had fresh, which decreased quarter on quarter. That was really because of the impact that we've seen in fresh produce, where Q1 was heavily impacted from the flooding, which we'll remember the iceberg lettuce and the cost of that, and that was quite a prominent part of Q1. As we came into Q2, we saw quite a few vegetable lines that were moving into deflation, so things like tomatoes, capsicum and broccoli. That was partially offset by what we were seeing in meat and deli, in particularly in the white meat space. That's both in poultry and pork, which were in an inflationary position. It's a very complex set of movements in there. It's somewhat difficult to kind of predict where it goes. I think what our expectation is that we are expecting cost pressures to remain, but we are expecting them to start to see some moderation. The pressures we think we'll continue to see in areas like dairy, energy and wages, but we would expect some moderation starting to come through in areas like freight, wheat, packaging, and potentially in that pork space as well. You get that kind of all into the mix and the question is what it will look like. I mean, we're starting in this half to actually cycle over the top of when the significant inflation started to come through. That would kind of also say that if we've got some moderating factors coming through and we're starting to cycle the significant inflation that we saw last year, that the numbers moderate a bit. Does that help? Yeah, that does. That makes it much clearer, particularly on the packaging side. Thank you. Just a second one on Ocado. Obviously the CapEx still seems in line. Yes, the opening date might be delayed, particularly for New South Wales. What about the business case in terms of sales and profitability? Is there any revision to what you expect in a contribution from Ocado both on sales and returns? Thanks. A really good question, Craig. We're not currently expecting any sort of material revision to the business case. Clearly, there's a little bit of phasing that you get with New South Wales obviously going into the sort of half 2. That'll work its way through. Generally speaking, from both a CapEx and implementation OpEx perspective as well, I think, we've clearly guided that we're not expecting at this point any upticks in implementation costs. Okay, great. Thanks, Charlie. The next question comes from Lisa Deng with Goldman Sachs. Please go ahead. Hi, guys, and congratulations, Leah. Just a question on supply chain. Would we be able to get understanding on how much of as a percentage of sales is actually supply chain related cost, that's sitting above the GP line in the first half and then also with moderating costs as well as Witron, one of the Witrons coming on, what is that view into the second half, please? That's the first question. Lisa, I'll send you my model after this. Lisa, we it's not a, it's not a number we disclose. I think you've got the view from both Matt and Steve. I think as we work through some of the disruption elements on the supply chain, they're not immaterial, clearly, in terms of what's been impacted, both not only from a cost perspective, but also as Leah mentioned, on the top line perspective in terms of lost sales as well. We don't, Lisa, we don't break those out for obvious reasons. Got it. The implementation cost is mainly sitting in, you know, that GP line, right? Because it's supply chain. The implementation costs for Ocado and Ocado and Witron, the 120 for this year that we talked about. Oh, I'm sorry, 120 minus 25. The 95. The Ocado cost is sitting in CODB, and the Witron cost will be split between gross margin and CODB. Okay. A follow-up on implementation costs into 2024, is there any change to that earlier AUD 220 million, I think we guided to, during the full year? Yeah. Look, we haven't provided, further guidance to that, to that, Lisa. Look, given the given the sort of phasing as we sort of expect, you could expect that the AUD 20 million differential in this year would move into FY 2024. Beyond that, I'm not giving any further guidance at this point. Got it. Thank you. The next question comes from Ben Gilbert with Jarden. Please go ahead. Good morning, all, and echo everyone's comments to you, Steven and Leah. Just the first question from me, just in terms of saying that volumes are moving back towards flat, how are you thinking about the outlook for market growth this year? Because we're seeing numbers in the U.S. and the U.K. at the moment that's got the market growing anywhere from sort of 8%-11%, 12%. Is that conceivable? Do you think the Aussie grocery market could put that sort of growth straight out for the first six, nine, 12 months of this calendar year? morning, Ben. Morning. There's a few components to that question, which is why we've tried to, you know, for the first time in a while, talk about volumes so that it makes it a bit easier to sort of work out where the sales are heading, because ultimately the sales are a combination of what you think the volume growth is, plus the inflation and anything you think might be added in from a mix perspective, because obviously the average sale price is different to the inflation number as well. We've tried to be transparent in that regard to help you. I mean, what we have said is, volume is moderately positive. And we've said that inflation is gonna be coming down, you know, more or less month by month. We don't know where that will end up, but you've got to believe that ultimately a lot of it in the medium term is gonna depend on where wages, inflation, ends up, you know, and to some extent, the impact of energy and interest rates. Wages will become a more important driver of inflation going forward. I think when you look around the world, there's no doubt that inflation in other parts is higher than what it is here. We didn't peak at the, you know, we've effectively peaked at between that seven and eight sort of level. Some of the overseas markets are sort of well into double digits. I don't see inflation-driven market growth being as high as some of the markets we've seen overseas. However, I expect the food market here to be more resilient than, you know, than overseas simply because, you know, there's a lot of Australians who are in a relatively good space still. Steven, I might just a couple of things. I mean, as we, I think we've spent a little bit of time talking about a little bit of a macroeconomic environment. You know, if you look sort of forward, Steven's spoken about the volumes and I guess elements around inflation. As we, as we also spoke a little bit of availability. As we can see availability improve, we'd expect that to be a sort of a positive tailwind, but obviously a lot of work to get that in shape with our suppliers. We should see benefit as population growth continues to and immigration levels certainly improve. Also, you know, as cost of living pressures, sort of increase, I think we're really well positioned obviously with our value position in the marketplace. If there is a switch from, you know, to, into, in-home dining or in-home consumption, I think we're really well-placed, to sort of work through that as well. I think we are actually well-placed in that sort of current environment to ensure the top line is, as solid as possible, through this half and beyond. That's helpful. Thanks. Just second one from me, just on Coles 360. It's obviously great to see you guys pushing more aggressively into that space. I think the talk in sort of some of the industry journals is your friends up north are doing up with $300 million a year out of their media business. How quickly can you scale that? Because in theory, that's a $100 million-$200 million type opportunity at a pretty healthy margin over the next couple of years. Can you give us any idea around where you are in terms of scaling up Coles Radio for years, but how you are in terms of scaling that? Do you think you can scale it more quickly, given some of the discussions have already been done from suppliers trying to get terms and sort of showing your wares and capabilities? Well, it's great to hear, Ben, that you've had positive feedback on it. Obviously it was only launched a few months ago, we're in the, you know, the early stages of providing the services to our customers. I think it would be fair to say we've been really pleased with the performance of the business so far, and there probably are opportunities going forward for us to accelerate some components of it. That will be part of our planning that we'll be doing as we sort of head into this budget cycle in terms of, just, you know, how hard we would wanna push that. Fantastic. Thank you. You know, it's fair to say, you know, the P&L is currently in a couple of places at the moment, and there's already, you know, media income there in various parts. We did make a very conscious decision last year to significantly increase the resources that we were putting into the area and brought Paul Brooks in, who was the sales director of Channel Nine, to come and lead that for us. Obviously he's building a very good team here at Coles. Fantastic. Thank you. Your next question comes from Richard Barwick with CLSA. Please go ahead. Hi, guys. Just want to talk about the availability and in-stock levels. You've talked about it being an industry-wide issue, which seems fairly clear. Do you have a view or do you have any metrics to compare your in-stock levels relative to your competitors? You did call out that the voice of the customer, or the NPS has been negatively impacted by stock availability. Do you see yourselves as any better or any weaker position compared to competitors? Yeah. Thanks, thanks, Richard. It's a good question and one we contemplate a lot around this table, as you'd imagine. I think what you've got to, starting with what is, what is Coles and what are we trying to do? We don't have as wide a range as some of our competitors. We try to keep the ranging tight, but tailored, from an efficiency perspective and a shopability perspective. We also have obviously some significant ambitions on the private label front and, you know, where possible in the past, particularly on the fresh foods business, we've tried to sign up for longer term contracts that provide us with a great cost, but also are ethically sourced. If you take us versus our competitors, we're similar in some ways, but we're also quite different. If you take the list we've provided, on this slide six and go down it, the dry pet food is an industry branded issue. The bottled water was a private label issue that was unique to us through our supply agreements. Fresh produce is an industry issue, but as I've said before, if you're an independent supermarket or in the fruit and veg business, it's far easier to source from different places and in smaller quantity than it is for us. Frozen vegetables is industry wide, albeit, we did have an Australian-only frozen veg sourcing policy, and we have decided to start sourcing some of that from overseas to supplement what's available locally. If you look at the WA rail, we do probably ship more from the East Coast to the West Coast, and again, we'll see some of that changing over time as we increase stock holding in WA, but also start thinking about more supply from that region. Far North Queensland, again, is mostly an industry thing, and you know, with both WA and Far North Queensland, the majority of product does go by rail, and if the rail is down, it's actually very difficult to replace it quickly or totally by road. And then on chicken and eggs, again, some of that's industry. You'll have seen that reported by Inghams last week. But again, we did have one of our egg suppliers close down, which impacted us. And the rest of it is, you know, a bit more industry wide, I would say. So there's one or two things that are unique to us. What's definitely true in the last six months is if you were a smaller player, sourcing small volumes, where you weren't particularly focused on how ethically sourced it was, then you would have had a much better in-stock position than us. But again, it's something I'd expect us to improve on over the coming months. Thank you. I guess I'm just trying to get my head around the idea that improving availability should be a tailwind, because in these instances, a lot of them are industry related. I mean, people haven't gone hungry because they couldn't get the products that you're talking about. They would have, you know, substituted into something else. For the most part, the examples you've given have, you know, impacted everybody. It's not a case of someone couldn't buy something from Coles, and so they've gone and shopped somewhere else. You know, once you have better availability, I maybe, I don't know, need a little bit more of an explanation as to show how that would actually dovetail into a sales outcome when, as I say, people would have substituted. I have definitely been in business long enough to know that availability drives sales, and in fact, it's the number one driver of sales. Let me give you some examples. I've been all around the country in the last few months to see it for myself. I have been to SA, WA, Queensland, and New South Wales, and then various parts of Victoria, and I've looked at every single competitor as I go around, whether they're a big competitor or whether they're a little one. It is very different not only by competitor, but by location as well. In Victoria, for example, I went into. When we had limited eggs and water, I went into the local Costco, and there were customers in that. I'll send you a photo if you want, 'cause I took it. There's a customer in there whose trolley has only got eggs and water in. What you've always got to realize is that most people in Australia shop in two or three different locations. They're going to city centers. They're going to shopping centers. They're going to Costco. They're hopefully coming to Coles more than anywhere else. The fact is, you either, as you say, substitute when you're in the store, or you substitute through a competitor, or you go without. Customers are making that decision up in their mind all of the time. I can tell you, I went to some of our stores, and we didn't have an egg. An egg is quite important, and that situation has been resolved now. You know, in that particular case, you'll go and get an egg from somewhere else. You won't say, "I won't have an egg with my bacon and egg." There are some things that are quite different. When you look at things like our chicken, our chicken is RSPCA approved. It isn't always RSPCA approved elsewhere. When you go, some people will find that important, other people won't. There's a lot of things that impact what people buy. I would take a lot of convincing if someone came into me tomorrow for an interview and said that availability doesn't drive sales, I don't think I'd re-recruit them, to be honest. I think it's actually quite, it's quite important in the whole scheme of things. It's important from an online perspective as well, because it's far easier, as you say, to substitute in store than it is online. Obviously once availability does get impacted, people want a closer look themselves as well to make sure they know what's going on. That's a long story which hopefully sort of says... We get a lost sales report every week, by the way. We think we know what we lose every week from our availability situation. I can tell you it's not 0, and I wouldn't be writing a slide about it if it was anything close to zero as well. It's actually fairly significant. Okay. All right. Thank you. Just one more quick follow-up. COVID costs, the fact that you've called out that it's down, you know, AUD 130 million lower than AUD 150 million obviously implies AUD 20 million in this half, presumably more or most associated with absenteeism, managing that. Can you just confirm that and the likelihood or the expectation of... You know, do you think we'll get those costs to zero, or are they just gonna keep on lingering into this second half as well? Yeah. Absolutely. In terms of absenteeism, is probably the biggest driver in terms of COVID costs. The impact to the half was about AUD 20 million. Yeah, pretty much 90% of that was actually related to absenteeism and the like. Again, I think, you know, sort of looking forward, we'd still feel there'll be an element of COVID cost impacts, but certainly at the lower level rather than the elevated levels we've seen historically. Do you think it's expected to reduce, Charlie? Lower than 20 into the second half? again, I'm not sure I have a have a, to be honest, a forecast, in front of me. I think the direct cost will reduce. clear. These are direct costs. Absolutely. obviously the. Absence has improved through the half. Yeah, absolutely. The majority of it is coming back. It's not settled yet. Okay. It almost got back down to pre-COVID normal, and before I popped the champagne cork, it went back up again. It's not the levels it was at. Hmm. Yeah. Okay. All right. Thanks very much. The next question comes from Bryan Raymond with JPMorgan. Please go ahead. Thank you, and just echo everyone's comments on congratulations. Just moving on my questions. Just on the cost base. I'm just trying to get my head around the gross margin and CODB picture in half. Gross margins were up, you know, it looks like about half of the upside in gross margins was driven by COVID cost online, which makes sense. I would have thought some of these logistics pressures would have weighed on that. Clearly, you know, price competition and promotional participation might still be subdued. I'm trying to understand how that was still up given all those logistics cost pressures. That's my first one. Then my second question will be on CODB, but perhaps, you know, could you address that and that on the gross margin side first? Thanks. Great. Thanks. Thanks, Bryan. Let me just go. I think in terms of the gross profit, I think you've pretty much did the waterfall there with all the various items. Let me sort of just sort of walk you through some of the key larger movements. I guess on the positive front through gross margin, what we did see is obviously direct COVID costs, mainly in relation to the supply chain logistics part, obviously improve on a PCP basis. We Steven spoke about, and so did Matt, some of the Smarter Selling initiatives that we've sort of undertaken, and they were a positive tailwind specifically around some of the loss protection measures that were put in place. As you know, one of the things that the business has been focused on over a number of years is continually improving gross profit through its strategic sourcing, through the sort of ranging and mix and the like. All those are sort of positive factors into gross margin. We did see though, obviously, stock loss rates increase higher than we thought. Logistics costs were certainly up as well, given the various cost pressures. We are seeing sort of pluses and minuses through that sort of gross margin. Net-net, it did, gross profit was up by about 43 basis points. 40... Sorry. Right. Yes, 43 basis points. Yeah. CODB line, again, lots of noise in the CODB line, right? Clearly, wage growth, as wage and salary growth, a significant portion of that. We continue to obviously invest in strategic investments like the IT and eCom that we've mentioned sort of earlier. That's the line also that you'll get the Ocado CapEx and OpEx, Witron and Ocado CapEx and OpEx through. There are some other items just generally that, to sort of factor through, and that includes things like the property expenses. So some of the tenancy and rates that sort of come through on property, they're linked to sales. Therefore, you do see an uptick in sort of tenancy costs through that. Obviously, on a positive front, clearly, significantly less COVID costs, which was positive. Two-thirds of the Smarter Selling or two-thirds of the AUD 100 million, is actually was realized in the CODB line. Lots of moving parts, but net-net, I think, you know, quite good improvements there in GP and some positive and negatives there in the CODB line. Right. Just if I can just follow up on the CODB side. On my numbers, it looks like a circa 9% underlying cash CODB growth ex-COVID costs. There's lots of ins and outs as you just went through. It's quite a high run rate. I understand you've got mid-single digit wage rate increases, rent's probably similar. You've also got flat volumes, online sales declined, and logistics costs are obviously in cog. I'm just trying to understand that run rate, that high single digit run rate, and how that should persist going forward. If so, the benefit from COVID costs unwinding will fade over the next two halves. Just trying to understand if that's a kind of a level that we should be starting to think about for our underlying cost growth going forward. In terms of in terms of this. Clearly, again, lots of noise in the result. Clearly, again, we shouldn't forget also the sort of the indirect impact that we're seeing through the COVID costs that we spoke about earlier, like the availability and other issues that we've sort of called out. We are continue to make transformation investments certainly in IT and digital eCom. The other thing that cycles through or works its way through a CODB line is depreciation and amortization. You would have seen that has increased over the last year and a half, two years, as we've obviously our capital expenditure moved from, say, circa AUD 1 billion to that sort of AUD 1.2 billion-AUD 1.4 billion range. You see that going into CODB as well. Yeah. Sorry, I was quoting numbers on a cash CODB, so ex-D&A basis. Yeah. No, I appreciate that at the total cost line. The final question just on these issues for me as a follow-up is, gross margins are up 140 basis points now versus first half 2020, despite obviously being in a challenging environment logistics-wise. Are these sustainable levels? I mean, maybe it's one for Leah, given her role going forward, but it just, it feels like it's stepped up meaningfully, not just for you, but for your competitor as well. Just trying to square that up versus what we're seeing on the cost side, operating cost side, I should say. It feels like it's moved a lot. I'm just trying to work out whether that's the new normal or whether we should be factoring in some unwind of some benefits you've had over the last three years. That's a really good question for the CEO, but let me just have a first stab at it. Sure. Thank you. Look, the things that we're not going to stop doing is, Smarter Selling and yeah, as we said earlier, Smarter Selling, a third of the Smarter Selling initiatives have actually been in the gross profit line. If you look at the last, the last, three and a half years, we're obviously coming to the end of Smarter Selling 1.0, which will deliver AUD 1 billion by June 30. A third of the initiatives have been in the GP line, right? Some of the things that we've worked through, and they've been really, really important. We're obviously working through what a Smarter Selling 2.0 Look like, but it's fair to say that Smarter Selling is part of our D&A. The other thing that I think, you know, we aren't gonna stop doing and we've been doing quite successfully is, you know, working really well with our suppliers. I mean, our relationship with our suppliers and how we work with them in relation to, you know, strategically sourcing, some of the excellent work our team does around, you know, ranging and in-stores and mix, they all sort of work into the sort of, the GP line. Obviously, going forward, one of the things that we'll see in the GP line is some of the benefits of Witron. Obviously, I know we haven't called out, what that number will be, but you can expect to see that in the GP line, obviously going forward as a positive impact on logistics costs. Leah, did you want to add anything? I think that was an excellent answer. Okay. Bryan. Thank you. I hope that was okay. Thank you very much. Appreciate it. The next question comes from Phillip Kimber with E&P. Please go ahead. Hi, guys. Congratulations to you both. The question I had, and it's slide 17. You show EBITDA for the Supermarkets, Liquor and so forth, and I'm really interested in the Supermarket business. It's gone up by AUD 124 million this half versus a year ago, and you said COVID costs dropped by AUD 130 million. Now, I know they don't all sit within Supermarkets, but I think the vast majority do. So it looks like, let's call it EBITDA, is sort of flat without the COVID costs coming out. That's actually a little bit different to your fiscal 2022 year where it grew, you know, in round numbers about 5%. So I'm just wondering, is it... Did availability get that much worse in this half versus last year to create that flat sort of pro- underlying outcome, ex-COVID costs? Or is there something else we should be thinking about? Yeah. Look, again, a really, a really good question. I think one of the things that's, unfortunately, I'd love it for it to be that simple, but it's not quite that, just that, that simple. There's lots of moving parts, right, that sort of work through that EBITDA line. One of the items you identified is clearly COVID cost and the reduction there, and they're sort of, they're sort of positive. The other positive element there is, again, Smarter Selling costs that work their way through. There were a number of headwinds. You know, we asked, we were cycling again, just, you know, we shouldn't forget this time last year, we were cycling quite significant headwinds as over the half that's just gone in relation to the lockdowns and the elevated sort of sales, but that was there. Clearly the availability and supply chain challenges, they continue to impact the sort of DIFOT numbers, and the like, and also the inflation in our own cost base that we sort of worked through. Lots of things there, including the investments I spoke about. I guess one of the things that you might wanna sort of look at is perhaps look through the year year-on-year growth. One of the reasons we provide the three-year growth is trying to give you a different sort of read, through that as well that might take some of the noise out of that result. Sure. Very quick one. D&A, I think you'd previously said, you wrote it in this release, 1.7. Obviously you'd need to adjust for the Coles Express business coming out, but this year will be lower. Like with Witron and Ocado, can we just assume that the delay, you know, that just gets pushed out a year, so that big step up will now happen in FY 2024 just for various delays? I'm just trying to understand if you've fundamentally changed your D&A target, or it's just a timing issue. Yeah. can I say firstly, the D&A target's got nothing to do with Witron and Ocado. The targets that I gave, or sorry, the previous notes that we gave in relation to the depreciation for Witron Ocado, they still stand. The basic change is really simple. Last year, the full year we guided AUD 1.7 billion for D&A. but that was assuming a full year of Express, and going forward. When we announced the sale of Express on the 22nd of September, basically under accounting rules, you stop depreciating and amortizing the Express assets. The Express depreciation for the year will only be about AUD 35 million. Just to give you a comparison, Express last year's total D&A was about AUD 140 or AUD 145 for the year. It just gives you a bit of an idea. What we're guiding is giving you a AUD 1.55 billion for D&A for the continuing operations, which actually includes Liquor and supers. You'll see a number in addition to that of AUD 35 million with respect to the Express business. Okay. I mean, that number was also stepping up. You know, next year, that AUD 1.55, does that step up again, which I think you'd called out previously in the strategy day that there was gonna be some material step up in- Well. I get that Coles Express needs to come out of it now, but in an underlying sense, is it still stepping up over the coming years? Clearly, CapEx will actually step that up. More importantly, probably the biggest impact next year will be the fact that you get Witron for a full year, for example, rather than the for six months. Just sort of noting that obviously that includes the all the AASB 16 sort of depreciation. It will step up in relation to CapEx, but specifically you get a full year of Witron. Yeah. Great. Thank you. Your next question comes from Nicole Pini with [Morningside] Equity Research. Please go ahead. Good morning. Thank you for taking my question. All the best with the transition and changeover. I would just like to further focus on the reported EBIT margin, particularly for the Supermarket division that expanded in the recent half. Already as discussed, due to some of the elements in the near term moving past. However, considering the EBIT margin history, for Supermarket, now there was some ASB effect in there, but the Supermarket EBIT margin is trending closer towards that kind of FY 2015, FY 2016 peak period, etching close to the 5.5%. Now, history suggests there are some limits to Supermarket margins. One, would you agree with this? Secondly, thinking more longer term, can you perhaps think of anything that structurally changed, and putting aside the near term moving parts already discussed, that could result in the margin trending closer to that peak level, specifically for Supermarket and longer term? Yeah. Nicole, that's an answer I could happily spend three hours going through all the things that might impact the Supermarket's P&L over the next few years. When you go back to, you know, the period you're referring to, there was obviously some interesting circumstances around price differentials and then there was a, you know, a fairly significant price discontinuity that was closed in a short period of time. That sort of price differential, you know, we think there's a price differential, but it's something that we focus on moving forward through private label development and all of the other things that we talk about to deliver good value. If you stand back from our P&L over the last three or four years, where as we've seen, 20%-odd, profit growth, margin expansion, but also some CODB growth as well. It's actually being driven by strategic initiatives, which are ongoing. As Charlie and Leah and Matt have referred to this morning, we do have a strategic sourcing program with suppliers. We do have a Smarter Selling program which impacts the gross profit. We are seeing some very positive mix changes over the years. Three or four years ago, the range in Coles was quite flat, wherever you went in the country. It's now more tailored. It needs to be a lot more tailored, but we're catering much better for the tale of two cities that we've talked about. Our premium range just continues to improve and our entry-level pricing continues to improve versus the various competitors. We've got a very positive mix benefit that's come through over the last few years as we've improved the ranges and the sourcing. Things like Witron will impact the GP as we've talked to, because it's the more efficient way of distributing product in Australia. If we look at CODB, obviously that's what Smarter Selling is designed to do, notwithstanding the fact that, you know, there are some inflationary pressures in the business. If your GP initiatives come off and your Smarter Selling initiative comes off, then you should have, you know, an EBIT percentage that, you know, looks fairly healthy. You know, clearly if there are discontinuities in the market or something else unforeseen happens, then, you know, clearly it can go the other way as well. I'm hoping the fact we've done this for four years now sorta demonstrates that these are strategic programs that are driving the P&L. What I've said for many, many years about Australia is that the supermarkets in Australia invest more CapEx as a percentage of their sales than anywhere else in the world. If you take our own investment that's going into either driving sales growth profitably, or it's to do with making this business far more efficient. If we weren't investing the sums of money we are, we wouldn't have access to projects like Witron and Ocado, which as I've been saying for four years, are game changers in this country. You know, will further benefit Coles for decades to come. I think the improvement is strategic in the P&L. It's planned. I think there's more good stuff to come, but you can never, you know, forecast what's gonna happen in the markets like this. I think, Steven, I'll just add also, in addition to the strategic considerations that Steven's mentioned, which are obviously all true. When you look at 2014 and 2015, the accounts did sort of change a bit later in 2019 with AASB 16. It doesn't make the EBIT percentages comparable as well. 'Cause if you recall, prior to AASB 16, you had the lease rental cost which cycled through EBIT. Now when they split that between depreciation and interest, you've got interest below clearly the EBIT line of that element. There was a change obviously in 2019. Just be careful when you compare that historical EBIT to the future EBITs. No, absolutely. Thank you very much. Hence that the recent number is quite attractive relative to the history. Thank you very much for that commentary. Thank you. Thank you. There are no further questions at this time. I now hand it back to Mr. Cain for closing remarks. Okay. Thank you, and thanks for all the questions this morning. I've seen some speculation that this is my last results announcement. Everyone will be pleased to hear it isn't. We've got the Q3 sales on Friday, the 28th of April, and that will be my last results announcement, and hopefully I'll be fronting it with the same bunch of colleagues around me. Hopefully, we've demonstrated that the business has passed through COVID in good health. This business is in really good shape for the future. We've got three tailwinds for the first time in as long as I can remember, and we've got an outstanding investment program ahead of us. I hope that we can serve you well in Coles up to Easter, and we look forward to seeing some of you in a bit more detail this week and next. Thank you very much.