Good day, and thank you for standing by. Welcome to Metcash 2024 half year results briefing call. At this time, all participants are in the listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. It is now my pleasure to hand you over to Mr. Doug Jones, CEO of Metcash. Please go ahead, sir. Thank you, and good morning, everybody. Welcome to the Metcash FY 2024 half year results. My name is Doug Jones. I'm the Group Executive Officer. I'm joined today by Alistair Bell, Group CFO, Grant Ramage, Food CEO, and Annette Welsh, Hardware CEO, John Barakat, Interim Liquor CEO, and Steve Ashe, General Manager, Investor Relations. I'd like to begin by acknowledging the traditional custodians of the lands from which we are all connecting today. We're connecting from the Wallumattagal country and pay our respects to elders across country, past, present, and emerging. The first half delivered a strong performance in challenging market conditions, and I'm extremely pleased and proud to present them to you today. The results showcase the benefit of our diverse and resilient portfolio of businesses, and it's particularly pleasing to note that our differentiated offer continues to resonate with shoppers. I'd say the standout performances were from food and liquor, and I'm particularly pleased with the food performance as it underpins a seamless transition to Grant into the new CEO role. Hardware has been resilient in the softer market, with retail networks continuing to grow and consolidating the gains after a period of extraordinary growth and remaining very well-positioned with leading market positions. I wanna highlight good cost management and an outstanding cash result. Turning to the numbers. Group revenue was up 1.6%, underlying EBIT down 3.4% to AUD 246.5 million. The cash results, as you can see on the slide, operating cash flows of AUD 218 million represents a cash realization ratio of 92%. Our guidance for the year remains in the mid-80s%. Profit after tax was lower on the back of increased finance costs, which Alistair will talk to, and primarily as a result of materially higher rates. Earnings per share were AUD 0.147 per share, and the board has declared an interim dividend of AUD 0.11 per share. The pillar results, as I said, are extremely pleasing. Top-line growth across the board and good operating leverage in food and liquor. Hardware remains the largest EBIT contributor. As discussed last time we met, corporate costs reflect the required investment, particularly in IT, cyber, data, core IT operations, as well as risk and compliance and ESG. Results in line with our guidance, which remains valid. Turning now to food. A great sales result, 5.7% growth, excluding tobacco. 6% growth, excluding tobacco in supermarkets. This has been underpinned by a continued improvement in the network quality, value, and relevance of our offer. That means more competitive prices, better ranges, and better store quality, and all of that supported by continued retailer confidence and investments in their stores. We continue to see shoppers include IGA in their repertoire, as evidenced by continued growth in foot traffic, and it's pleasing to note that volume returned to growth in the Q2 and into the second half. And as shoppers look for value, strong growth in private label up 19.2%. The tobacco declines continued, down 12%, as the illicit trade and the impact thereof has a material impact. Metcash Food's share of the legal tobacco market, though, actually climbed, as it has done for the last few years. Inflation continues to moderate. In the first half, it was 6.5%, five point one in the Q2, and in October, 4.3%. I do wanna highlight very pleasing continued improvement in the team score, now 74%. The network opened 18 new stores, closed eight for a net store growth of 10. Campbells and Convenience also delivered a very pleasing result on a strong customer base and healthy food service demand. Food EBIT was up 3.6% to AUD 101.7 million on great trading performance, despite a decline in tobacco sales. This reflects good cost management in the face of cost of doing business pressures. I do want to point out that the results include a restructuring cost of AUD 2.8 million as the business realigned capabilities and resources to support our strategic initiatives. This had the effect of releasing, on a gross basis and annualized, about AUD 8 million in costs, of which AUD 4 million have been reinvested. EBIT margins of 2.15% reflects this performance, as well as the lower tobacco mix. Turning to hardware. The hardware and tools businesses' total sales were up 2.9% to AUD 1.8 billion. Network sales were up 2.1% in uncertain and slower trading conditions. IHG was down a touch, but scan sales were up 0.7%, with DIY up 1.4% and trade up 0.3%. This is an exceptional result given the housing start has slowed as much as 15%.... The difference between the scan sales and IHG's underlying sales really is reflective of the network continuing to manage inventory levels in the face of slowing inflation, softer demand, and improved availability of product, particularly timber. IHG's dual trade, dual strategies in trade and DIY, whole of house, and making houses into homes, continues to progress pleasingly, and we see a number of DIY categories delivering growth above 8% in the half. Total Tools reported sales were up 18.2% to AUD 351 million. Here, network sales were up 4.1%, although they have slowed into Q2 in the second half, with traffic down but conversions pleasingly up. A real highlight was the Insider program, which remains exceptionally popular, and that membership base has grown to around two million members. Interesting to note, the 60% growth in redemptions, which highlights its value to its members, and a quite remarkable penetration of 92% of total sales being made to Insider members. I want to spend a minute on exclusive brands. As we've moved the offshore consolidation hub from Shanghai to the IHG DC in Ravenhall, Victoria, this is an example of the power of the group and the value to the Total Tools business. Some key data points as evidence. Exclusive brand inventory is down 17% across the network. So what that means is that we freed up cash and working capital for our stores and for our franchisees and JV partners. Despite that, exclusive brand sales were up 11.5% on better availability and faster replenishment, down from 10-12 weeks to 1-2 weeks. It does mean, however, the wholesale sales of exclusive brands were down 20% as the supply chain resets in a new, leaner, and faster mode. This will persist into the Q3, but the benefits will remain long after that. Total Tools is now at 112 stores, with six more opening by the end of February, and we remain confident of achieving our 130 store target by the end of 2025. Hardware EBIT was down 5.1% to AUD 110.6 million on lower sales volumes and increased costs. It's worth understanding IHG in some more detail. So firstly, wholesale margins were steady at 2.9%, and retail gross profit margins were also stable. IHG was primarily impacted by costs and primarily in the retail space. Firstly, approximately AUD 4 million in regulatory occupancy costs and labor-related costs, particularly in Victoria. And it's higher than other pillars because we're domiciled in Victoria, and we have a high retail store base that the other pillars don't have, which has a high exposure to CPI-linked occupancy costs, state-led taxes, and employee-related fair work increases. Hardware pillar EBIT margins 6.2%, included IHG at 4.3% and Total Tools at 14%. Total Tools earnings were up 5.3% to AUD 49.3 million for the half. We've provided significant additional detail in the pack to help you understand that business, and I'll discuss some here and point you to some more in the appendix. Firstly, a good way for me to understand the business is to look at the relationship between Total network sales and our reported EBIT. For the last twelve months, that was 7.9%, up from 7.7% in the preceding twelve months. So as you know, this is made up of a few things, including, firstly, the margins that we make from owned and co-owned stores. For stores, excluding those acquired during the year, the average EBIT margin was 9.4%. Also included is franchise fee income at 2.4% of network sales, plus, of course, exclusive brands margin, supply income, and less the cost of running the business. So despite the reported margins as a percentage of reported sales reducing as we add more retail stores, our EBIT percentage of network sales will continue to increase as we add more retail stores. Turning to liquor, another great result from a very steady business. Sales were up 2.4% to AUD 2.5 billion. Retail sales were up 2.8%, and on-premise sales were down 2.6%. As you would expect, we're seeing trends towards value across and within categories, with strong growth, particularly in beer and RTDs. We note that the preference for convenience and the service of local bottle shops persists with more at-home consumption, and it's very pleasing to note strong growth in our own and exclusive ranges. Liquor EBIT is up 3% to AUD 50.8 million on strong sales growth and good cost management, which allowed the business to hold EBIT margins flat at 2%. Looking at our strategic initiatives, our focus is in a few key areas. Firstly, on improving the quality of the network and our offer to shoppers. Then on increasing the resilience and sustainability of our customers, members, franchisees, and JV partners. Of course, growing store and customer networks is a key focus, too, as is supporting the growth objectives of each one of our businesses, including things like commercial sales and Total Tools, the JV program reset in that business, and the whole of house strategy in IHG. We made good progress on all fronts. Some of the highlights include the DSA and Sapphire programs, and the continued reduction in the IGA price gap, as we turn now our attention to managing and convincing our customers, that the perceived price gap is as low as the actual price gap. I'd also point to the move to Ravenhall, and in addition to Total Tools moving into that facility, Hardings also moved in during the half.... We've made good progress on the DC in Truganina, Victoria, allowing Food to be confident to, of being able to move in, in the middle of next year. I do want to point out the post-acquisition synergy and value realization success that we've had, particularly in hardware, over the last few years. Some data to help you understand that. Between FY 2020 and 2022, we invested AUD 75 million on an entry multiple of 5.3x. Pleasingly, the exit multiple actually achieved has been 2.3x, which I'm sure you'll agree is a great result. This is a capability that we've built in the hardware and across the rest of our business. Moving to digital, as I've said before, our digital programs are focused in three areas. Firstly, in supporting our customers with solutions to help them manage their businesses better. This includes Sorted, Ask Ross, ALM Connect, and IHG, IHG Trade Tools. Next, on providing a better and more convenient set of options for shoppers and end users, including e-commerce and loyalty across all our pillars, and the IHG Trade Technology Suite to support builders spend more time in their businesses and on-site. And finally, on modernizing our own business, and this is not just in Horizon, but across all areas, including examples such as the IHG Retail Synergies upgrade, Retail Systems Upgrade. You will have noticed the lowest spend rate on Horizon. We continue to make progress on our design and build, using our own capabilities and within a measured and disciplined program, focused on delivering quality outcomes while managing risks and costs carefully. Our guidance for CapEx and OpEx costs for that program remains valid. We continue to focus our ESG efforts and strategies in three areas: people, planets, and community. I'm delighted that our safety key measure of recordable injury frequency has improved again this half by 17%. Emissions are down 5.2%, and we're ahead of our science-based targets. Power generated from solar is up 22%, and we're supporting the sustainability efforts of our stores with battery recycling now in more than 1,000 stores, and over 160 tons of batteries already recycled. This progress across these and other areas has been recognized in another improvement in the Dow Jones Sustainability Index score, now up to the 89th percentile. Before I hand over to Alistair, I'd like to just take a moment to remind everybody that this is his last results presentation, and to offer my, my own and our businesses thanks and recognition for his contribution, support, and to wish him well in his retirement. Alistair? Thank you, Doug, and good morning, everyone. It's very pleasing to be reporting another set of results, which has sales growth, sales of AUD 9 billion in the half, an EBIT of AUD 247 million, and an underlying profit of AUD 143 million. These are a good set of results, reflecting our strength, resilience, and diversity of the portfolio. It's a testament to the team for delivering during these challenging times. I thank my fellow executives for their leadership during the last six months. There is plenty of information in this presentation and the financial statements, so I'm just gonna focus on some key points. Looking at this slide, in addition to the trading highlights that Doug covered, there's been a continued focus on managing costs and cash flows. Cash realization ratio for the half was a healthy 92%. In addition, our debt leverage ratio ended below our target range, leaving the balance sheet in good shape at the half. In relation to the net debt position at 31 October, being the half, I would like to highlight that since the half year, we've already completed the acquisition of the remaining 15% of Total Tools for AUD 102 million, are acquiring AUD 40 million of growth businesses in IHG, there are four businesses in that AUD 40 million, and have reset certain Total Tools JVs for AUD 43 million. Now, moving to the capital management slide. This slide is familiar to all. As part of talking about our performance, there are some common themes that reoccur, as they are essential to our capital management framework. This page nicely summarizes the really good progress and momentum on all scores during the half. All measures are strong, a very pleasing result. There are aspects to this and components outlined on this page, which I'll cover in more detail in coming slides. Now to the P&L. Here we show the traditional P&L, half and half. You can see sales have grown by 1.6% to AUD 9 billion, a record first half. EBIT is down AUD 7 million, to AUD 247 million, with EBIT margin at 2.7%, very close to fiscal year 2023, and converting into underlying profit of AUD 143 million. Doug provided insights into the trading performance, but there are two items I wish to highlight: rent impacting EBITDA and interest costs. Firstly, EBITDA is up on last year, principally because of increasing property rent, which is impacting ROE, right of use asset depreciation. This is a cost which particularly impacts our retail business. You can see net finance costs are up, and I'll talk about this in more detail later. The AUD 44.9 million in this half compares to AUD 38 million in second half 2023... and this is in a period of much higher cash rate environments. Another item is significant items, and as you can see, they have, they have substantially reduced this half and still relate to the same items as last year. Let's move on to the cash flows. There are three points I'd like to highlight. Firstly, our operating cash flows of AUD 218 million has delivered a pleasing cash realization ratio of 92%. This is a strong performance for the first half and reflects working capital management as seasonal impacts. We still expect the ratio to be in the mid-80s in fiscal year 2024, which is recognizing the ongoing impact of inflation and expected further adjustment to tax installment rates and the shape, the change in shape and weighting of the portfolio, as we've discussed in our briefings. Secondly, the CapEx and acquisition of AUD 76 million is tracking in line with our guidance, given at fiscal year 2023 results, and we expect the full year to remain within our guidance. Thirdly, from the surplus cash flows and borrowings, AUD 65 million has been distributed as dividends. This distribution is lower due to the DRP, which was reactivated for the last dividend. This results in a low and pleasing leverage ratio of 0.59x at the reporting date, which is well within our longer-term target range of 1-1.75. Net debt is reflected in the balance sheet on the next slide. Here you can see we continue to be in a healthy position. There are a few points I'd like to highlight. Firstly, working capital, so the top left-hand side of the table. The table shows each of the components of working capital. Each amount of receivables, inventories, payables is significant, and the net position is small. As a B2B business, we're always in a net negative working capital position. The change in relative contribution from each pillar, because they have different length of working capital cycles and days, does have an impact on the group. There's been a significant effort across the business to ensure our working capital is optimized, and this has contributed to the strong cash result in the half and the slight reduction in the working capital days. The bottom right-hand side focuses on inventory, as it's core to our flywheel. Inventory values have increased with sales, as have inventory days, for the mix effect of the buying patterns. However, it's pleasing that the average working capital days, at the bottom of the left-hand table there, have slightly improved, reflecting the management of supplier stock funding ratios that support these buying patterns. With receivables, we closely monitor DSO trends, and pleasingly, we continue to have a low level of past dues. With CapEx, the top right-hand side, the vast majority of the acquisitions, that's the light blue bar, relate to the Total Tools, AUD 14 million in the half. Total Tools acquired 5 more JV stores in the half. We expect CapEx and M&A to be weighted to the second half, including the IHG growth acquisitions I referenced earlier. As a general comment, we continue to see a pipeline of further growth opportunities, but remain disciplined in applying our capital investment framework. Moving to debt and debt management. In earlier comments, I referred to our net debt remaining within our target leverage ratio, but interest rates increasing. This page summarizes the picture. You will note that the average debt is higher than closing, and this is due to the seasonal nature of our working capital cycle. The average debt levels during the period were AUD 225 million higher than the closing net debt. The closing ratio is well within our target, as we've already noted. Net finance costs are up AUD 7 million on the second half of 2023. That's 14.3%. This is principally due to cash rates being higher, which are up substantially more as a percentage than this increase. The average weighted cost of bank debt increased by 173 basis points. Our credit margins remain comparably low. This is a good news story, but as we know, cash rates are much higher, and we expect interest rates to continue to have an impact into fiscal year 2024. Even since the half year, we've had a RBA rate increase. We have AUD 150 million of hedging in place at 3.7% for the next eight months, and we'll continue to monitor and assess our hedging levels. Also, you'll notice in the half year report that transaction fees in relation to customer charge cards are AUD 6.6 million, are slightly higher than second half of 2023, which was AUD 5 million. Like our bank debt interest costs, this is because cash rates are higher and the experience is consistent with history, and we expect this to continue to have an impact into fiscal year 2024. Now, moving on to dividends. The board has approved an interim fully franked dividend of AUD 0.11 per share, and represents a payout ratio of 75% for the half. We are continuing with the dividend reinvestment plan to provide an opportunity for investors to reinvest. The DRP is a 1% discount, and the DRP gives some incremental flexibility with our capital management frameworks. I'll now hand back to Doug. Thanks, Alistair. So turning our attention to the outlook. Sales into the second half have continued to be in growth, which is very pleasing. Food and Liquor continue to perform well, and they're supported by their competitiveness and that differentiated value proposition. Hardware continues to perform better than the market, and we're confident that we remain ideally positioned in the detached housing and professional tool segments to capitalize on any improvement in consumer confidence and activity levels. Our focus on cost and working capital remains. Our cost optimization program is expected to deliver between AUD 14 million and AUD 16 million in annualized in the second half. We would expect that about a quarter of that will manifest in the second half this year. Group sales increased by 0.8% with growth in Food, Hardware, and Liquor. Total food sales increased 4.8% or flat, including tobacco. Supermarket wholesale sales, ex tobacco, increased 4.9%, also flat, including tobacco, and as I've already noted, volume growth continued into the second half. Wholesale price inflation for November was in line with that of October at 4.4%. Total sales in hardware increased 2.4% and pleasingly reflected a return to growth in IHG, as well as the contribution from store footprint expansion and acquisitions in Total Tools, with IHG sales up 1.6% and Total Tools sales up 6.2%. Total sales in liquor were up 1.5%, and again, pleasingly, with growth in sales to both retail and on-premise customers. So in conclusion, as I've said a few times before, I'm confident and optimistic and enthused about where we find ourselves. The fundamentals are solid in all of our businesses. Our networks are healthy, confident, and investing for growth. We have strong positions in attractive markets, and our leadership teams have delivered good organic and acquisitive growth, and that gives me confidence for the rest of the year and into the future. With that, I'd like to draw this presentation to conclusion and open for questions. Thank you. As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by while we compile the Q&A roster. Once again, that's star one one for questions. Our first question comes from the line of Shaun Cousins from UBS. Please go ahead. Thanks, good morning, Doug and team. Maybe just a question on Total Tools. Can you just talk a little bit about the activity levels? You've called out a softening in the Q2 relative to the Q1. I take it that's consistent with that like-for-like sales decline. Have you seen a stabilization of that rate of decline in the Q3 to date? I'm just curious, or, or, or is it sort of decelerating and in terms of as in it's getting worse? I'm curious in that, we've seen Total Tools be a tremendous performing business, but it's young. We're starting to see some sort of a moderation and a decline. Where do you think we get to, in terms of where does it settle, please? Hey, Shaun, thanks for your question. We've, you know, we're only four weeks into the Q3, so I wouldn't draw too many conclusions based on that. As I noted, the decline did accelerate in the Q2. Your point about the business being a young business is noted. I mean, it is a 30-year-old business, so it's young for us. And, you know, we do have experienced operators. You know, what makes me most confident about our ability to trade really well through the cycle is the fact that while foot traffic into stores has moderated, and that's just on the back of less visibility from our customers to future projects, they all remain busy and our conversion, so when they come to our stores, our ability to close the sale actually has gone up. So, you know, we'll continue to update you as we would normally on sales trends. I think it's too early to draw any conclusions and I'm very confident that the business is in really good shape. Great, and maybe just a question around the put option and conscious that this is a tricky sort of topic there, but the put option value has declined by some AUD 8.6 million, as per the significant item. Yet, in 4.2 of the 4D, you're seeing the value increase, and recognize there's a lot of moving pieces there in terms of, you know, ownership interest potentially sort of changing there as well. Maybe put simply, is the value of the Total Tools business on a like-for-like, basis going up or going down on the back of that put option value change that we saw there, please? Thanks, Shaun. Yeah, I expected that we'd get a question on this. The put option valuation relative to the 15% of Total Tools holdings that we purchased recently went up. You're correct to point it out. About half of that increase was actually the interest unwind. The balance was a very small improvement increase in the performance for the measurement period, which is a year leading up to a date at which the option was exercised. And we had a couple more stores. In terms of the JV, you, and you're right to point out that actually that was a credit in significant items, and that's because that, in contrast to the entirely backward-looking valuation at the date of exercise of the put, that is a, a current evaluation, and it looks almost entirely at current performance trends. And as you've seen, like-for-like, volumes are slightly down, and that's what's driving that, that difference. So recent trading is what's driving the significant item, which is actually there at that 8.6 positive for you? That's correct. Okay. All righty. Thanks so much, sir. Thank you, Shaun. Our next question comes from the line of Tom Kierath from Barrenjoey. Please ask your question, Tom. Oh, g'day, guys. Just a question on Total Tools to follow from Shaun's. Can you quantify what the impact from Ravenhall switching the distribution over there was on the performance of Total Tools? Yeah, hey, Tom, no problem. We estimate it to be just shy of AUD 1 million in the quarter. And that's because, as you, as you know, the Total Tools sales, reported sales of exclusive brands was down for the reasons I discussed. Cool. Cool. Then secondly, on the cost out, the AUD 14 million-AUD 16 million, can you just clarify exactly how much you're expecting to kind of bank from that? Like, I think you did. You said you did AUD 4 million in the first half. You got AUD 8 million and you banked AUD 4 million. Is that a similar sort of, I guess, trajectory in the second half? I just wasn't quite sure on that point. No problem. Happy to clarify that 4 in food is going to manifest, all of it will be present in the second half. That's included in that 14-16 range of the difference, and that's on an annualized basis, of course. The balance, about a third of which is in hardware, will manifest steadily through the second half, which is why I said about a quarter of the annualized numbers. In other words. Right. Okay. Okay. All right. Thanks. Thanks, Doug. Thank you, Tom. Our next question comes from the line of Benjamin Gilbert from Jarden. Please ask your question, Ben. Good morning, Dave. Can you hear me? Just a question, firstly, around the tobacco excise and any impact you got from that, or benefit in the accounts for the first half. So we do get some benefit from that, and we... I think the team did an exceptional job of positioning themselves appropriately. There was a significant uplift in demand ahead of that increase from our retailers, and we made sure that we fulfilled all of that demand. Most of the benefit that we get from holding, purchasing that stock ahead of the price increase, we reinvest back in price and pass it on to our retailers, and we bank a very small amount, low single digits, in terms of direct to the bottom line. Thanks, Ben. Just on the competitive backdrop in food at the moment, it seems consumers are still shopping across more stores. They're probably focusing more around dry, and there's still obviously a lot of price increases coming through. Just in the context of declining tobacco sales and obviously the resilience you guys are seeing in your business, how are you thinking around managing your margins looking forward over the next sort of 6, 12, 18 months? And I suppose in the context of that, we're hearing one of the big retailers out there pushing suppliers a bit harder for terms at the moment. Do you see this as an opportunity to go a little bit harder and extract a bit more? And how ultimately do you think about sharing that with your customers versus banking a little bit of it? Yeah, thanks for that. You know, that is at the heart of the challenge of being a modern wholesaler. Exactly that point is making sure that you're working closely with suppliers to pass on to our customers and their shoppers products at the right price. You know, we're kind of obsessed with getting the lowest possible prices onto the shelves as we can while managing our own business for a sustainable future. The slowdown in price increases doesn't mean that there are none, firstly. So we've seen a significant drop in the number of price increases, but they still remain historically high, and inflation remains higher than historically it has. Our focus is, as I've said a few times, is on making sure that we keep volume moving through our sheds and our networks, and working with suppliers. What we found is that our margins are relatively stable, because we earn some of it as gross profit margins and some of it as service fees. Our ability to manage our own cost base is supported at times of higher inflation, by that ability to take some stock profits. But as inflation comes down on products, it generally comes down in CODP as well. But we're gonna have to pay close attention. We're confident that we've got the right teams and the right work practices in place. We are very confident of the support that we get from our suppliers to continue to do that. Thanks, and just final one from me, Doug. Just in hardware, there seems to be a bit of a view out there in the market that there's, I wouldn't say clear, but you sort of see the forward order book comes off in a reasonable way, sort of around March, post-March. Just interested in how your customers are telling you they're seeing the forward order book, and then the pricing versus volume dynamic in hardware as well. T hanks, Ben, which you obviously called out? Yeah, I'm gonna invite Annette to add some more color, but briefly, inflation has come down dramatically, certainly faster than we anticipated it to, which has some, you know, makes trading conditions difficult. And I've spoken about the way that our retail networks have been managing inventory. Our customers are generally telling us that they're busy, but their visibility to the pipeline is shorter than it was six months ago, and I think I actually made that statement in the last two of these results presentations. Let me invite Annette to add some more color. I think spot on, Doug, in terms of how the forward order book looks, and I think it also depends by state. Certainly Metro, Melbourne, and New South Wales Metro would be in a more challenging environment than those of our other states. Plus, also remember that we are the number one to the small and medium builder who have generally a better line of sight and a more positive outcome on their future. The other part to that being, you asked a question around the price versus volume. I would say we have seen deflation, and we called it out in the pack, significant deflation in that timber market in the first half. That's really now come to a balanced position. We don't see too much more deflation coming through, but we also don't see too much inflation at the same time. So volumes, I think from that perspective, in our view, holding well. Then the last thing I'd add is that the position that Annette described of serving those small and medium home builders means two important things. One, we have really good relationships at our store level, whether they're our own stores or independent stores. And so we have good visibility to how they're feeling and how they're trading. And secondly, they're telling us that in the main, they've worked through any of those fixed price contracts that were causing the network so much trouble. So by nature, they have less exposure to it, but that they did, they're feeling much better about their pricing going forward. Fantastic. Thanks, guys. Appreciate it. Thank you, Benjamin. Our next question comes from the line of Craig Wolford from MST Marquee. Please ask your question, Craig. Craig, your line is open. Please ask your question. Good morning, Doug and team. Just, thanks for taking the question. Just firstly, clarifying the... I just want to clarify the 6.2% sales growth for Total Tools, acknowledging that it's only a short time period, but you've deliberately referred to it as sales growth. Is that being impacted by that wholesale sales destocking that you've talked about? And if so, is there a better guide you can give us on the like-for-like performance of Total Tools? Hey, Craig. So we don't generally give like-for-like at the outlook, but the answer to the first part of your question is yes, it is impacted by the slowdown in wholesale sales of exclusive brands. Again, I just, you know, I really want to reiterate that this then catches up once the supply chain is normalized and sales out of our stores, which are up 11.5% for the reporting period, it will continue to support that. Like-for-like store sales are negative in Total Tools in the low single digits, and I'll leave it at that. Yeah, it's good, good clarification, though, so similar to the trends in the first half. Secondly, just on your performance in food in light of the tobacco decline, you mentioned the Teamwork Score was up. Can you give some more clarity as to what's improving the Teamwork Score, given I think the measure you said on the slide had did include the effects of the tobacco decline? Sure, no problem. I'm gonna invite Grant to make some comments. Yeah, thanks, Craig. When we look at the Teamwork Score, obviously as tobacco declines as a part of our mix, that actually puts downward pressure on Teamwork Score. So excluding tobacco, we've seen really good progress in our Teamwork Score, and that's driven by a number of factors. Firstly, supply has improved. So if you look at supply versus the previous corresponding period, first half of last year, our outbound service levels to our customers has improved pretty significantly. In addition to that, as the sales mix in stores themselves shifts towards promotions, long-term, lockdown prices, price match, private label, all of that is good for Metcash, and we've seen, you know, our sales increase in those areas because our value programs are really resonating well with shoppers, and so they're growing as part of the store sales mix. And I think those are the key ones. I mean, in addition to that, we continue to add more suppliers into both our DC ranges and our charge-through ranges, and so obviously we continue to try and improve the proportion of the goods that our customers want, that we can supply competitively. So there's a number of factors, but yeah, it's a good movement for us. Right. So just to be clear, that last piece around adding suppliers to, you know, both DC and Cherrybrook, is that a meaningful contribution, or is that the smallest of all those measures? All those items, all of those. So it, but, you know, it's obviously a continuing focus for us to add in suppliers that have previously traded outside of Metcash. And, you know, a good example of that in this year would be Cobram Estate, so No. 1 olive oil in Australia that's come into our DC network and is doing very well. All right. Thanks, Shaun. Thank you, Craig. Our next question comes from the line of Michael Simotas from Jefferies. Please ask your question, Michael. Good morning, everyone. I've got a couple of questions on the hardware business. The first one is on Total Tools. Thanks for giving us more disclosure. That helps us think about the business going forward from here. Can you give us a little bit of color on what the underlying store margins have done over the last several months or so? And the reason I ask is with like-for-like sales declining a little bit and some of the industry feedback pointing to pretty high levels of promotion and some drag from theft, it looks to me like store-level margin must have fallen a little bit. Can you give us a little bit of context around that, please? Yeah. Hey, Michael, thanks for the question. So I'm glad you noticed the increased disclosure, and we certainly hope that it's helpful to everybody. Total Tools store margins have compressed slightly in the last year, primarily in the last six months, as you would expect. They have. There's two key reason or three key reasons for that: slowing volumes, increased cost of doing business pressures, similar but not as dramatic as in IHG, and competitive and promotional pressures, as you've described. As you would expect in any market like this, as volumes slow, competitors are going to work harder for their customers' business. I think that's as simple as that. Has theft been an issue for that business as well? Theft. It's relatively small. So it's, I would say, up, but it's not material. I wouldn't include it in those items. All right. Wonderful. Thanks for that color. And then, and then the second one is on, the acquisition contribution in IHG. If you could just sort of help us understand what the contribution was, during the period that's just reported, how much of that flows through into the next period? Because it looks like EBIT would have been down well in the double digits, if not for the acquisitions. And Alistair mentioned AUD 40 million of strategic acquisitions post-balance date in IHG as well. So if you could just sort of wrap all of that up and give us a little bit of help on how we should think about that going forward. Sure. So the contribution from acquisitions in the first half was actually very low, less than AUD 2 million. You would expect that that would annualize and be slightly higher than that in the second half. Your second question, can you just clarify, were you asking about the Total Tools JV resets? No. So on slide 18, there's a comment that there's strategic acquisitions amounting to AUD 40 million in IHG. Strategic growth in IHG, approximately AUD 40 million post-balance date. Yes, that's right. Sorry, I just wanted to clarify. That's correct, and the contribution will be in the very low single digits at an EBIT, EBIT level in the second half. I'd just remind you that the, unlike food, this Christmas period is actually a very slow period for, for builders, so it's not the major profit contribution period. Okay. That's AUD 40 million of retail sales that you've effectively acquired, right? No, there was AUD 40 million invested. Invested. Oh, invested. Okay. All right. Makes sense. Thank you. Right. Thank you, Michael. Our next question comes from the line of Bryan Raymond from J.P. Morgan. Please ask your question, Bryan. Good morning. Thanks for taking my question. Just, first one is just around the impact of Blue Yonder within the food business. You talked earlier to improved service levels. Just wondering, if there's a structural element there as part of that Horizon program, how has that impacted the business? And, is there any real meaningful benefits that you can quantify for us through either sales or Teamwork Score or some other measure? Thanks. Yeah, sure. So certainly, Grant spoke about it in answer to another question. Our outbound service levels have improved. You know, some of the key metrics that we track very closely are, you know, how much of what our customers order are we fulfilling? And that's primarily driven by what we have in stock. How much capital are we deploying into working capital? And you wanna make sure that you're not overinvested, and then obviously, what your sales and margins are. The forecast accuracy is a key driver of your ability to make sure that you're in stock when your customers want it. And Blue Yonder has supported about an 8% increase in forecast accuracy in the last 12 months, which is meaningful, and we expect that will continue to increase. So yes, that does drive total sales, but it also drives Teamwork Score. Okay, excellent. And just my second question is actually on liquor. It hasn't gotten a lot of focus today, but, the margins were flat, but looking a little bit longer term, they're substantially above where they were pre-COVID. And, just wanting to understand if there's been sort of some structural changes in either business mix or the cost base that would result in a sustainable 2%+ margin in that business? Or should we expect that the pre-COVID levels closer to sort of 1.7% is sort of where we'll end up eventually in that business. It's obviously performing very well, but there's a lot of moving parts, so just trying to understand that margin outlook a little bit better. Thanks. Yeah. No, thanks, Bryan. The answer to the question is really similar to that across the rest of the group, which is that, you know, we're a much bigger business than pre-COVID, so there's definitely a scale benefit. I certainly believe that we're operating more efficiently as well. We're managing working capital and costs better than ever before. But also, like, in food, we have strong support from our suppliers, and that's on the back of them having been rewarded for that support. I think if you compare our liquor sales numbers over the last few years, they compare well to the rest of the market, and suppliers have benefited from that growth and continue to support us. Unfortunately, I can't give you guidance for margins, but as you will hopefully pick up, we feel good about where we are today. Yeah, I'll leave it at that. Excellent. Thanks. Thank you, Bryan. Our next question comes from the line of Phil Kimber from E&P Capital. Please go ahead, Phil. Thanks for taking my question. Just around costs, maybe if we can start with corporate costs. They were up a lot year on year, but I get the feeling it might have been more an unusual impact in the last year's number rather than this year. And so I guess the question is really: Is that first half corporate cost sort of a reasonable guide for what we should expect in the second half? Yeah. So hey, Phil, so thanks for the question. We gave guidance at the year-end results in June for approximately AUD 30 million for the full year. And I think I said that that remains in place for the full year this year. Just in terms of the cost savings that you're talking about, I mean, if I just look really high level at the group P&L, and obviously there's a lot of acquisitions impacting it, but I think your gross profit dollars are up, you know, 6%, your costs ex D&A are up 9%, which is why your EBITDA is basically flat. And your employee benefit line in the detailed P&L was up 8%. Is that cost saving program that you're doing over and above what we should expect from sort of underlying inflation? Or is that more a program to help try and mitigate some of the inflation costs that I assume will continue to come through in the second half? Yeah. So you're right, the cost pressures will continue to manifest through the second half. And I would say that the efforts that we're putting in our cost saving programs are focused on offsetting that inflationary pressure. And certainly would like to be able to bank some of those over and above as well. So, if you like, you can split it between the two. I do think it's important to point out that, particularly in things like employee costs, as you acquire retail businesses, you do have a step up in those costs, and that does throw your leverage out a little bit. We anticipate that our... The cost program that I've spoken about will deliver benefits long into the future, beyond this first year. So these are not kind of one-offs. Yeah. And then, the last question was just around, I think in the past you talked of Project Horizon, any sort of costs would be taken above the line. Is there any to call out, or are they, you know, pretty well immaterial going forward, that is? Sorry. Yeah. No, we said that Horizon costs would remain within significant items. I'm not sure if I'm misunderstanding the question. Yeah, for the second stage, you said you were going to take them above the line, but maybe I got that- Beg your pardon. Yeah, stage two. Yeah, so we're still in stage one, so absolutely in stage two, what we anticipate is that we will essentially reset the program to be within BAU. We'll build on the, on the capabilities that and you know, new tech suite that phase one installs. So that, that remains true, but we're still in stage one. And stage two will start, broadly speaking? In fact, some of the value realization will start while we're still busy with stage one. You know, we're already, for example, managing and improving Blue Yonder. And those costs are, you know, as much as I say, we're not at stage two. Those costs are not included in the significant items. That's general IT costs. As we install, for example, upgraded warehouse management systems in some of our liquor satellite sheds through the course of next year, once we've done that, the cost of supporting and running those will sit within BAU. So it'll phase in as we deliver those value realization programs. Okay. That's great. Thanks, Doug. Thank you, Phil. Our next question comes from the line of David Errington from Bank of America. Please ask your question, David. Well, good morning, Doug. My first question, if I could, just a holistic listening to everyone else's Q&A. I'm getting the sense that the opportunity of being able to pull cost efficiencies, cost levers, is more open to you in food at this point in time. And I read that you've got probably a little bit more efficiencies that you could pull out because you're still using casual labor in your DCs, and you've got elevated absenteeism. So is it right to come out with the view that maybe there's some more opportunity to hold and maybe grow your margin a little bit in food? Going forward in hardware, as you say, as you're going into retail, you're gonna have a bit more costs, and the costs there seem to be a bit more sticky in terms of Victoria, et cetera, et cetera, seem to be the cost of doing business with this regulatory stuff, labor costs going up. It seems that the cost lever in hardware is a little bit less available. Is that a fair approach to, to consider? I think it's fair, but I'd probably add a bit more to that. In food, the work that's been done, firstly, wasn't primarily focused on removing costs. It was very much about setting our business up and our areas of focus to be aligned to our strategies. As the business has changed and we've grown, we needed to make sure that we were focusing in the right areas, and it's great that it delivered some costs. But that was kind of a step change. There are always opportunities to be more productive in our distribution centers and to get the mix between what I would call temporary and full-time labor right, and that is the core job of a wholesale logistics team. So, yes, they're continuing to focus on that. I would be cautious agreeing with you about expanding margins. You know, you've, you do have a little bit of a mix effect, but until, you know, you're really in strong volume growth, it's very difficult to see a material expansion in food margins. In hardware, you're right to point out that particularly as a result of some of the Victorian-specific increases, Fair Work, taxes, state land-based costs, those were a significant hit, and we've spoken about that. We did forewarn of in our year-end results. That said, there is no shortage of effort in the retail network, both in our own stores and those of our partners to manage those costs. It's just, you know, you—it's very difficult to take out a big cost hit like that and manage a slowing in volume growth at the same time. What happens in retail, of course, and again, we've spoken about this before, is that a retailer's EBIT margins are more exposed to volume ups and downs than a wholesaler's. And in hardware and tools, which is more cyclical and less defensive, you have that aspect as well. As I've said a few times now, that will continue to improve as the long-term demand and the long-term market position that we have in IHG and Total Tools manifests in what we believe is an environment where more building is required. Just a follow-up to the food one. I want to ask a question to Alistair. I want to congratulate him on his cash realization, so don't cut me off. He's gonna get some praise before he leaves the company. But the follow-up on the food is that the big increase in private label sales of 19%, I mean, that's a big jump, isn't it? I mean, how well are you set up to... There's obviously some trading down going on. How well do you think Metcash and the IGAs are set up for this trading down? Do you think you'll still be able to hold good against the Aldi and the chains, or do you think you might have to continue to reinvest in that area? Hey, David, I'll take that question. Alistair's making a note of your praise and thanks, so thank you for that. I'll take it, and I'll invite Grant to comment. You know, this is not a new question. We believe that the improved quality of the network. So let's be clear, the improved ranging, the improved store environment, the improved programs and campaigns, and of course, the improved pricing, has underpinned a real belief in our business and more and more in shoppers, that the differentiated value offer that the local IGA stores provide is something that you can take advantage of and not have to pay any more for. We will continue to work very hard to support that strategy so that shoppers continue not only to include us in their repertoire, but to choose IGA first. Yeah, I'd add to that, say, David, that that 19% growth's good. Really pleased to see private label finally getting some better traction in our network. It is off a relatively small base. You know, the majority of our sales are still branded goods. But it's what's exciting for me is that I think the shopper demand for private label has really switched on an understanding of that demand in our network and amongst our customers, and they are very, very supportive of continuing to grow private label and seeing private label as a larger part of our mix, albeit probably never in the realms of some of the other retailers in the market. And so in this half, we've dropped the price of a further 100 top-selling Community Co lines, and seen stock allocated to all parts of IGA around the country for the first time, which is, you know, an indication of the support that the retailers are giving to the program. So yeah, there's, there's a lot more opportunity and upside in this in the coming years, but it's really started to unlock through, through this half. A good first six months, Grant, so well done. On the cash flow... Sorry if I cut you off there, Grant, too. Apologies. Alistair, you know, great cash flow, but one thing I just want to question is the finance costs did catch me out a little bit. They're increasing, obviously, because of the rates, and you, you have flagged that. But just looking at the M&A and, and the CapEx that you're looking, do you think the working capital can offset your cash flow? I'm not looking for guidance, but I'm just thinking that the finance costs could break AUD 100 million for the full year or certainly in the near future. Is that something you can offset, or is there something around the corner that you could realize a bit of cash that could offset that? Or is that what we're looking at going forward, that the finance costs could, could go above AUD 100 million in the not-too-distant future? Thank you, and thank you for the compliment. I won't give a forecast, but there's a number of points that you flagged. We've got a great focus on working capital management, which goes to the cash realization ratio, so we'll always look to do slightly better. And yes, the increase in RBA rates had a flow-on impact. I called it out in my speech of second half to first half this year, and we've already seen a slight increase in RBA rates since the half year, so that should be modeled through. In terms of full year, we will continue to manage our average debt levels with what we've previously considered the right guidance. We won't be talking about it, but the first half, we incurred AUD 45 million, and there's been a slight rate increase since then, so that's probably the best guidance to give. David, I just want to come in and make a comment on that as well. So our interest charge was up 18.2%. Our average interest rates were up north of 45%. So you know, certainly you would have expected that they would go up. As Alistair said, subsequent to the half, there's been a further increase from the RBA. I think we provide extensive disclosure on our average rates, our average debt, and so I'm hoping that those can be modeled with some accuracy going forward. Yep. Yeah, you've certainly given us the tools to do so. Thank you, Dave. Thank you, Grant, and thank you, Alistair. Thank you, David. And next question comes from the line of Lisa Ding from Goldman Sachs. Please ask your question, Lisa. Hi. I have a couple of questions. The first, a follow-up on pricing in food. It seems that we've talked about a further narrowing of IGA price gap to competitors. Can we give a little bit of color on how we're doing it, whether it's more supplier funded, whether it's leveraging our strategic buying and our balance sheet a little bit more? You know, and how should we now think about that price gap relative to the key competitors? Hey, Lisa, thanks for your question. I'm going to be a little bit boring because you've heard all of this before. We continue to enjoy strong support from our suppliers. We have, I think, a very well-practiced and well-oiled processes around making sure that we demonstrate to those suppliers that their investment generates returns for them. We use a number of different programs, from low prices every day all the way through to Price Match. In terms of the focus and the narrowing of that gap, our areas of most success are in our large stores, and you can imagine that that's that makes sense. It stands to reason. And our focus now is on the medium and smaller stores, which while the price gap continues to improve, the shape of that chart, if I can say, is the same. We think we have a way to go. So as I mentioned when I was talking, our focus now is on shopper perception of our price gap. There's no doubt... We're not naive. We know that that hasn't kept up with the reality, and we need to address that. And one of the ways that we'll do that is to continue to narrow that price gap and continue to focus in medium and small stores. Got it. But the clarification is that the narrowing of the price gap isn't so much going to impact our margins. It will be through some of the retailer support programs. That's, that's our strategy, yes. Got it. Second question is more on hardware. So I recall, when we were all last together in Investor Day, October last year, we had this market activity forecast chart that showed that, you know, the housing starts will be basically reverting back to sort of 19 levels. But with the double-digit decline in approvals that we're now seeing through the market, how should we think about that outlook? Is it, does that change at all? Yeah, so those outlooks have continued to become lower, as there's a new outlook. It comes from the HIA, and it's publicly available. The reversion was to the long-term average, five years pre-COVID, and off the highs of the last few years. You know, the one thing that I do just want to point out, when you look at our hardware retail business, while the margins are down for reasons that I think we've discussed at length today, they actually remain above the long-term average. In fact, not just the long-term average, they're higher than they ever were pre-COVID. So while we would like them to be as high as they were in the peaks of the last two years, certainly, and we're working hard to bring them back up, it's a material indicator of the health. It's a little bit like the question I got about liquor, and those margins. We're still above FY 19 and before retail margins in IHG. Okay, and the very final is, in the breakdown of the financial in cost, there was an item of AUD 6 million that is to do with the, I think, the credit, the transaction fees in relation to customer charge cards. What, what is that? Because it... Yeah, what is that, and how do we think about it? Yeah, that's, that's Amex fees. If you go back and look at the historical year-end accounts, you'll find it disclosed in the same way. It was from memory in 2018 and 2019, circa AUD 3 -AUD 4 million, per half. And that was because interest rates at that time were about 1.5%. Obviously, it dropped right down when cash rate went as low as 0.1%. And now that the cash rate is at 4.35%, that is higher. It's essentially the cost of that Amex finance, so you can treat it as debt. Okay, so where basically, if I think about the full year, do I just extrapolate it on an annualized basis? Well, it's debt, and as I said, it's always been there. And it's always been treated in the same way, and it's subject to increases in our cost of finance. Lisa, just to build, linked to cash rates, cash rates have gone up, so assume there will be an increase just because of that. Okay. Thank you. Thank you, Lisa. I'm showing no further questions. I'll now turn the conference back to Doug for any additional closing comments. Thank you, operator. I really would just like to say thank you for participants in the call, thank you for the interest and support, and I look forward to further conversations with many of you during the course of the week. With that, I'd like to close the conference. Thank you.