Thank you for standing by, welcome to the Coles Group FY 2023 full-year results briefing. 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 1 on your telephone keypad. I would now like to hand the conference over to Leah Weckert, Coles Chief Executive Officer. Please go ahead. Good morning. It's great to be talking with you this morning. I'm joined here today by Charlie Elias, our CFO, Matt Swindells, our Chief Operations and Sustainability Officer, Ben Hassing, our Chief Digital Officer, and Michael Courtney, our Chief Executive of Liquor. Before I begin, I'd like 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. It's just been over 3 months since I came into the CEO role, and during that time, we have made some organizational changes, with the appointment of Amanda McVay as our Chief Customer Officer, Michael Courtney as Chief Executive of Liquor, Anna Croft as Chief Commercial Officer, commencing in January. There's also been some portfolio changes, with Matt Swindells taking on responsibility for the program delivery of Ocado and leadership of our manufacturing facilities, Charlie Elias taking on responsibility for transformation and procurement, and Ben Hassing taking on responsibility for financial services and payments. I've also been traveling around the country and listening to our team and customers. I've now been to every state, and I've met with state leadership teams and store managers and walked more than 100 stores. I've also been doing some customer listening through customer focus groups. The other big focus over the last few months has been working through a refresh of our strategy with the board and the leadership team, and I'll be giving you an overview of that today in advance of an investor day, where we'll go into more detail on it later this year. Today, Charlie and I will cover the full-year results first, and then I will take you through, at a high level, the Evolve strategy, and then finish up with outlook before we go into Q&A. There's a bit to get through. Moving now on to Slide 3. In FY 2023, Coles delivered group sales revenue growth from continuing operations of 5.9%, group EBITDA growth of 3.8%, and EBIT growth of 1.8%. Every year, there are a number of one-off items impacting results, and of particular relevance to our underlying performance in FY 2023 is the implementation OpEx for our 4 automated D.C.s and CFCs, as well as the AUD 25 million provision relating to the 2020 award-covered salaried team member review. If these are excluded, on an adjusted basis, EBITDA grew by 5.3% and EBIT grew by 4.5%. We experienced strong growth in our exclusive brands portfolio, with exclusive to Coles growing supermarkets of 9.6% and exclusive liquor brand growth of 8.5%. We are continuing to make investments for the future, and during the year, we accelerated investments in our retail media business, which was launched as Coles 360 in October and achieved media income growth of 27% year-on-year. Another significant milestone was the opening of our automated distribution center Redbank in Queensland. From a portfolio perspective, we entered into an agreement to acquire two automated milk processing facilities from Saputo Dairy Australia and completed the sale of the Coles Express business. We also achieved our Smarter Selling target of AUD 1 billion in cumulative benefits. On Friday last week, we provided an update on the progress of the Ocado project. The New South Wales CFC is broadly on track, with ramp-up expected at the end of this financial year. Victoria has been delayed by 12 months, with ramp-up now expected mid-FY 2025. This has impacted on the expected cost to completion. As many of you have probably seen in the media and in information shared by the Australian Retailers Association, loss has emerged as an industry-wide headwind, and within Coles, we have seen an increase of 20% year-on-year. I'm going to let Charlie cover the financials in more detail, so let's move straight on to Slide 5. Over the last few months, I've had the chance to listen to many of our customers talk about the challenges they are experiencing with cost of living. We know from our research that our customers are becoming more value-conscious, with many worried about their ability to cover costs, particularly young families and those under 34. They are telling us they are reducing spend on things like visits to the hairdresser and beauty services, entertainment, and gifts. Eating out, takeaway, and coffees from the café are increasingly being seen as treats for a special occasion. As the shift in home consumption occurs, they are looking to the supermarket to help them do more with their budget. Unsurprisingly, they are looking for more specials, more affordable brands, and more affordable cuts of meat. Many of them are meal planning, stretching out the time between purchases of less urgent items, such as cleaning and household items, and they are looking to catalogs, loyalty programs, and in-store markdowns to make their budgets go further. We are well-placed to deliver on what the customer is looking for with over 6,000 own-brand products, everyday trusted pricing on more than 4,000 lines, hundreds of products on Dropped & Locked, thousands of weekly specials, and a Flybuys loyalty program. Pleasingly, we are seeing two other trends which support supermarket sales growth: population growth, which is now expected to be around 1.7% in FY 2024, and the stabilization in our supply chain, which is leading to improving availability metrics. Availability improved from the first half to the second half in FY 2023. We have seen further improvements since the start of the new financial year. Moving now on to the next slide. There is no doubt that there are a number of industry dynamics at play. Three of the most significant for us are cost price increases from suppliers, driving price inflation to the customer, rising wage costs, and loss. While inflation and the number of cost price increases are moderating, there are different experiences across categories. Fresh produce is in deflation, whereas bakery and dairy remain at elevated levels of inflation. Wage costs will increase into FY 2024, with the increased payroll tax in Victoria, which is captured in our remuneration cost line, which represents an approximately AUD 20 million increase year on year. June 2023, Fair Work Commission increase of 5.75%, plus the additional 0.5% superannuation guarantee, has been passed on to the supermarkets team in full. Stock loss is at levels that we have not seen for a very long time, increasing in FY 2023 as a result of elevated levels of organized retail crime and theft, driven by the cost of living pressures our customers are facing. Turning this around is a key focus, and it also provides us with a significant opportunity going forward. Moving now on to Slide 7. Over the last few years, we have been making significant investments into our digital business. We have unified and migrated all of our customers to a single website, coles.com.au. We have expanded and optimized our network, in particular, accelerating the rollout of immediacy options in both click and collect and home delivery across both supermarkets and liquor. We've added key features to the Coles app, including digital receipts and enhanced filter function, where you can now filter by brand, dietary allergens, and bought before characteristics. We have integrated Flybuys offers into the app. Customers can now select their shopping method upfront. We continue to innovate with online Best Buys and QuiteLike Meal Kits business, which delivers healthy meal options direct to our customers. Loyalty and personalization also play a key role for our customers. Exiting FY 2023, Flybuys had over 9 million active members and a 30% increase in points redemption, supported by activities to improve customer experience. Our subscription service in Coles Plus has also seen a 30% increase in contribution to e-commerce sales. Coles 360, our Coles media business, which we launched in October last year, achieved growth of 27% in net income year-on-year and is in place for future growth going forward. Moving now to Smarter Selling on Slide 8. Another key achievement this year has been the AUD 1 billion in cost savings delivered through our Smarter Selling program since FY 2020. This program has been important over the last 12 months, as it has contributed to offsetting cost inflation we have seen in areas such as wage costs and fuel. Key initiatives which delivered benefits included service transformation at front of store, advanced analytics to optimize markdowns, energy-saving initiatives, and productivity improvements in online and in-store. Moving to Slide 9, where I'll provide an update on our major transformation projects. A significant strategic milestone for FY 2023 was the opening of our first Redbank ADC. As we've said in the past, this will transform our supply chain and provide us with a strategic cost advantage, with the first full year of benefits in FY 2026 following ramp-up across both sites. The ramp-up at Redbank is progressing. At the end of FY 2023, it was servicing just over 100 stores. This has now stepped up another 50 and is now servicing around 150 stores. At our site in Kemps Creek, New South Wales, initial commissioning work commenced in line with schedule. You can see on the slide the implementation operating expenditure we occurred in FY 2023, which was slightly below what we forecast at the automation day in May, largely due to lower-than-expected transition costs. We are also now providing some additional guidance on transformation OpEx for FY 2024 and FY 2025, which you can see on the slide. Moving on to the update on our automated CFCs on Slide 10. At our Q3 sales results briefing, we flagged that there were delays affecting construction of the CFC. We now expect the New South Wales CFC to commence ramp-up at the end of the second half and the Victorian CFC to commence ramp-up in mid-FY 2025. This is the result of additional works required to rectify construction issues with the grid, identified during quality control processes. Outside of the construction elements of the project, progress has been made during the year on a number of fronts, with new vans commissioned, technology foundations being put in place, including trial orders being successfully processed through the system. The first spots on the New South Wales grid and product ranging work, including the fresh produce and bakery room, equipment and operating procedures underway. Turning now to Slide 11. Before I hand over to Charlie, I'd just like to cover some of the highlights we have delivered from a sustainability perspective. We have maintained our focus on reducing emissions and waste, making significant progress towards our target of 100% renewable electricity across our operations by the end of FY 2025, and remaining on track to achieve this. We set a Scope 3 supplier engagement target of 75% of suppliers by spend to have Science Based Targets by the end of FY27, and this has been validated by the Science Based Targets initiative. We also reached a significant milestone during the year of having donated the equivalent of 200 million meals since 2011 through our partnership with SecondBite. This is such an important, important partnership for us, not only to reduce our waste in store, but to help support and feed thousands of Australian families in need, which has become increasingly important in the current environment. In June, we phased out soft plastic shopping bags in store and online, a move that will remove 230 million plastic bags from circulation in one year. Safety continues to be a focus, and we achieved a 9% reduction in trips year-on-year. Diversity and inclusion are also a focus, and we reached our target to have more than 40% of our leadership positions filled by women. We now have 3.5% Indigenous employment, and we were proud to be the sponsor of Sydney WorldPride. Pleasingly, we recorded our highest ever, might I say, engagement score in May. This was 3 percentage points above the May survey in 2022, and ahead now of the industry average, and 10 percentage points higher than the survey we conducted in FY19. Finally, we continue to support our Australian producers to drive innovation and sustainability, awarding more than AUD 3.6 million through the Coles Nurture Fund. We also achieved the fifth consecutive year of improved engagement on the Advantage Supplier Survey through collaboration and building strategic connections with our suppliers. With that, I'll now hand over to Charlie, who will take you through the financial results in more detail. Great. Thanks, Leah, and good morning, everyone. I'm now going to turn to Slide 13, which is the group results. I will firstly talk to the results as a continuing operations basis. Sales revenue increased by 5.9% to AUD 40.5 billion. EBITDA increased by 3.8%. EBIT increased by 1.8%. Adjusted EBITDA and EBIT from continuing operations, which excludes the major project implementation OpEx relating to the automated facilities, as well as an additional provision relating to the 2020 award covered salary team member review, would have seen adjusted EBITDA and EBIT increase by 5.3% and 4.5% respectively. EBITDA and EBIT were supported by Smarter Selling benefits and a net reduction in direct COVID-19 costs compared to the prior period. Net profit after tax declined slightly by 0.3%, basic earnings per share declined by 0.4% to AUD 0.781. On a continuing and discontinued operations basis, that is, including the Express segment, net profit after tax increased by 4.8%, basic earnings per share increased by 4.4% to AUD 0.823. The board has declared a fully final dividend of AUD 0.30 per share, bringing the total dividend for FY 2023 to AUD 0.66 per share, a 4.8% increase compared to FY 2022. If we move to the segment financials on Slide 14, we've presented the segment financials to separate continuing and discontinued operations, to again, to reflect the sale of the Express business. If I start with supermarkets, sales increased by 6.1%, with growth in the second half up 7.7% compared to 4.6% in the first half. Comparable sales were 6.8% in the fourth quarter. Sales growth was delivered through Dropped & Locked value campaigns and a successful execution of trade plans, including festive events such as Easter, Christmas, and Mother's Day. More targeted and personalized customer experience and offers, and the collectible and continuity campaigns also supported sales growth throughout the year. Our gross profit margin increased by five basis points year-on-year, at the same time as continuing to invest in value, growing our exclusive to Coles revenue by close to 10%. The margin was supported by Smarter Selling initiatives, one-third of which worked their way into GP, reduced COVID costs, increased media income from Coles 360, and a decline in tobacco sales. The margin would have been better had it not been for the increased logistics costs, particularly fuel, and the 20% increase in stock loss that Leah mentioned earlier. CODB, as a percentage of sales, increased by 20 basis points year-on-year to 21.6%, as a result of underlying cost inflation and wage increases flowing from the June 2022 Fair Work Commission annual wage increase. CODB was also impacted, impacted, particularly in the second half, by increased depreciation and major project implementation OpEx, as well as a number of other significant costs that arose at the back end of the year, such as the AUD 25 million provision we referred to earlier, a reevaluation of employee liabilities, with the increased Fair Work Commission wage increase, and larger than usual variation in bond rates, which also impacted liabilities. These were partially offset by the Smarter Selling benefits and lower direct costs in FY 2023. Further strategic investments were also made in the year in, in digital, e-commerce, and technology, in areas such as Coles 360 and the e-commerce platforms. Statutory EBITDA and EBIT increased 4.5% and 2.9% respectively. However, after adjusting for the major project implementation OpEx and the AUD 25 million provision, EBITDA and EBIT increased by 6.1% and 5.8%, respectively, with an adjusted EBIT margin of 5% for supermarkets, in line with FY 2022. In Liquor, revenue was flat, having returned to growth of 2.7% in the second half, after declining in the first half by 2.4% as the business cycled COVID-19-related on-prem closures and restrictions. Comparable sales were 1% in the fourth quarter. Sales were driven by strong performance in the Liquorland banner, as well as growth in the ELB portfolio, with ELB sales revenue increasing by 8.5% for the year and 13% in the second half. EBITDA was flat, despite cycling on-prem closures in the prior year. EBIT decreased by 3.7%, reflecting increased D&A following investment in the portfolio as part of the Liquor transformation program, most notably the Black & White format renewal program and the e-commerce investments. Pleasingly, EBITDA and EBIT increased by 13.2% and 19.5% respectively in the second half, benefiting from sales and margin growth across the fixed cost base of the business. Finally, the other segment, which comprises corporate costs, Coles' 50% share of Flybuys net result, the net gain or loss generated by Coles' property portfolio, and the product supply agreement reported at, in total, a negative of AUD 63 million. Corporate costs of AUD 90 million were incurred with an increase of AUD 9 million, largely as a result of higher insurance and store support costs. Coles' 50% share of Flybuys' net result was a AUD 13 million loss, and earnings for property operations were AUD 39 million. The product supply agreement for the 2 months for May and June contributed AUD 2 million to EBIT. You can see on the slide, here are the impact, the Express divestment and further information is also provided in the release appendix. I'll now turn to Slide 15 and cash flow. Operating cash flow, excluding interest and tax, was AUD 3.6 billion, with a cash realization of over 100% at 102%. This was driven by positive movements of working capital and provisions. The positive working capital improvement primarily reflects the higher trade payables, offset by trade receivables from the PSA with Viva, as well as increases in the GST receivables. The positive movement in provisions and other largely reflects the increase in the related provisions, including the AUD 25 million provision related to the 2020 award covered award covered Salary Team member review. The increase in average inventory days reflects the lower inventory levels last year due to the availability challenges and a partial rebuild of the inventory following low levels over the last few years during COVID. I'll now take you to the capital expenditure slide on 16. Gross operating capital expenditure on an accrued basis was AUD 1.356 billion, an increase of AUD 157 million compared to the prior year. Capital expenditure continued to be focused on growth and efficiency initiatives. Within supermarkets, CapEx increased largely due to investments in new stores and renewals, with 17 new supermarkets and 46 renewals completed during FY 2023. Efficiency initiatives focused on the investments in the ADCs as well as service transformations in the store. In liquor, capital expenditure was driven by new store openings and renewals, with 35 new liquor stores, 236 renewals completed, as well as investments in core IT systems. Coles continued to optimize its property portfolio during the year, with net property capital reducing by AUD 60 million compared to the prior year, largely driven by higher property divestments during the year, resulting in net property inflow of AUD 72 million. Now, if we turn to the balance sheet on page 17. As at 25th of June, we reported negative working capital of AUD 1.5 billion, capital employed of AUD 11 billion, and net assets of AUD 3.4 billion. We maintain a strong balance sheet with investment-grade credit metrics, which provide flexibility for future growth. Working capital improved by AUD 89 million compared to the prior year as a result of the higher trade payables due to the timing of year-end payments and the increased trade and other receivables, largely as a result of a product supply agreement. Inventory levels declined, primarily driven by the Express divestment. Property, plant, and equipment of AUD 5 billion increased by AUD 178 million compared to June 2022, driven by the increased CapEx during the year, partially offset by inflation and property divestments. Right of use assets of AUD 6.5 billion, again, decreased by AUD 692 million as a result of the Express divestment, which also saw lease liabilities of AUD 7.8 billion decrease by AUD 832 million as a result of the divestment. Net debt, excluding lease liabilities at the end of the year, was AUD 521 million, a AUD 159 million increase on the half-year net debt position. I'll now take you to the capital management slide on 18. We've extended our debt maturity profile and continue to maintain access to diversified funding sources. We do not have any debt maturing until FY 2026. At a full year end, Coles' average maturity of drawn debt was 5 years, with undrawn facilities of AUD 2.3 billion. The Coles Board declared a final dividend of AUD 0.30 per share, with a payment date of the 27th of September, bringing total dividends for the year to AUD 0.66 per share, a 4.8% increase. We retain our existing annual dividend payout ratio target of 80%-90%, franked to the maximum extent possible. Finally, before I turn it to Leah to take us through the strategy evolution and the concluding marks on outlook, our current published credit ratings are BBB+ with S&P Global Ratings and Baa1 with Moody's. We've retained headroom with our rating agency credit metrics and a strong balance sheet to support growth. Over to you, Leah. Thanks, Charlie. I'm gonna skip us forward a couple of slides. I'm now on Slide 28, the one that says Strategy Evolution. The listening sessions and store visits all over the country have been a really fabulous way to start in the role, as they've enabled me to get a strong view on what's working well in the business that we should continue to foster and amplify, as well as the opportunities we have to improve performance. Pleasingly, there is enormous pride in the teams to be working for Coles, and this is reflected in our MySay team engagement results. They value the culture that we now have as a business, which has been built since the merger and is characterized by wanting to deliver for the customer, care for each other, support for the community, and wanting to build a stronger business for the future. Now, the teams were also very generous with their feedback on what can be improved. Capability building of the team to drive productivity and customer experience was a key theme. There are some key areas of opportunity in our operating model and systems, particularly in fresh, which will improve sales and store standards. We recognize that we have more to do on our digital engagement with the customer, from the customer experience online through to how we personalize value and communicate. Value is top of mind for everyone, and our existing offer is strong, but the team have really challenged me on how we can communicate, finding this value at Coles more simply and more powerfully. Consistency of execution capability, both in-store but also on projects, is important for future success. All of these insights have been taken into account as we have refreshed the strategy over the past few months. Our winning in our second century strategy, which was set shortly after demerger and had the focus areas of Inspire Customers, Smarter Selling, and Win Together, was always established with targets through until the end of FY 2023. It has been a successful strategy and driven good results, particularly in the early years. The last few years have been unusual with the pandemic and large amounts of supply chain disruption. Customer behaviors have changed, and we have become more aware of the challenges that the future may hold with weather events. In light of this, we have taken the opportunity to Evolve strategy and to focus our efforts on the areas that will create the most value. Our vision remains unchanged: to become the most trusted retailer in Australia and grow long-term shareholder value. We have reset our purpose to helping Australians eat and live better every day. Helping refers to the growing ask from consumers to help them solve problems. What's for dinner? How do I be more sustainable? How can I eat more healthily when life is so busy? Right now, supporting them to find value and making the budget balance is one of the biggest ways we can help. Eat and live refers to food as our core purpose, surrounding that with adjacencies like liquor, pet, health, beauty, home care, which are all high transaction frequency, close to our core and convenient to buy alongside food. Better refers to our passion for more delicious, more healthy, more sustainable products. Every day is a very important concept because it points to the consistency that we need to deliver in our business to give every customer, every day, a great experience in our stores and online and with our products when they get them home. To support this purpose, our strategy is aligned around three pillars. These pillars create a flywheel, where activity in one can accelerate value in another to create a virtuous cycle. In our destination for food and drink pillar, we will focus on a great customer offer. Value, quality, range, and event execution will be improved and tailored across the fleet to ensure our customer value proposition in food is strong and complemented by other home needs. Accelerated by digital, we'll support higher levels of digital engagement with our customers through personalization, unification of our digital experience, and a focus on being omnichannel. It is also about driving growth in different ways, such as through Coles 360 or an expanded offer from what you will find in store. Delivered consistently for the future will focus us on delivering today for our customers through improvements in our operating model and team capability, whilst taking action that enables us to have success in the future, such as through a strong Simplify and Save to Invest program, investment in our store network, modernization of our supply chain, resilience to the security and outsourcing arrangements, and driving sustainability. Underpinning our three pillars are enablers that are critical to our success. Win together, which focuses on safety, diversity and inclusion, team engagement, and working productively and collaboratively with our community and supplier stakeholders. Foundations, which focuses on financial discipline and the technology and data capabilities we need to deliver the strategy. We will look to share more detail on each area over the coming year, as well as sharing our measures of success and progress. Turning now to Slide 29. Before I move on to outlook, I'd just like to make some comments on some of the immediate areas of focus. The first area of focus is availability, loss, and quality, which are all linked. Industry-wide, over the past few years, we have let customers down with the number of gaps we have on shelf. Our North Star has to be restoring availability to pre-COVID levels. This will drive sales and improve customer satisfaction. As you have heard throughout the presentation today, loss has emerged as a cost to headwind through FY 2023. Addressing this is a significant opportunity for us to drive performance in the P&L, and we are actively going after this. The second area of focus is continuing to deliver value for customers and maintaining competitiveness. We need to be focused on this to remain relevant to the customer at this time and to continue to grow market share. We will be focusing on launching our Simplify Save to Invest program to find efficiencies of over AUD 1 billion over the next four years, which with the current cost headwinds across areas like wages, fuel, loss, and construction, will be more important than ever. Finally, we are focused on improving customer experience. We have already rolled out some new training across the store fleet to lift team member capability, and we have an exciting roadmap of digital initiatives over the next year. I'll now move on to outlook on Slide 31. For FY 2024, the value-conscious consumer and cost inflation across the P&L will be important factors for us to navigate. In the early part of FY 2024, supermarket volumes have remained modestly positive compared to the prior corresponding period, and we have seen signs of customers shifting from out-of-home dining.... headline inflation has continued to moderate, with the fresh produce category remaining in deflation. However, inflation in bakery, grocery, and dairy remains consistent with the fourth quarter. As we enter the year, stock loss is a priority, and as I've already mentioned, we are taking immediate actions to address this. Availability has continued to improve in the early parts of the financial year, with many measures the strongest we have seen for over two years. Our new Simplify and Save to Invest program has kicked off and will be important in helping to offset the recent Fair Work Commission annual wage increase of 5.75% and the recent increase in Victorian payroll tax, which will impact our remuneration line by around AUD 20 million. Consistent with our Evolve strategy, we're also looking to continue to invest in our physical and digital footprint. As the new CEO, I am energized by both the challenges and the opportunities which lie ahead, especially with our strengthened leadership team, who are very focused on delivering to drive our success. There will, of course, be some speed bumps, but I'm confident that with the support of the board and our team, we will deliver our vision of building customer trust and long-term shareholder value. 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, then two. If you're using a speakerphone, please pick up the handset to ask your question. The first question today comes from David Errington from Bank of America. Please go ahead. Good morning, Leah. Good morning, Charlie. Leah, I think the key issue that all of us in the investment world today are grappling with is the costs and what's happening in the business, particularly in that second half. We probably, we probably shouldn't have, but we did get caught out a little bit at the magnitude of these cost increases. Now, my question is, can you go through that, run through a little bit more in detail, the source of these cost increases? Because we're talking big numbers. I mean, you're talking 6.5% nearly in wages, and the rule of thumb is if wages are 10% of sales, you're talking big numbers. And then you've got your other costs, your implementation costs. I'm trying to find out how much... And then you've got wastage as well. I mean, it really does seem to be a pretty tough time in terms of cost management. Can you go through, in a bit more detail, how much of this is industry-based costs? How much is it, is Coles-embedded type cost increases? And then going on that, what can you do other than smart selling to mitigate this? I mean, can you work your rostering a bit harder? What can you do with wastage? What is it there because obviously, you're just not gonna stand still. What is it that you can do? Because we're trying to understand this cost increase that we've seen in the second half, and obviously, going forward, how much of that you can mitigate and how much of it is it we just have to withstand it, and we have to adjust our expectations for the supermarket industry in terms of profit performance. Thanks, David. There's a bit in there, so I might break it up into some component parts. I might make some high-level observations, but I might get Charlie to maybe talk us a little bit through the bridge from an earnings perspective and some of the big contributors there. I think, you know, one of the areas that we've already highlighted that we've got a lot of focus on is the stock cost piece, and I might get Matt to give you a bit of insight into what we're working on there to really lean into that, into that problem. I mean, I think from a headline perspective, there are definitely a number of factors here which are industry factors at play, and we have sought to really call them out in the presentation. The two most significant ones for us are the level of wage increases that we've seen, going into FY 2024, but actually over, you know, the last year as well, where we saw a significant increase in the wage rate from the 2002 Fair Work Commission decision as well. Then the second one is loss. I think, we've seen the ARA talking about this one over the last month or so as a real industry-wide issue. They've come out with some estimates that as a retail industry across Australia, the estimate is it's impacting sales by sort of 2%-3% as a rate to sales. Obviously, we've seen a lot of commentary from our global peers on this as well. If you have a look at some of the commentary out of the UK or the US, most of the grocery retailers have been calling out for the last 12 to 18 months, the headwinds that they've been facing into in terms of a stock loss issue. I think, you know, those two are not unique to Coles. They are, they are industry issues that we are leaning into. I'll get Charlie maybe to talk through the bridge, which outlines a few of the other moving parts in there. Great. Thanks, Leah. David, what I'll do is... What I'll do for everyone is actually take some of the the bridge on the cost of doing business on a year-by-year basis, then actually talk a little bit about perhaps what was more skewed in the second half as we walk through that. Firstly, as you'd appreciate, there are lots of moving parts through this. Firstly, we had depreciation. I'll first talk about on an earnings basis. Depreciation and Amortization was up by AUD 60 million, and that AUD 60 million clearly relates to our capital investments that we've been making over the last few years and working their way through at D&A. If we then move to the sort of the cash CODB, I think the very first important point to really sort of highlight was really the Smarter Selling benefits and then the benefits from COVID online. When you put these together, we're actually required to offset the higher inflation, right? In terms of the inflationary- Mm-hmm. pressures in the, in the cost base. When we look at the remaining costs through it, I'd like to think about it as a third, a third, and a third. A third related to growth in growth for the year. Growth in relation to new stores, rent linked to the increase in sales and sales dollars, increases in things like the payment and credit card fees. A third relating to some strip, you know, investments that we're making, which include not only the Witron and Ocado project OpEx during the year, investments in the digital tech and e-com, but also we upweighted our spend, for example, in cybersecurity. Then the balance of the third was a range of factors. The AUD 25 million provision that we spoke about, which relating to the salary review of 2020, the REDcycle collapse, which again, impacted the industry here in Australia. The impact of that was really felt in the second half. Also, if you think about the volatility in bond rates, we've seen bond rates being quite volatile now for the last at least the last 12-18 months. In 2022, there was a positive impact on bond rates in the second half, which didn't obviously repeat in the second half this year. If I isolate some of these things for the second half, our project implementation spend was actually greater in the second half than it was in the first half. The REDcycle impact and the provision were a second-half impacts, and obviously, the, the first half benefited more from the COVID unwind than the second half. There was less COVID unwind in the second half. They were the factors really that looked on the sort of the year-on-year and then the second-half impacts on the CODB. Yeah, obviously, obviously, the Smarter Selling and offsetting. Can you do stuff to offset it with like labor rostering and stuff like that? What are you looking to do to mitigate some of these cost increases, Charlie and Leah? Yeah, well, I think as, as we've, as Leah announced, I mean, we have, as you know, the first program was, was for the four years, ended the June 2023. Today, we're announcing that we are targeting greater than AUD 1 billion over the next four years, in, in, in a program, titled, Simplify and Save to Invest. And those AUD 1 billion will be looking at all aspects of, of our, of our operations, and not too dissimilar to the Smarter Selling type initiatives that we had in the first four years. They're the sort of programs, David, that we're gonna have to roll out to offset these pressures on inflation. Yeah. That really covers off that covers off the CODB piece. The, the, the last issue, though, that sits in, GP, David. Yep. In terms of, you know, the movements we saw in, in GP, we had some tailwinds in there from Smarter Selling, a bit of COVID costs to unwind, and importantly, a tailwind from the growth that we've seen in Coles 360. But the headwinds we had in there were mainly, yeah, wages, fuel, and loss. And loss is definitely the most significant one in there. Like, kind of when we look at that bridge, the one that we look at and say, "We need to lean in and get that number to shift," it's the, it's the loss number. So I might get Matt to talk to that a little bit in terms of... Maybe could start with a bit of a one-on-one on what- Yeah loss is, and then we'll talk a little bit about what we're doing. Thanks, Leah. Good, good morning, David. I think it's important to, first of all, just clarify, when we talk about total loss, it's really in two parts. There is waste and markdown as we manage fresh quality and availability, and that was particularly disrupted in half 2 through some of the impacts in our supply chain with Scott's collapse and then Americold cyberattack. We, we had a bit of disruption that we cycled out, and pleasingly, with some work on assortment within the category teams, that has improved. The second part, though, is stock loss, which you can think of as shrinkage or theft, and that's continued to be a challenge. Just building on Leah's point about this not being a Coles or just an Australian retail problem, but a global issue, we have very close relations with a number of international retailers, both US and in Europe, and we can confirm it's the same problem, it's the same magnitude, and when we do apples with apples, it's broadly the same drivers. Importantly, I think we're all facing the same challenges with a similar set of actions. For us, they're really listed in three big buckets. So the first is a continuation of technology that's being deployed at pace. You would see that we were the first to implement smart gates. These are the gates that prevent a customer that hasn't paid for their goods from exiting the stores. The second one is trolley lock. That stops what our team members would describe as push outs, where someone can fill a trolley and then just try and exit the store, the wheels lock, and, and that's been very successful. We pioneered both of those. We are rapidly now rolling out Skip Scan, which is the process of self-checkouts, AI and camera technology, which will prompt the customer back around the process if, if they're stored by calendar year end in, in that space. That technology continues, and we're looking at ways to accelerate. Second one is then an operational focus, and that covers all immediate aspects. It's been underway for a time. It's on things like team member training, it's on over-servicing in our checkouts, it's on the use of store headsets. We've increased security guards and covert guards in our stores materially with great success. We have additional collaboration in each of the states with the police to really drive that organized theft that we've seen increase. We've also got a whole piece around range optimization for high-risk SKUs in high-risk stores. There's no stone being left ration. Then finally, we are using data analytics to try and identify trends in our operation, where we may not be able to immediately see a problem. The use of artificial intelligence and data can help flag up areas where the team can go and investigate both external and, and internal theft. That's really using a more precise way of looking for problems within our operation. They are the three areas. We've been underway already, and we continue to drive even harder to get ahead of this problem as we see it. Once again, this is an industry issue and, and one right around the world. Well, thank you very much, Charlie, Leah, and Stuart. You've been wonderful, and I really appreciate your answers. You're, you're certainly not sitting on your hands. Before I go, a call out to Michael Courtney. Great start and delivering a great second half in liquor. Thank you very much for your answers. Thank you. The next question comes from Shaun Cousins from UBS. Please go ahead. Great. Thanks. Good morning. Just a question regarding stock loss. How much did that increase second half 2023 on second half 2022? Was it 100 basis points higher, 200 basis points higher? I'm curious if Coles is more impacted because of the extended self-checkouts, those ACOs, which slightly make theft a bit easier, at Coles versus Woolworths. Will there be any effort on the part of Coles to add labor back into the store in terms of that checkout area? Could that effectively unwind some of these productivity initiatives to better manage this theft problem that Coles is facing, please? Yeah. Maybe if I start with that, that, that last one, which is around the degree of self-checkout. When we look across the fleet, what we see is that stock loss is a rising type in all stores. This is not something that is particular to stores that have a self-service front end. Every store has seen increases in stock loss. As Matt said, in our self-checkout areas, we have made investments now in terms of the training for the members manning, manning them. We don't, we don't feel that that is the nub of the issue here. We actually need solutions that can go across the entire network to address the issue. In terms of the, the number, so it was more heavily weighted to the second half in terms of what I'd describe as the adversity of the rate versus, you know, a, a long-term sort of regular expectation around stock loss. So we have seen it, you know, step on Q1 to Q2, Q2 to Q3, and then Q3, Q4 was relatively constant. If I can just add to that, Shaun, we didn't call out the full year results last year. It really wasn't an abnormal, if you like, a larger issue or an abnormal issue. Really, it was sort of weighted very, very much to the second half of 2023. I think stepping back a little bit, I mean, we would have seen gross profit growth, you know, more in line with what you would have historically have seen, but for the stock loss issue that we've called out. We're not gonna give specific numbers, but it gives you directionally where we would have gone, but for the stock loss. Okay, great. Thank you. Then my, my second question is just around online. That enjoyed tremendous growth in the fourth quarter, up 17%, after what was quite low growth in the third quarter. Can you just talk a little bit about should we expect an annualization as some of the initiatives that you've implemented, in the fourth quarter play out? Did any of this high growth in online contribute to the lower EBIT margins in supermarkets in the second half, please? I'll let, I'll let Ben answer this one. Yeah. Good morning, Shaun. Thank you. Thanks for the question. Also, thanks for your research and insights. Always love going through those when you send them out. Yeah, to your point, the, the online trend, it has improved. I mean, you can kind of see that as well through H2. We had double-digit growth, in line, and then Q4, 17% growth, and actually the trend continues to improve. I think if we look back last year, a lot of this was our, you know, year where we were up against growth from the lockdowns the two years previously. So there was naturally for consumers, they went back to shopping in store. One of the behaviors, though, that did change, pre and post-lockdowns was that just more and more customers engage with us digitally. As they go and they shop in store, they're first engaging with Coles digitally, making better, more informed choices as they shop. I think also some of the benefit that our customers are getting, especially with online, is just more convenience, when they especially those that are value conscious, when they're shopping online, they can see how much money they're saving in real time. If they're working off of a fixed budget, they can better manage their budget through online shopping. In, in terms of the overall trend improvement, you know, Leah talked about better every day, you know, eating better and living better every day for our customers. I think inside of Coles, this is broadly, not just with my team, we just talk about getting better every day. This, this past year, we've, we've talked about how we invested more in real-time analytics and getting feedback from our customer, responding from our customer quickly, as well as from team members in shop. That's helped inform our roadmaps for both what we show customers, but also for our, our picking, packing, last mile solutions. All in all, our cycle time is down 48% year-over-year, so we're responding faster for our customer. All of that said, we're, we're pleased with the trend. We're pleased, pleased as well today with, with the trend in online. We've given a lot of great features for our customers. There's certainly a lot more to come. On the profitability standpoint, I would, I would just call out there is positive contribution to both supermarket and group EBIT as a result of online, and I might just leave it at that. Great. Thanks, Ben. It's not lower margin? It didn't weigh on margins, Ben or Leah or Charlie? I think we'll leave it where Ben had, sort of indicated, Shaun, that it's a positive contribution- Okay. To it. Okay, fantastic. Thanks so much. Thank you. The next question comes from Ross Curran from Macquarie. Please go ahead. Hi, team. I was wondering if I could, maybe get you to unpack in a little bit more detail, the Simplify and Save to Invest program. Does the fact that you've called it Save to Invest mean that shareholders are unlikely to see much of the benefits that get put back into the business? The Simplify and Save to Invest program, it's really the evolution, if you like, of our Smarter Selling program going forward. One of the things that I've definitely found when I've been out talking with the team was that, you know, Smarter Selling, it was a strategy pillar. It was also the cost out program. It encompassed store renewal, the data strategy, things like that. In terms of the evolution of the name, we feel that Simplify and Save is definitely, it's doing what is written on the tin. That is really clear to the, to the team, that we need to take complexity out of the business. We need to take cost out of the business so that we do have the ability to continue to invest. As we build out the targets for that, one of the things we very much look to is what do we expect the cost inflation to be that we would need to offset, to be able to continue to maintain margins? Then also, where have we got strategic initiatives that we want to be able to invest in going forward? That, that is the primary two purposes of the program. It doesn't necessarily expand EBIT margins. It more offsets the, the inbuilt inflation. That, that, that's right way, right? Well, I, I think, Ross, I think if you look at it, I mean, clearly inflation rates at the moment are a little bit, are elevated relative to historical, right? So I think we need to look at this as a four-year program. We're calling out it's a billion-dollar plus over four years. So we look at this as a four-year program. Yes, part of it will be offset inflation, part of it will also, you know, would generate cost savings, where not only will that sort of seek to improve our earnings, but also allow us to invest further. So it's not 100% investment. It's just indicating that it's, it's part of releasing earnings to offset the cost pressures, offset, and allow us to invest back in the business, and that includes also driving, you know, driving earnings growth. Can I just ask secondly, then, on Ocado, do you think you could just give us a little bit more color around what caused the delay? It looks like there might have been quality issues when they were putting the grid in, that it wasn't built to the spec, millimeter accurate as it needed to be, when it's put together. Can you just help us understand how slipped as much as it has? Yeah. Well, I, I might hand it to, to Matt, just to talk a little bit about the, just the, the, the actual Ocado release that we put out last week. Look, it's, it's clearly not an ordinary building at CFC. You're right, the degree of tolerances are particularly high, not too dissimilar to our Witron facilities that particularly Redbank, that we opened recently on, on time and on budget. It's something that Ocado have done around the world with multiple vendors. In this instance, there is some work that's been identified that needs to be rectified. The good news is that work is coming to completion in New South Wales. It's a process that Ocado have, have designed and deployed very successfully there. We got our very first robot on the grid in the ambient hive, which is the bigger, more complex part of that yesterday. It's a, it's a requirement for some additional works that relates to the specificity of the quality and the standard, and the team are working through that in a very tried and tested way. Are you still happy with, with how it's progressing? Yep. I, I think the New South Wales one yesterday, from what I've seen, is, is broadly on schedule. There are a couple of operations that have occurred in, in the last week. We got the totes into the hive, which are the containers that are used for storing stock, five weeks ahead of schedule, and the team are all working very well together to the revised plan, and we're looking forward to it being successful. If I, if I just take a step back, Ross, I mean, we've now got the benefit of we've got multiple CFCs that are live with other client partners around the world. The likes of, you know, Sobeys in Canada, we've got Aeon in Japan, we've got Kroger in the US. What we, we do know is when those CFCs go live, they get a really significant step up in customer satisfaction and NPS, and that's really driven by three key things. So the first one is just the world-class perfect order rates that you can achieve through the CFC, that you just can't get, through a store pick model. The second one is the freshness guarantee that many of the retailers have been able to offer on items in their fresh produce and meat categories. Then the third one is the extended range. I think, you know, from a, from a customer offer perspective, we now have multiple examples around the world of that really kind of delivering the benefits that are expected. We are working with all of those client partners to ensure that we're very well placed to deliver on that as well. Thank you very much. Thank you. The next question comes from Michael Simotas from Jefferies. Please go ahead. Good morning. I don't, I don't wanna labor the point, but I was just hoping we could touch on costs again, and in particular, get a bit more color and a bit more understanding of how costs will flow into FY 2024, because I think it's in everyone's interest for the market to get a little bit closer than what we got this year. There are a lot of moving parts. If I look at your headline costs, they grew by just under 10% in the second half. There actually should have been a number of tailwinds from Smarter Selling and lower COVID costs, et cetera. It looks like your underlying cost growth was maybe even double digit. You've got bigger underlying wage cost inflation into FY 2024. You've got the payroll tax issue. How, how should we think about what your cost inflation is going to look like in 2024? Because it looks like it might even be higher than what it was in 2023. Yeah, look, great, Mark, great, great question. Look, I, I think we did, we did call out a couple of things. If we look at the, the, the sort of second half, second, second half, we've specifically given you guidance now in relation to what the project implementation costs are gonna be for FY 2024. We've, we've, we've actually outlined those. We've specifically called out, obviously, our wage increases, which are higher for FY 2024, at 5.75% relative to FY 2023. At yes, we did have some Smarter Selling benefits, which were in the second, second half. We didn't have the same COVID unwind. That was more a first half phenomenon. We didn't get that offset through the second half. We did obviously this half, that is, we just exited, there was a timing where the implementation of some of the project spend was greater and weighted into the second half than the first. There were the things that we spoke about, which were sort of one-offs again, which was like the REDcycle collapse. We don't see that being a repeat going forward. The AUD 25 million provision, which was an additional provision, which we put out a release in June in that regard. That was again a one-off at the time, which was impact of the second half. There were a number of phenomena there that impacted. I think the other one, just to sort of highlight as well, in terms of when you look at a second half versus the second half growth, the second half 2022 did have the benefit of bond rates, which meant that the costs were lower than perhaps they were. We did not get that benefit back in the second half of 2023, 2023. How bond rates manifest themselves, they're the rates that you use to discount employee entitlements and the costs, and therefore, our costs in the second half of 2023 were higher than that, they were in second half of 2022. There are some things there. I'm not gonna give a forecast of what bond rates are moved. If I was, I'd be in a different role. you know, and there are, you know, various things like inflation that continue, to be through that cost base. I don't know if that's, if that's helped, Michael, address some of your questions? Yeah, it gives us a bit to work with. Thank you. Then second question, when do you think we'll actually see some net benefits through the P&L from the Witron and Ocado implementation? Because the way it was originally articulated, it was quite a nice setup where the costs fall away and you start to get the benefits in FY 2025. You've said that you'll get net benefits from Redbank starting to flow through in FY 2025, but you've still got AUD 255 million of implementation costs. When will we actually see some of those returns start to come through on a net basis? Well, I, I, I think you, you if we just step back a little bit, over the next 12 to 16 months, we've got 3 automated facilities that need to go live. So you have the ramp up, you have the transition, you have the implementation of those 3 facilities really ramping up. So things like Ocado, it really won't be into FY 2026, is where you would start to see that. In terms of in terms of Witron, both Redbank and New South Wales, yeah, clearly, Redbank is ramping up at the moment. It's we've, we've called out that it's delivering to 102 stores as at the 20, as at the end of June 2023. That's obviously continues to increase as it transitions. we do expect, a full year, benefit from the ADC from FY 2026 onwards. Will that, will that be enough to offset additional costs, though, particularly given Ocado's been delayed? Well, I, I think we've given you what the Ocado implementation and the ADC implementation costs are. That's the forecast I have given. I'm not gonna give a inflation forecast out to 2025 and 2026. More importantly, we, you know, the benefits that we've called out from Witron and the two automated facilities are quite significant, and we do expect them to be at a full run rate in FY 2026. Then, as we've said, Michael, the Simplify and Save to Invest program will work to take efficiencies and productivity into the business to drive cost out, which will assist us with offsetting the cost inflation as well. Okay. Okay. Thank you. Thank you. The next question comes from Adrian Lemme from Citi. Please go ahead. Good morning. Just wanted to ask about the Dropped & Locked campaign. Has the extension of that in the second half also contributed to the gross margin decline we've seen in the second half? Because from memory, it wasn't in the PCP. We make investments in value every year. We've made them in previous years. We made them during FY 2023. The biggest impact to the GP line is definitely the stock loss. It's not as a result of significant trading down or shifts in the shelf margin. Adrian, as I said earlier, I think, just we step back a little bit. If we adjust for stock loss over the period, we would have seen gross profit growth more in line with historical growth. Okay, thank you. Can I just ask another question related to Ocado? Sure. With the cost increases in the project, how are these being shared between Coles and Ocado? It just feels like Coles is having to wear all these increases, please. Yeah, I mean, obviously, we're, we're not going to be discussing any contractual arrangements between Coles and Ocado on this call. What we're really focused on as a, a set of partners at the moment is getting the facilities live. Okay, thank you. Thank you. The next question comes from Tom Kierath from Barrenjoey. Please go ahead. Morning, guys. Just a question on the provision changes. On Slide 15, I think you've got a reconciliation there of the cash flow. It says changes in provisions is up AUD 70 million. In the first half, it was negative AUD 51. It kind of implies that provisions increased by about AUD 120 million in the second half. I know you got the AUD 25 million for the wage remediation stuff. I'll presume that's in there, but I'm just trying to understand what the other moving parts there are in that provision line. Most of the provision changes there relate to sort of self-insurance provisions. Employee- Right. The employee entitlements effectively. It's the sort of things that I was referring to earlier in relation to discounting the. You know, appropriately reflecting the liability of both employee entitlements and insurance arrangements at the end of the financial, financial year and the period. Yeah, okay. That's actually a pretty big impact on the second half then, yeah? Sorry, sorry, Charlie, is, am I right in assuming that- ... Yeah, is that a question or a statement? Could you just repeat that? Oh, it just looks like there's a pretty big increase then from the bond rate charge and the self-insurance that's come through in the second half. I'm just making sure I've calculated that right. Yeah, that, that, that is right. What also impacts is when you're, when you... And that is correct, so it's definitely skewed in the skewed in the second half. The other impact is not just the rates, but also the fact that when you get a 5.75% plus 0.5% superinc- increase in terms of wages, you're discounting those at a much higher level as well, and so the impact and the cycling through the, through the provision is greater. Got it. Thanks, Charlie. Thanks, Leah. Appreciate it. Yeah, I guess I probably should just add as well, what wasn't helpful was the AUD 20 million, was the AUD 20 million call-out we mentioned in relation to the Victorian payroll tax increase. That is also needs to be factored into the provision calculation as well, which actually lifts again, the employee entitlement top calculation and provisions, et cetera. Yep, yep. No, understood. Thanks. That's, that's it for me. Thank you. The next question comes from Ben Gilbert from Jarden. Please go ahead. Morning, team. In terms of just trying to put all this, this cost and GM trends together, the shrink was probably over 40 basis points run rate in the second half, and we've got to flow that through into the first half. Costs are going to continue to run at least high single digits. Do you see a scenario whereby you think you guys can actually grow your EBIT in the supermarket division next year? Because a lot of headwinds, albeit some of these into 2025 and 2026, it's a real challenge to grow EBIT grocery unless you can still grow sales at 8% next year. Thanks, Ben. I mean, obviously, we're, we're not going to make a forecast on the EBIT for the year. You know, what we've really tried to do through this call is share with you some of the headwinds and the tailwinds that we've got moving into, the EBIT for, for next year. Loss is, is definitely still elevated on the stock loss side. We've made some improvements over the last couple of months in terms of the waste and markdown components of, of loss, and that has, come down to a level more in line with what we have seen in the past. We've then got the, the wages, costs, which we will have to pass through, and the, transformation OpEx. They're probably the big three that we would, we would call out. Within that mix, we've also then got the Simplify and Save to Invest program that will be in place, and we have targets against that for this year as well. Yeah. Ben, I think it's really important to what if we step back a little bit for FY 2023, and you actually make the adjustments that we've heard, some of the one-off adjustments that we referred to, we actually delivered great supermarkets EBIT percentage of 5% for the year, right. Which is broadly in line, and in fact, in line with the FY 2022 sort of numbers. Even with some of these headwinds, we've been able to do that. We are obviously calling out second half as a little bit more challenging because of the stock loss issue and some of the one-off impacts. Really need to look through some of those and, you know, as Matt and Leah have said, you know, there are programs to address stock loss. It won't be a quick fix, but that'll be a program in place to address those. You know, our Simplify and Save to Invest program is going to continue into over the next period to help offset some of these inflationary pressures. The other tailwinds that we've got coming through, because we've talked a lot about some of the headwinds, but, you know, there's a set of tailwinds coming through, too, Ben. We are definitely seeing improvements in availability, and that's improved even further going into the new financial year. We've got some good tailwinds coming through from the growth that we're seeing through the Coles 360 program, which is a very nice kicker through to the gross profit margin. The other one then is population growth, which is really healthy at the moment, and as I don't mean, I don't have to tell you this, but population growth is one of the biggest stimulants that we have to more food consumption in Australia. You've kind of got all that, and then I think, you know, the question then is: What does the consumer do? At the moment, we think that we're starting to see the shift to in-home consumption, and we think that the offer that we've got in place in terms of the value offer, but also what we can provide in terms of meal solutions, is really strong. Yeah. I think- Sorry, Charlie. Right. Yeah. All I was going to add to that was, if you follow the trend in, in, in volume growth, we started the fiscal year in 2023 in negative volume, negative volume growth. That obviously improved through the first quarter and continued through the second quarter, and continued through the balance of FY 2023 and in the early part of FY 2024 trading. That positive volume momentum is important for FY 2024. Yeah, that's, that was gonna be my, my second question to, to end on a, on a bit of a positive note from my side was just around the market growth and, and how you think about expectations. Could you give us any color around what you saw in terms of share trends, in terms of through Q4 and, and how you feel you're tracking through the September quarter? And on that, given the momentum you've got, do you think you're pushing hard enough for terms in the market from your supplier base? Because it, it seems like your, your competitor up north is probably going a bit harder than you guys. Do you think you're sort of getting your fair share of, of trade spend and, and margin out there in the market at the moment? Well, let me start on the, on the market observation. I mean, from a market share perspective, the key measure that we will look to is the performance versus the ABS numbers that are published. From a year-on-year perspective, FY 2022 - FY 2023, we, we grew market share, and we think that that's a good indication of the value proposition that we do have for customers at the moment. Quite a bit of that growth that we saw actually did come through in, in Q4. We saw good resonance in terms of what we were doing with Dropped & Locked, the MasterChef Continuity program, as well as the weekly specials program we have, the everyday low prices that we have, and the Flybuys program. you know, Flybuys is obviously a, a really important part of that mix for us as well. I think from that perspective, we, we feel we're well placed in terms of the offer that we've got for customers, and it does appear to be resonating. In terms of the, observations on terms, we'll appreciate the, the observation. Definitely, we'll, pass that back to the, back to the team. Our view would be we have, really strong relationships with our suppliers right now. We have a well-established process for, looking at cost price increases and, and validating those, so there's nothing in particular I would call out on that. Okay, fantastic. Thank you. Thank you. The next question comes from Craig Woolford, from MST Marquee. Please go ahead. Morning, Leah and, and Charlie. you've given an updated table of the transformation costs, which is AUD 255 million in FY 2025. Is there any chance that there'll be any of those transformation costs in FY 2026? The reason to ask the question, I just want to be 100% clear that I'm interpreting it right, that once those costs drop out, there would be a, you know, in FY 2026, if there is no other transformation costs, there'd be a AUD 255 million improvement in EBIT for, for that year. Is that the way to interpret these transformation costs? Yeah. Let me go through what those transformation costs are in the first instance, because I think that, that's important, and that'll help you in your understanding, it'll help you in looking at that. Firstly, those implementation costs are a couple of things. One is to complete the program and complete the project. It's actually the project OpEx in relation to those programs. Secondly, as we ramp up, and we talked about incremental ramp-up and the dates that relate to both the CFCs, for example, but also the New South Wales ADC. When you wrap those up, there is an element of dual running costs. For example, if we, you know, if we simply from a CFC, think about it, as we transition some of the home delivery volume in the catchments in Victoria, for example, and New South Wales into the CFC for a period of time, there'll be some dual running. There'll be things like transition costs and things that will incur. There'll be a number of those costs. I think from a, from a ADC perspective, so from a normalized facility perspective, they will largely be worked through for FY 2025. When we work to, in terms of Ocado, there will be some Ocado costs in FY 2026. ... and that's as obviously, as we, at the tail end of the ramp-up of FY- of the, Victorian facility. Can I just check, Craig? Because you, you put out a number there of AUD 250, because I think you've added the 2 OpExes and the 2 depreciations. The depreciation will be something that will be ongoing, that, that doesn't vanish when the- Yes, correct. they go live. It's really the implementation OpEx as Charlie just outlined, which, you see- 125. Yeah. So if I look at if you go to Slide 9, in relation to the ADCs, that is a full run rate of the depreciation of the two ADCs, actually running. So that'll be an ongoing depreciation expense. You can see that there's a small ramp up there in terms of dual running and transition for FY 2025. That should be pretty much the end of the two Witron facilities. If you go to Slide 10, and specifically on Slide 10, we've got AUD 100 million there for Ocado, project implementation OpEx, so AUD 100, and so AUD 55 for depreciation. Again, depreciation will be something that continues. But more importantly, very clearly, FY 2025 is the peak, right? Yeah. By then, we would have had the 3 automated facilities go live, right? Sure. With the Ocado facility in Victoria, you know, in the early stages of its ramp up and transition. The project implementation costs unwind, and then there should be FY 2026, a return on investment from more efficiencies from the ADC. The depreciation is there, but hopefully, there's some cost per unit reductions in how you run the DCs and the CSC. Correct. Got it. Then the other one, obviously, Leah, think about the direction of the business and, you know, making the business more or the store more relevant to the shoppers. You, you did 46 renewals in FY 2023 in supermarkets, and there's only 50 planned for FY 2024. That's running at about a 17-year cycle on renewals. Is that the run rate you expect going forward, or is it just a bit low for, for some specific reason? The... I mean, it, we've got 58 for this year, which is a little bit of a step up, year on year. There, I mean, there has been a number of challenges in terms of access to construction and resources to be able to do renewal and property work over the last, the last period. There's, there's a bit of a degree here of we need to bring the run rate back up to kind of what we were at, a couple of years ago, which was around the, the 50 mark. It's one of the things that we will definitely be looking at from a, a store presentation perspective, is what are the opportunities in the, in the renewal space, but we would seek to, to manage all of that within the, the capital envelope that we've already announced today around the AUD 1.2 billion-AUD 1.4 billion. Okay. Thanks, Leah. Thanks, Charlie. Thank you. The next question comes from Bryan Raymond, from J.P. Morgan. Please go ahead. Thanks, guys. Just on to 2024 costs again, sorry to belabor the point, just thinking about the incremental labor hours required in store in 2024 versus 2023, given given the comments you made earlier around availability, and obviously, that some of these stock loss measures will require extra labor as well, our feedback indicates execution could probably be improved at Coles as well at the moment. What are you seeing in terms of extra labor hours, and how much of that can be offset by the new cost out program? Thank, thanks, Bryan. I mean, I think the, the point on loss is really that this is a three-pronged appra- approach. Technology investment gives us the added benefit that it's structural and ongoing. Once you've made that capital deployment, you get the benefits back. Clearly, the whole concept of using data and artificial intelligence to identify issues in itself is a much more efficient way of tackling the problem. You're right, the part in the middle has got the ability to improve, particularly service execution, and we've been running, as Leah said, some more training within our store teams around service and how we can dial up that customer interaction. There are obviously some carry-on flows from the Agile Smarter Selling program in terms of operational efficiency on process with regard to shelf replenishment availability that continue to drive benefits. Net net, at this stage, I wouldn't say that that's a further investment to tackle the problem in resources, more a prioritization of focus. Okay, sorry. So just to understand that, so you're saying you don't need to increase store hours next year because you've got enough, or year-on-year, but given all, given all that? Sorry, I just want to make sure I'm clear on where you... The store hours that we have are very much just driven by our sales shape. The way in which our rostering system works is, it's based on what we expect the sales and volumes to be going into store. If we, if we see good increases in terms of volume and sales as we shift to in-home consumption, then we'll see a proportionate increase in terms of the store hours. We're definitely not calling out that there's significant investment above and beyond that sales-driven shape. Okay, okay. just on, just to understand the Ocado D&A component, seems a bit bigger at AUD 55 million in FY 2025 than I expected. First, first part of the question is, is that- ... the forever D&A line that we should be thinking about, the, the perpetual number there? Secondly, how given, given you state that online is profitable for you now, how, how do you think then about the net benefits of Ocado, given the share of the economics that Ocado takes? It just feels like it's gonna be, you know, a, a reasonably big EBITDA benefit you need to offset that D&A, which is pretty high relative to the CapEx you're spending in there. Yeah, just, just interested in the net benefits on Ocado long term. Thanks. Well, why don't I start with that, and then Charlie can cover off the depreciation question. Yeah, as I, as I said earlier, there's definitely customer real customer benefits and differentiation here that is derived from the CFCs around your perfect order rates, your freshness guarantees, and also the extended range that you can have in the offer. The extended range does also provide you with opportunities to drive a slightly different margin mix as well, because you can orient that around products which aren't widely available elsewhere, and so typically will be higher margin than your category average. The other thing from an operational perspective for us is that the CFCs are one overall piece of how we think about the overall network that we use to deliver online orders. I mean, if you think about it, the CFCs are gonna represent about AUD 1.5 billion worth of sales out of AUD 40 billion worth of sales from an omni-channel perspective. We definitely think about our customer from an omni-channel perspective, which is most of our customers and our most valuable customers, shop in store and online. We will be continuing to use our stores for immediacy. We will continue to use our stores for click and collect, and outside of Melbourne and Sydney, we're gonna continue to use those stores for home delivery as well. If you think about it, we're gonna be taking out the picking that happens the next day, home delivery, out of the stores. Those stores that it's gonna come out of, they are our most constrained in terms of capacity, and they're also our biggest and busiest. By taking those home delivery next day orders out, you actually reduce congestion in those stores, and you create capacity. On the congestion point, what happens is you end up with a better experience for the bricks-and-mortar customer, and you end up with a better experience for the home delivery next day customer as well, because they're getting the order out of the Ocado facility. From a capacity perspective, because we've taken out that pick from the stores, we can then have more room to expand into areas like the click and collect, and the immediacy. We do definitely have to think about it in the overall context of how the network is put together. Ben, could I maybe just get you to talk a little bit about kind of how you think about, like, the cost curve as well? Yeah. Yeah, yeah, that's a great point. Leah, you mentioned we, we do spend a lot of time with Ocado's operational partners. I've been in almost every market myself, along with Matt, US, Canada, Sweden, France. Team just got back from Japan. We're learning from the partners that are live, but there's something really unique in our context. One, is we're not starting from scratch, so we already have the demand. Ocado is the great fulfillment, proposition, and capability that we'll have to, to deliver on. If you think about the cost curve, let's say cost per unit, it's really driven by capacity within the CFCs, and so we'll be much further to the right on the cost curve. We're gonna have greater line of sight more quickly to overall profitability of, of the CFCs. The second thing that I'd add, too, just unique to our context, is amongst any other retail partner, we already have, the operational capability, for last mile delivery through our own van network, which covers more than 95% of the population. Just wanna make sure we call that out the difference in our context. Charlie? Yeah, look, specifically the depreciation. Let me talk about it in sort of three, in sort of three parts, okay? Firstly, working through depreciation, there was an element of even though the buildings are actually leased, obviously there's the right of use asset depreciation that works its way through the depreciation line. That's not necessarily in the CapEx number that you'll see, but it works its way through depreciation. The other thing there is clearly there's an element of IT and technology spend, which is capitalized, and that's obviously typically capitalized and depreciated over a shorter life than, say, a building or some of the fixed assets. There are some other assets that actually do work their way on our balance sheet. Talked a little bit about the scope of these CFCs, like the, the bakery, the, the industrial bakeries in, in, at the facilities, the fresh cut produce rooms, that sort of machinery. There are assets that we are depreciating. Sort of a blend of all those sort of three elements, through our depreciation, profile, which may, you're right, looks a little higher relative to our CapEx guidance for, the CFCs. Right. Okay, that 55 should fade a little bit then, as some of those shorter life assets get depreciated fairly quickly. That's not the sort of long-term number necessarily. Correct. In relation to the returns, I mean, as we did with, with, with Witron, I mean, closer to these facilities coming online, we'll continue obviously that dialogue with the, with the market in terms of how to, how to think about these returns with respect of, of, of these assets. We're, we're really not gonna sort of go into that here today. Okay, great. Thanks, guys. Thanks, Bryan. Thank you. The next question comes from Phillip Kimber, from E&P Capital. Please go ahead. Hi, guys. That was a question I was gonna ask, but maybe I'll do it in a slightly different way. If I look at the Witron Ocado implementation operating expenditure, it's about, you know, AUD 150 million over the course of the project on a AUD 1 billion spend. Whereas for the automated CFCs, it's AUD 200 million on a AUD 400 million CapEx. I'm just wondering, why are those implementation costs so high for Ocado? Secondly, do they include the fees that you're paying to Ocado, and so therefore, you know, I guess similar to Craig's question before, you know, they're gonna just keep continuing going forward until you, you know, I guess, increase your market share in online enough to offset those fees? I guess I'm just trying to understand that. The costs look very high for Ocado relative to the CapEx, especially when you compare it to the ADCs. Yeah. Well, well, I think firstly, the contractual arrangements want to be there in terms of the various assets and how they actually work their way on the balance sheet are two very different things, right? For example, in the Ocado arrangements, the fit out, things like the hive, the grid, and some of the smarts there that relate to that automated facility are actually the assets of Ocado, and Work backstory. When you do see, we're not really comparing like-for-like in terms of spends. They are both projects that, when you look in their totality, are projects that, well over AUD billions of dollars in their totality. I think it does reflect that. In terms of the project implementation, OpEx, again, it's just in relation to the nature of the work that we need to do as part of this. The OpEx includes things like, you know, our people who are-- and some of it's the capitalized, some of it's written off, includes our people who are, who are obviously working on the technology component, who are part of the integration. It includes, you know, members of the management team that we already have in, have in place, today. It really is looking at those, at, at those costs, effectively, they are slightly different. But I think when you look at the, the Ocado ones, we've got 2 facilities effectively being ramped up within a, a 12-month period, elapsed, period. That is going to be heavy on transition of store volume into the CFC, so back, back of house. It will be done in an orderly process in terms of how that sort of works our way through. It really relates to the boots on the ground that we've had at our retail partners and our learnings from there in terms of the time period it takes to, to ramp those up appropriately. The good advantage that we have as Ben spoke about earlier, given that we have existing orders, we see ourselves on that cost curve come down much, much more quickly than a number of the retail partners overseas, where they haven't had the benefit of transferring existing volume into CFCs. Okay, thank you. Thank you. Once again, to ask a question, please press star one on your phone. The next question comes from Shaun Cousins, from UBS. Please go ahead. Hi there. Thank you. Hopefully, mine will be pretty quick. I, I just had a follow-up on the Victorian CFC delay and CapEx, OpEx increase. I was just wondering if you could comment if there's a reason for the difference in Victoria versus New South Wales, and also just to check why you're paying more, particularly on the CapEx side. There's no difference in terms of the work to be done between the two. It's just the, the staging and the timing of the work itself. In relation to-- look, in relation to CapEx, again, as I said, it's really spend, right? Spend to actually complete the projects, and these are our spends that we will incur. The areas that we look at is, obviously, there's some element of capitalized rent and interest costs through the build, is the first thing. Secondly, yeah, clearly, we have teams working today who are, yeah, working work on tech, tech, digital, data integration, and obviously retaining them for the period of the delay is really important. That IP that they have gathered in the work they've done to date is really important for the successful integration and implementation cost. They are, you know, capitalized people costs that, that are part of ensuring these projects are successful. As I mentioned in my previous answer, we do have some of the operational leadership team in place, and that we'll be keeping those. Also reminding that we have a 12, 12, yeah, really, 12 months is the time between, or there's a extended period between the New South Wales and Victorian go-live, go-live dates. Really, through all that, it is pretty important. I think probably one last point. You'd expect us to do this and work this through. Given the status of the program, that is, we're 55% the way through CapEx, there's obviously a contingency that we have reflected in our forecast, which is not unusual for a project at this point in time and relative to the completion status as well. Okay, now that's very clear. Thank you for clearing that up. My second question is just on stock loss, and it's probably for Matt. Firstly, Shaun wears baseball caps, just in case you're tracking him when he goes in store, so check out your online. That's really, that's really good to know, Scott. If you could let us know the characteristics of everyone else on the call, that'd be super. No, no, no. That's just, just him. No, that's obviously a joke in case there's any press online. In terms of Matt's answer to an earlier question-... Can I just clarify, are you, in terms of the stock loss, so I understand the bit about waste and markdowns, but, in terms of the stock loss itself, are you guys concerned that there's internal theft going on as opposed to theft from customers? You know, we've heard a lot of stories, obviously, about tobacco and, and things like that, developing a black market with the increase in taxes. Are, are there any comments you can make on the type of stock loss that you're looking at most particular? No, well, look, Scott, I mean, obviously, the, the vast majority of our team members are great contributors and asset to the business. I'll start there. But with 110,000 team members across Coles, we do reflect the society and the community that we work in. If, if this is a widespread challenge across all of our stores, across multiple parts of the community, it's fair to assume that some of that does flow into our operation. That, that's what I would say first. I think Leah's already called out, this is all stores and all categories, so it's a, a widespread problem, and it ranges from an increase in organized crime right the way through to what we would term petty shoplifting and the spectrum in between. That gives you some idea. We are targeting all of it, and we are prioritized and focused on every single AUD of opportunity to come back into the business. Okay, great. Very clear. That's all I had. Thank you. Thank you. The next question comes from Lisa Deng, from Goldman Sachs. Please go ahead. Hi, Leah. Hi, Charlie. I had 2 questions. The first is actually on our digital strategy. It looks like we've actually unveiled a little bit more of a holistic end-to-end digital strategy here. I just wonder, if we look sort of in the medium term, next 3 years, how sizable or directionally, how material would say an uplift to sales or GP margin would be? If you can just help us think a little bit through that. A follow-on is, I did a bit of math when Charlie was talking about the one-third, one-third, one-third. If I took the one-third increase and then backed out the 80 for Witron and 13 for Ocado implementation, then I get roughly an AUD 90 million uplift in the year past on digital investments. How do we think about that going forward as well, alongside that uplift on sales or GP? Thank you. I mean, Lisa, it's, it's great to hear that you feel that the digital strategy is starting to hit the mark in terms of something that's very much omni-channel and end-to-end. Ben, did you want to make sort of any comments on that component of it? I think the only thing that I'd, I'd add, I think, you see this part in the strategy today, there's further unveiling that we'll, we'll go through, I believe, later in this year. We've put the customer at the center, so it's less of an emphasis just simply on channel, but it's really around customer. Three things we hold to be true is, one, unify the experience. If we think of an example, this past fiscal year, we unified the website. We've done things like bringing the Flybuys loyalty integration into the app. Certainly, there's more to come with unifying, unifying the experience. We're delivering at a faster pace, and that means you have to know what the customer wants, and you have to be able to pivot really quickly and let them inform what you're doing. I mentioned a 48% reduction in cycle time, which is a very significant increase in speed. You have to have optionality. We're talking about, you know, the, the great benefits that the CFC will provide. We're also, as you can see in our network numbers, investing in propositions that are very fast delivery for the customer. I'll just leave it at that, Lisa. More to come for sure in the future on digital strategy. Yeah. I think I'd probably say, Lisa, we, we won't be sharing any sort of forecast of what we think the impact on GP is gonna be. I'm really conscious of time, and your second part of your question was starting to get into quite a bit of detail of ins and outs and numbers. I might actually suggest we take that one off line, and Anita and Lisa could give you a call afterwards, Lisa, to just work through the, the calcs you've done, if that's okay. Got it. Yeah. Thank you. Then just quickly on the 2nd one, you mentioned that, you know, the overall strategy will include adjacencies as well, and we see obviously, Liquor has been outperforming, and there at, has, you know, there is a sizable sort of store rollout plan and renewal plan. What, what is the ultimate sort of well, not the ultimate vision, but what's the medium-term vision in terms of Liquor? Like, what, what are we thinking in terms of market share gains or, you know, margin improvements? How, how, how sizable are we talking here? Lisa, you've given Michael a chance to speak right at the last detail and see, Yeah. before I had to do it. Yeah, thank you for that, Lisa. I'm obviously not going to give any forecast around market share growth or continuing performance, but the way that I would answer your question is to say that in terms of what has been driving the performance to date, if we look across renewals, if we look across new store openings, if we look across e-commerce, and if we look across initiatives that have been going on in terms of range, such as ELB, I think that there's more headroom to run in each of those. I think that the momentum that the business has at the moment is very positive. I think in terms of the strategy evolution for the group, it was like accelerated by digital, fit really well with what the next phase of the work is to do. I think without giving a forecast, I think that there's certainly ample opportunity to continue evolving our customer proposition going forward, which should hopefully see us continuing growth. Is the strategy here profitable growth, or more market share at any cost? No, it's certainly profitable growth. Okay, thank you. Thank you. At this time, we're showing no further questions. I'll hand the conference back to Leah for any closing remarks. I thank you all for attending the call this morning. I think we've managed to cover quite a wide range of, of topics. I, I just finish up by saying that as we've headed into FY 2024, we have some things which really give us hope around the tailwinds that the business has in front of it. We've seen the further improvements in availability. We're showing signs of the consumer starting to move to in-home consumption. We've seen a customer that has responded really positively to the customer value proposition that we have in place, and we're continuing to see population growth, which is a really positive trend for us as, as a business. In addition to that, we're really excited about the forward growth that we've got in the digital space and the early success that we've had on, on Coles 360. We're really excited to take forward the Evolve strategy that we've got and start to see implementation of that in the business as we move forward, and we'll look forward to sharing some more with all of you on that in the coming year. Thank you. Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.