Thank you for standing by, and welcome to the Woolworths Group Limited FY 2022 half-year earnings announcement analyst call. All participants are in a listen-only mode. There will be a presentation followed by a question and answer session. If you wish to ask a question, you will need to press the Star key followed by the number 1 on your telephone keypad. I would now like to hand the conference over to Brad Banducci, Chief Executive Officer and Managing Director. Please go ahead. Good morning, everyone, and welcome to the Woolworths Group's FY 2022 half-year results briefing. Joining me today are Stephen Harrison, our Chief Financial Officer, who will present our H 2022 financial results a little later on. Amanda Bardwell, Managing Director of WooliesX. On the line from New Zealand, Spencer Sonn, Managing Director of Woolworths New Zealand. Natalie Davis, Managing Director of Woolworths Supermarkets. Pejman Okhovat, Managing Director of BIG W. Claire Peters, Managing Director of B2B and Everyday Needs. Last but not least, Bill Reid, our Chief Legal Officer. I will provide an update on the half and our progress against our FY 2022 strategic priorities. Steve will then present our financials for the half before handing back to me to finish with current trading and our recent outlook. Thereafter, we will take any questions you may have. Hopefully, everyone has a copy of our investor presentation. I was going to start on page four for those of you who are following through the presentation. H22 was a half dominated by COVID. It was book-ended by the outbreak of the Delta strain in July, as most of you hopefully will remember, in Sydney and in Fairfield, and then later in December, somewhere between Christmas and New Year by the outbreak of Omicron. Altogether, this was one of the most challenging halves we have experienced as a business to date. While the COVID outbreaks led to increase in home consumption, which benefited sales, the impact of direct and indirect COVID-related costs and the BIG W store closures had a material impact on our earnings for the half. Pleasingly, we ended the half-year strongly with a good Christmas, helping our customers enjoy a much-needed festive holiday season. Despite the disruption and our primary focus on our team and customers, we made good progress on our strategic agenda during the half. While it feels like a lifetime ago, we completed the demerger of Endeavour Group at the beginning of the financial year and began our partnership in PFD with the Smith family on the same day. We have also established Q-Retail in partnership with Quantium to deliver on the group's advanced analytics ambitions following the increase in our shareholding in Quantium to 75% in May. I will touch on some more strategic highlights shortly. I will also come back to our performance in H2 in the outlook section. However, despite the challenges posed by Omicron in the last seven weeks, we are confident we can deliver improved financial performance in H2. For those following, I was just gonna turn then to slide five. What we've just laid out there for those of you who are interested in a very colorful palette, which we're still working to refine, you'll see a simple summary of all the challenges that we faced between July and January. July saw the introduction of strict trading restrictions in New South Wales, as I alluded to, our largest state. As opposed to previous outbreaks, most BIG W's were closed to in-store customers, with 91 BIG W stores impacted by mandated store closures. All this saw a large number of our team across the group impacted by isolation requirements and strict lockdowns in the 12 LGAs in New South Wales. BIG W's e-commerce penetration reached over 30% and peaked at 15% of Australian food sales in Q1 in New South Wales, placing enormous pressure on our online teams in New South Wales. In terms of our DCs, we introduced split shifts and smart managers in DCs to try and minimize the impact on stock flow and ensure a steady supply of food and everyday needs. In September, we stood up Australia's largest rapid antigen testing program in our DCs, starting in New South Wales and Victoria. Our supply chain moved over 26 million cartons per week in Australian food in September alone, higher than the amount of cartons we moved in December 2020 before COVID. We continued to rebalance our DC network across the country to ensure all states were appropriately supplied. While our customer scores were impacted by the various disruptions as a result of COVID, a real highlight is that we managed to maintain strong scores in our customer care metric across all retail businesses. This reflects the extraordinary efforts of our team to care for our customers during this challenging time. As sales growth began to moderate in October, in line with the easing of restrictions in New South Wales and Victoria, COVID re-related costs remained high as we kept COVID safe settings in place and broader supply chain disruptions continued. In late December, just when we thought we had seen it all during COVID, Omicron led to an unprecedented level of team absenteeism, not only within our own stores and DC teams, but also in our supply and transportation partners. As an aside, I am pleased to say that we have seen some stabilization in the operating environments in recent weeks, and I'm sure we'll have questions on that when we go forward. Just moving on to slide six. You'll just see a summary on slide six of just how all the impacts came through on our supply chain. I'll let you read that at your leisure. Slide seven is one I wanted the team to include just at the last moment, just to give you a sense of disruption. It's just a way of looking at it. It really reports to you our outbound service level, and you can look at it for years. Once this dies, it's not a perfect measure of what happens in a business, but essentially what did the store order and what did they get from the DC? It doesn't measure whether a load was late or whatever the case may be, and it doesn't attribute to why the order wasn't able to be fulfilled. What you see if you look at that slide is a material fall reduction in our uptime service level, which went down below 70% in January. Really materially below what we're used to, which is the mid-90s. We actually would always want 100%, as you might imagine, and we also want it always on time. If you looked at this in a perfect order type of logic as you would in e-commerce, where you look at whether you've got a full basket and whether it's on time, the number would have gone probably below 50% in. It just gives you a sense of the challenge and certainly not to make excuses, and I'm sure we will come back and talk about our CODB. I certainly hope we do in the half, but it just gives you a sense of the volatility that we went through last year. Moving to slide eight. I think it is very important for us, and this was always our focus for the half, to ensure we got great stock flow to our stores and made sure that we gave everyone every customer in Australia an inspirational Christmas. We did achieve that. We ended the half with good momentum with strong Christmas trade across the group. Strong customer advocacy across the group, despite issues in our stores which the customers gave us appropriate feedback on. I'm just looking at brand NPS or reputation. We maintained a strong market share. Some highlights to call out would be the total sales up 3.6% in December in Australian food, where I'd say we did focus on getting stock in-store, a good trade plan. Our Woolworths Food Company seasonal ranges performed really well and actually just amazing performance by our supply chain Primary Connect team with 2 million more cartons than December 2022 despite the interruptions caused by COVID. Importantly to also call out the digital traffic remained strong across all banners with around 54 million visits to our digital platform in December. A record number of Everyday Rewards users during the month. A number the team would know I always am interested in is number of digital visits versus physical visits inside the group. In December for the first time, in certain weeks we had more digital visits than physical. I thought that was a really important inflection point, which I'm happy to talk about later. In terms of Slide nine, I'm pleased to say that while we, and we'll talk about it, we, you know, we have work to do on our financial performance, and we made good progress in our strategic priorities. Slides nine, 10, and 11 provide some achievements but also some areas where we have more work to do. You know, that's why we all like working in retail, 'cause we've always got more to do. It was a half where we did really continue to advance our strategic agenda. This will stand us in particularly good stead as we embed these various initiatives in FY 2022, in the second half and then into FY 2023 as we go on. I touched on some of the areas already. I'd like to focus on a few more. As you would have seen in our materials this morning, we've provided an update on our team member pay remediation. In FY 2021, we launched an end-to-end payroll review to ensure compliance with all of our obligations, ensuring we pay our team appropriately, the awards, enterprise agreements and so on. As part of our review, we've unfortunately identified certain areas of non-compliance in relation to hourly paid team members employed under three Woolworths Group enterprise agreements. With our retail enterprise agreements among other team members, we apologize to those impacted. We are committed to rectifying any and all payment shortfalls, and we will continue to fix issues as identified and as our review progresses. We are committed at the Woolworths Group to set the gold standard in terms of payments and ensuring we do the right thing by our team. Our review is ongoing. We hope to have it completed by the end of this calendar year. At this stage, we've reviewed more than 85% of our team members and more than 70% by pay, total payable cost. We've booked a provision of AUD 144 million to reflect the expected cost of remediating what is our biggest individual group of team members, those employed under our retail enterprise agreement. Just moving on to priority two and sort of calling out another strong half in e-commerce with sales across the group increasing by 48% or 69% on a two-year compound annual growth basis, the right way to look at growth if you wanna look at it over many years. Our direct to boot service continues to transform our store pickup experience, a team effort between Woolworths Supermarkets and WooliesX. We now have 653 supermarkets offering the service. We have also increased the capacity of existing stores to provide the service during the half. Over 80% of all pickup orders are now direct to boot rather than at a service desk at the front of a store. Our highest rated customer net promoter score experience inside e-commerce is our direct to boot experience. Just amazing efforts by our team in the last two to continue to grow that business. New Zealand is also making progress in convenience with e-lockers and drives rolled out to 56 stores in New Zealand by the end of the half. It would be remiss not to mention the continued progress across e-commerce and digital at BIG W, which is critical, especially during when our stores were closed. Just keeping us moving, on slide 10, if we look to our food retail proposition, our curated Core Value Up range and space has been rolled out across all supermarkets nationally in 30 major categories. We're continuing to make sure we have the right range and the right stores for our customers. It's still early days, but we are seeing this range really resonate with our customers. We've also expanded our multicultural range now available in 186. I'm particularly pleased with the progress we've made, increasing customer engagement with our rewards app and our ability to provide more value for our customers. This will be central to us going forward as we talk to the topic and lean into the topic of price increases and inflation. We achieved record membership up 4.5% to 13.3 million members compared to Q2 last year, with scan rates also increasing. Our Everyday Rewards Boost program continues to resonate with our customers. Around 39,000 new customers used Boosted in December and over 100 supplier partners in Woolworths participated in the program, providing personalized offers to our customers. Moving on to slide 11. As we disclosed in Q1, we have a new reporting segment called Australian B2B, which includes PFD and our other B2B food businesses, as well as B2B supply chain, which has our Primary Connect third-party business and Statewide Independent Wholesalers, Tasmania. We're all getting used to reporting to the segment, and I've no doubt and would encourage questions going forward on it. Of course, it'll settle down as we get into the right rhythm on reporting quarterly and half- and full-year on the segment. Just in terms of PFD specifically, PFD had a solid half despite the impact on its customers of the many COVID, you know, shutdowns and pleasing, all B2B businesses reported sales growth on the prior year. I mentioned the successful Q-Retail, bringing together the best of Woolworths Group and Quantium's retail analytics into one cohesive team, and we are already seeing results from initiatives to optimize promotional activity and further our range localization strategy. We look forward to seeing the benefits of this, of course, delivered to the bottom line in H2 and then into H23. Moving on to slide 12. Moving to our sustainability progress. One of the things, actually, when I looked at our profit announcement, I don't think we celebrated enough is the 6% decrease in Scope 1 and Scope 2 emissions across the group in H1, which is terrific. We still have a long way to go, but it's driven really by us continuing to focus on improving electricity and refrigeration consumption. Just amazing effort for the team. Finally, on slide 13. Before I close, slide 13 is a reminder of our Woolworths Group ecosystem or adjacency strategy, for those of you that who depends on what your how you like to describe these things. I have received some feedback that it was too complicated, so thank you for those who provided it, and we applied to simplify it. During the half, we have made good progress in all quadrants to transform our business, including Everyday Needs ecosystem, but we clearly have more work to do to build a better business for the future. I will now hand over to Steve to present our H22 financial results and come back to close on current trading and outlook. Over to you, Steve. Thanks, Brad. Good morning, everyone. Let me begin with a quick recap, starting on slide 16. In mid-December, we provided an update on our expected half year trading performance due to the impact of COVID-related costs and the moderation in sales following the easing of lockdowns in New South Wales and Victoria in Q2. Pleasingly, trading momentum improved in late December, and we had a good Christmas trading period with the results for Australian Food and BIG W in line with the earnings guidance we provided in December. Turning to the specific numbers on slide 16. Due to the demerger of Endeavour Group on the 28th of June, I'll focus my commentary on continuing operations before significant items, which adjusts for Endeavour Group in the prior year and the demerger accounting. Group sales growth for the first half was strong at 8% with sales of AUD 31.9 billion. Sales benefited from the first-time inclusion of PFD and the acquisition of Quantium in May. Excluding PFD and Quantium, sales increased by 4.2%. Group EBIT declined by 11% to AUD 1.4 billion, reflecting the challenging operating environment in Australia, which adversely impacted Australian Food earnings and also BIG W through store closures. Group NPAT declined by 6.5% to AUD 795 million. It's a smaller reduction relative to EBIT, due to lower financing costs and tax compared to the prior year. We also booked significant items from continuing operations at AUD 119 million after tax, primarily due to the increased provisions for team member pay remediation. This continued operations in the current year reflects the non-cash gain on the merger of Endeavour Group of AUD 6.4 billion. I'll discuss our dividends later in the capital management section. On slide 17, I wanted to quickly touch on sales performance and trends. This page highlights the ongoing volatility we've seen due to COVID restrictions and prior year cycling, impacting the comparability of one-year growth numbers. Growth slowed in Q2 in both Australian Food and New Zealand Food on a one-year basis as the benefit from higher in-home consumption reduced as COVID restrictions eased. In BIG W, sales momentum improved materially in Q2 following a period of store closures in New South Wales and Victoria, predominantly in Q1. Year average growth for all businesses remained solid. Moving to slide 18, where we show group EBIT and EBIT by business for the half. In Australian Food, EBIT declined by 7.6% to AUD 1.217 billion due to the material disruptions to our stores, DC, and team due to higher volume COVID impact and an increase in e-com mix, which runs at a higher wages to sales ratio. COVID also impacted our ability to offset CODB inflation in the half. Due to delays in implementing productivity initiatives, and we continue to invest selectively where appropriate. However, given the strong finish to the half, EBIT was at the higher end of our previously disclosed range of AUD 1.19 billion-AUD 1.22 billion. EBIT grew 2.6% on a two-year basis. As disclosed in Q1 and as Brad just discussed, we've created a new operating segment called Australian B2B in half one of FY 2022, which includes the addition of PFD to the group. The first time contribution from PFD at an EBITDAR level was somewhat offset by the amortization of intangibles on the acquisition, as well as collective investments across the portfolio of our B2B businesses. This result also reflects the impact of reduced mobility on out-of-home consumption, which impacted both PFD and Believe at Work in the half. New Zealand Food EBIT increased 3.3% to NZD 200 million. While sales growth in half one was strong due to COVID restrictions in place and higher inflation, COVID-related costs increased materially on the prior year and impacted the flow through to EBIT. BIG W's EBIT declined 81% to AUD 25 million due to the material impact to sales from sales and store closures in Q1 in particular. For the half, total other costs were AUD 69 million. Other now includes our share of Endeavour Group's impact and also includes the team thank you bonus of AUD 84 million in the half. Excluding Endeavour Group's contribution, we expect group costs to be AUD 190 million approximately for the full year. To slide 19 to cover COVID costs. In half one, group COVID direct costs were AUD 239 million or 0.7% of sales. While this was below the AUD 257 million excluding Endeavour Group in the prior year, direct costs only capture the cost that could be directly attributable to COVID, such as health ambassadors in our stores, the cost of cleaning and PPE, rapid antigen testing, and additional warehousing as required. Due to the profound impact Delta had on the end-to-end supply chain in the half, there were a number of additional impacts, including increased team absenteeism and incremental overtime hours to ensure we could keep our stores and DCs running, and lower efficiency and productivity levels due to ongoing disruption. We have had indirect COVID costs in all our businesses, but the impact was largest in Australian Food, with indirect COVID costs of AUD 69 million in the half. Moving to slide 20 to cover key balance sheet metrics. Average inventory days from continuing operations declined by 0.4 days compared to the prior year to 30.2 days. This was due to strong sales in food and was partially offset by higher inventory days in BIG W due to the impact of store closures on sales in the half. For ROFE, we've normalized to remove Endeavour Group from EBIT and funds employed. However, ROFE includes our 14.6% investment in Endeavour Group and its contributions to earnings in the half. Normalized ROFE from continuing operations declined by 290 basis points to 14.1%, largely driven by lower group EBIT in the half. On slide 21, we've included a recap of our capital management framework and called out some key highlights. Despite lower EBITDAR from continuing operations, we generated operating cash flow of AUD 1.7 billion in the half. This was used to sustain our assets and fund growth during half one. I'll touch on some of the other capital management highlights in later slides. Moving to slide 22, let me talk about cash flow. Cash flow from operating activities before interest and tax was AUD 2.6 billion, which was broadly in line with the prior year if we exclude Endeavour Group. Lower EBITDAR from continuing operations was somewhat offset by working capital benefits, which we've laid out on the following slide. Lower interest paid reflects the demerger of Endeavour Group and the refinancing of borrowings with favorable interest rates during the period. Adjusting for the impact of the Endeavour Group demerger, the cash realization ratio was 91%, largely due to higher cash tax installments paid related to financial year 2021 in the half relative to the tax in the P&L. Adjusting for this one-off cash tax installment in December, the cash realization ratio was over 100%. Investing activities increased compared to the prior year, largely due to the acquisition of PFD and the increase in CapEx in the half. I'll cover CapEx in more detail on a later slide. Finally, for financing activities, Endeavour Group repaid an intercompany loan of AUD 1.7 billion to the Woolworths Group following the demerger. This was used largely to fund the buyback of AUD 2 billion completed in October this year. In total, there was a net cash outflow of AUD 1 billion in the half, reflecting a AUD 0.6 billion increase in investing activities and a step-up in cash returns to shareholders in the half. Moving quickly to slide 23, to cover working capital and non-cash moveme nts. On this page, we've separated working capital movements into continuing operations and discontinued operations. Increase in inventory from continuing operations reflected higher inventory levels due to strong trading and efforts to minimize supply chain risk. Increase in trade payables was due to increased purchases, somewhat offset by reduced payment days to our suppliers and the timing of payment runs. In total, continuing operations, working capital and non-cash increased to AUD 122 million, largely due to an increase in provisions reflecting the team member pay remediation provision and self-insurance. Discontinued operations reflects the non-cash gain on the demerger of Endeavour Group of approximately AUD 6.4 billion. To slide 24 and CapEx. As a reminder of our capital allocation classification, sustaining CapEx includes spend in areas like maintenance, safety, renewals, IT and supply chain, and investment in productivity initiatives. Growth CapEx refers to spend in areas like new stores, e-commerce, and other projects that are expected to drive high sales growth and increase gross margins over time. Operating CapEx for the half was AUD 822 million, up from AUD 730 million in the prior year. This includes a hundred and twenty-six million on projects with strong sustainability benefits in areas such as refrigeration and solar, and the increase in spend year-over-year reflects a higher investment in supply chain and e-commerce as we flagged in August. The FY 2022 operating CapEx is still expected to be approximately AUD 2 billion. Moving to slide 25, the board today has approved an interim dividend of AUD 0.39. Important to note that while the 1H FY 2021 dividend was AUD 0.53, this includes the AUD 0.13 related to Endeavour Group earnings. Excluding this impact, the interim dividend was marginally below 1H of FY 2021, which when adjusted for the AUD 0.13 would have been AUD 0.40. While we've maintained our typical payout ratio for the half, the reduction in the dividend is less than the reduction in EPS due to the lower shares on issue resulting from the buyback. Together with the interim dividend, the FY 2021 final dividend paid in 1H and the AUD 2 billion buyback, AUD 3.2 billion will be returned to shareholders in FY 2022. Moving to debt and funding on slide 26. The group's sources of funding and liquidity remain strong with good access to both bank and debt capital markets, having total committed undrawn facilities of AUD 2.6 billion in addition to cash. In September, the group successfully completed AUD 1.6 billion of sustainability-linked bonds with a direct link to our sustainability commitments regarding the reduction in carbon emissions. We remain committed to a solid investment-grade credit rating and have significant headroom to our current ratings of BBB from S&P and Baa2 from Moody's. Finally, on slide 27, let me give you a brief update on Primary Connect. While it was a very difficult half for our Primary Connect team, given the disruptions from COVID, we're continuing to make good progress on our supply chain transformation. MSRDC continues to increase throughput despite the COVID disruptions, averaging 2.2 million cartons per week in half one, with increases in volumes expected in half two. The Heathwood Chilled and Frozen DC in Queensland opened ahead of schedule in the half to help manage COVID disruption, and we also opened the Palmerston North distribution center in New Zealand in September. We have begun construction on our first automated CFC in Auburn, and we expect to lay the slab for our new Sydney NDC at Moorebank this month. With that, let me just say thank you and I'll hand back over to Brad. Thanks, Steve. I've heard the line's still bad, so I'm gonna talk up a little bit more and apologies if myself or Steve have been hard to hear. Apologies to my colleagues in the room if I'm shouting. Australian food sales, let's turn to the trading, current trading and outlook. Australian food sales have increased by 5%, approximately 5% over the first 7 weeks of the year, with a two-year CAGR of around 6%. Sales growth has been driven by a return to in-home consumption by customers due to Omicron and in some cases, of course, putting their self-imposed isolation. We're also seeing inflation continuing to trend upwards, with shelf prices increasing by 2%-3% in the half to date compared to the prior year. COVID costs have remained elevated in the first 7 weeks of Q3, with direct COVID costs of AUD 34 million or 0.4% of sales. We expect to see a normalization over the course of this half. We are starting to see some signs of stabilization in the operating environment and are confident we can restore a more predictable operating rhythm across the group. For BIG W, sales declined by 4% in the first 7 weeks, but remained up 6% on a 2-year CAGR basis. We expect a challenge in half, but equally expect the business still to be profitable in H2. In New Zealand, sales growth of 5% in the first 7 weeks or 3% on a 2-year CAGR basis has benefited from higher inflation and lower sales growth in the prior year, with Omicron not yet having a material impact. We are doing what we can to prepare for Omicron to minimize disruption to our team and customers in New Zealand. Despite the many challenges experienced in the first half of 2022, I am confident that we're well positioned to deliver for our customers, our team, and our shareholders in the second half and in the years ahead. I'd like to finish by thanking our team and partners for their extraordinary efforts during an extremely challenging half and of course, also our customers for their patience, understanding, and support. I will now turn the call over to the operator for questions. 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 withdraw your question, please press star then two. If you're using a speakerphone, please pick up the handset to ask your question. The first question comes from Michael Simotas from Jefferies. Please go ahead. Good morning, everyone. Can I ask the first question on your COVID cost performance on a year-to-date basis? The COVID cost as a percentage of sales moderated quite significantly notwithstanding Omicron. What did you do differently in January to be able to achieve that? Can you make some comment on what the indirect COVID cost trend has been as well, please? Thanks, Michael. I'll make some high-level comments and then pass over to Steve to talk to some of the detail. In many ways, when we looked at the first half and all the challenges we had, we really were committed to the Play Safe Christmas. We put a lot of effort into, in fact, in many cases, over-recruiting into our DCs and our stores with an expectation that we would see some level of absenteeism or isolation or whatever the case. We really were focused on stock flow and having a great Christmas and the momentum that that gives us into the second half. When Omicron hit, actually, we were very thankful that we had done this because it helped us materially to adjust to the world of Omicron. In addition, you know, we were the biggest users of RAT tests in the country when they were extremely expensive, and we had nurses and everything else to do with it. Again, when we transitioned from PCR to RAT, we felt ourselves in a very good place to be quite forensic on how we dealt with this. I would say when you looked at the first half, we took a lot of learnings and lessons, and some of the settings we put really helped us as we come into the second half. You see that in our sales number, as well as in our direct COVID costs that Steve will talk to. Hopefully also ultimately, we'll see it flow through in our bottom line. I'll let Stephen now talk to how we disaggregate it, but the one thing which we've tried to do, which I should just be clear on, is we've tried to use similar methodology for calculating direct COVID costs for the last couple of years. We haven't changed definitions as we went. Our version of direct COVID costs is the one we set up for our business in FY 2021. When we allude to the second order ones, those are everything that wasn't in the way we measured in FY 2021. The reason we did that was just to create some, I suppose, robustness in the way we measure. Stephen, I want you to talk about H1 trades 7 weeks on, and there's a material step down, and then also the second order impact. Yeah. Thanks, Brad, and thanks for the question, Michael. Just on the direct costs, and we laid this out in the profit announcement. I think the thing that I would reflect on is, you saw in the move from Q1 to Q2, the step down in team costs, and I think that Q2 number, you know, we came down from AUD 51 to AUD 34. That actually is a blended number across the quarter. As the settings and restrictions changed in the different states, we were able to reduce our team costs. That's the vast majority of why direct COVID costs have come down over Q2 and then into Q3. I think, you know, you see when you look back at the second half of last year, when the settings allow, we are looking to remove those costs as swiftly as we can. I think it's fair to say that the indirect costs have continued to be an impact, particularly in January. I think the slides that Brad referenced, slide seven in the pack, showing some of the disruption in service levels, which reflects the disruption in our DCs and outdoors, will give you an indication of why we continue to have some of those indirect costs continuing. As things start to stabilize, we'll obviously be very focused on trying to manage those costs down over the course of the quarter and a h alf. Okay. Thank you. My second question is regarding the comments on inflation in the second half as well as shelf prices. I mean, we can certainly see a lot of price increases on your shelves and those of your competitors. What success have you had so far in recovering the input costs that you're facing in terms of realizing those shelf price increases? Michael, because you were so polite, we're gonna let you ask the second question that's supposed to be one and then back into the queue. We've got pressure across our end-to-end value chain on cost increases. We can come back and talk about, you know, obviously the ones from our suppliers to ourselves, but it's everywhere. Our biggest individual cost increase that we've seen, by the way, is commissioning either our new DCs or new stores. While it's been a very painful half having so much work underway in Primary Connect, actually, if you look at on a replacement cost basis, actually I'm quite thankful that work's underway given the material inflation we've seen in infrastructure right now for very obvious reasons to do with, you know, how freight, the role international freight plays in that. If I come to supplier cost increases to Woolies, we started to see the pressure starting in late November in terms of increases that we've been requested to process. Now passing those through December, you know, we really try to use judgment. We had to pass through some meat cost increases. The red meat ones, but we try to be very sensible and very focused on delivering a great, affordable, inspirational Christmas for our team. That then has continued in January and into February. That's why we called out the number we did there. The reason we called out shelf, Michael, is it is quite hard at the moment, given our need to dynamically adjust promotions depending on our stock levels, to actually give you a blended rate. For me, I'm quite focused on looking at shelf 'cause it's a good early indicator of where things will go. We've only at this stage engaged with about half of our suppliers on their various cost increases and so we still have a lot of ways to go. This is very early in the journey. In terms of what we've seen, at this stage, we've seen a very rational process. The cost increases from our suppliers have flowed through and, you know, we obviously test and stress test them and get them to validate it, as you might imagine. We don't accept everything we're asked to accept. The ones that we have accepted have flowed through to shelf prices, at this stage of the game. It's all been very rational. I don't know, Nat, there's anything you wanted to call out specifically? I'd just say to give a flavor of the rationale behind some of the supplier cost requests, you know, international freight costs increasing is clearly something everyone is staring into. Commodity costs The coffee, dairy products, and manufacturing costs. You know, that's playing through at the moment across our long life categories in the store. On the flip side, as Brad mentioned earlier, we've had you know, significant deflation in fruit continuing. Now we expect that to continue for a few more months, and we're very conscious about you know, when we stare into these cost basket, looking at the whole relationship and seeing what we can optimize. We use it as an opportunity to also review things like promotional funding and make sure that we're getting the best investment there for our customers, and really balancing our value equation. That's very important to us. Just to get ahead of a question on why fruit is deflationary, it really comes down to avocados and apples, which we can talk about later, but they are still huge supply benefits sitting there, and that's leading to depression in the market and prices, which are fabulous for any buyer. Thank you. The next question is from David Errington from Bank of America. Please go ahead. Morning, Brad. Brad, I'm wondering if you could help me out a lot 'cause I'm as confused as an analyst as I've probably ever been. I'm trying to work out why your cost performance is so much poorer in cost of doing business in supermarkets than your major competitor in Coles. If I could call out some numbers, Coles' cost of doing business only increased AUD 100 million, 2.6%. They had a headwind of COVID of about AUD 50 million. Your cost of doing business increased by AUD 520 million with a COVID cost tailwind because your COVID costs were AUD 20 million-AUD 40 million below. The disparity in your operating performance is really stark. Now, I know that you look at Coles' performance. I don't expect you to comment on Coles, but I certainly expect you to, if you could please, give us an explanation as to why your operating performance in cost of doing business grew by 10% when Coles had exactly the same challenges in terms of supply disruptions, et cetera, et cetera. Where I'm going to, I'm starting to wonder, have you got a financial control problem? Are your numbers. Now, we had a downgrade in December that was really late, and it was a surprise. I'm worried about whether you're on top of these control issues. You know, are they 'cause the costs just seem to blow out. I mean, we've gone through the CapEx issue a lot. I, you know, we won't do that now, but the costs just seem to be uncontrolled at the moment, Brad. You know, we're having this discussion today because of what Coles delivered yesterday. Coles seem to be in control of their costs. They gave a very good explanation that they have weekly meetings, and they really control every cost that goes in. I'm not sure that you guys do the same. Can you give us a bit of an explanation? 'Cause we, as investors, are trying to work out whether there's an opportunity here for these costs to come out or whether there's something systematic in your business that we just continue to see cost blowouts. If you could help us there, that would be terrific. No, thank you, David. We did follow your complimentary messages to our colleagues at Endeavour, and we do think it was a great result as a shareholder there and obviously the narrative yesterday. We can't talk to our competitors. We can only talk to our own numbers, and Stephen will give you the breakdown. If you look at the half and all the disruptions that happened, and we all sit here, and we pay lip service to frontline teams and doing it hard and doing the right thing by them, it would seem actually us investing in our store team to get the right experience for our customers was the right thing to do and the right thing to do in our stock flow through our DCs, and it's validated in our sales number and our reputation number that sets us up for the second half. It's very hard to sit here and not say we focused on doing the right thing, and we did the right thing for our team. That included the thank you bonus to our team and included actually making sure the store management team, when they work on a half step, were paid the appropriate step for the half and to make sure there was enough safety team in those DCs and in the stores. That's what you're seeing, David. We won't walk away from that. We need to deliver for the half, and we look forward for the full year, and we look forward to, of course, making sure we do in the second half. You know, we'll go through the numbers, but when you add up the additional costs we put into store teams and into DC, you know, that's AUD 350 million or somewhere there about out of the total. Never mind anything else. I think, by the way, we should talk to cash CODB and just park depreciation for a moment. You'll see ours haven't gone up, of course, with amortization, but just park that so we get a clearer message back to this and recognize, as you should well know, our DC costs are in our CODB and they're in GP for most other retailers. I think we should also just make sure we're looking at the right apples for apples. Steve, if you could just talk to the high-level numbers, and I'm happy to take for you to come back, David, and take accountability for us, I think, doing the right thing to do for our team in an environment that it was as hard as it gets. If you track any metric around how our team members feeling mental fatigue, physical fatigue, uncertainty, we think these were investments that put us in a good position on the go forward. Over to you, Steve. Yeah, thanks, Brad. David, look, I'll give you the high-level wrap and say, but I think, you know, the key is the color to it. You know, as you rightly point out, with over AUD 500 million increase in CODB, that if you back out D&A, about 450, as Brad said, roughly 350 of that is the cost of our teams in our stores and the cost in our supply chain. There's another AUD 50 million across, you know, conscious decisions and investments we've made on our people system and some of the costs associated with the remediation, investments in cyber. And then there's a range of other things we're doing, but, you know, we've made some conscious decisions to continue to invest, to grow our business. We're investing in driving digital traffic to our digital assets. Important to driving sales in our stores, also important in driving the strong growth in digital advertising in Cartology that you see going through our GP line. We do have general inflation in our business, and I think, you know, we would be the first to acknowledge that we made conscious decisions to pause our productivity initiatives going into stores and the realization of benefits of those because of the material disruption that our store teams and our DC teams face. Our businesses that have a drain on the P&L in the first half and we think are long-term investments that build capability and strengthen business over time, be it, you know, investments in e-commerce or advanced analytics or some of the new businesses that we've started. At the end of the day, you know, what drove this ultimately is the disruption that we've had from COVID. In truth, the sales dropped away much more quickly in the second quarter than we would've liked. You know, we could have made choices to reduce some of those costs and cut wages in stores in December. We made a very clear decision not to do that. We've done that in the past, and we've seen how that's gone, and that's not the way we run these days. You know, we do set ourselves that ambition to offset inflation with productivity. We wanna get back to that agenda in the second half of this year once we see stability in our operating rhythm start to improve. You know, I think we agree with the sentiment. High costs were higher than we wanted them to be, and we need to get that balance right in the future. We didn't get that balance right in the half, as you see in our earnings result. At the end of the day, we're focused on delivering for our customers and for our team and for making the business a better business long-term and more sustainable. You know, happy to take any questions, but you know, we take the feedback on. We do manage costs very carefully. You know, there's a strong DNA in the retailers, in all of the people who are sitting around the table, be it in our stores or in our DC. We have a very disciplined cadence of looking at cost on a weekly basis as do our colleagues down south. You know, we will be very focused on that in the second half. I just would also like to add, David. We came in with authenticity at the right time when we had the information we needed to call our earnings downgrade. That was not a thing we wanted to do in early December, but it is in line with our values and our purpose. We're open, transparent, and authentic. If we have an issue, we call it when we call it. That was called then. You've seen the consequences of it in the numbers now. It's not new news. It's that news played through. However, you do see the market share across our various businesses. You do see the reputation and advocacy we have, and you do see the good start to H2. Thank you. The next question comes from Grant Saligari from Credit Suisse. Please go ahead. Good morning, Brad and team. Question just around, I guess, price perceptions and the reality of price. In a number of cases, Woolworths seems to be leading shelf price increases across the industry, and as you've noted, prices are up average 3%-4% in the first seven weeks. Just keen to hear. We're also seeing promotional intensity down, year to date, from supplier funded promotions. Just keen to hear about any feedback you're getting or what you're thinking about in terms of price perceptions at the moment with Woolworths. How you're thinking about managing the reality of price comparisons, given that we all recognize prices are going up, but they're going up at different rates among different retailers, please. Yeah. Thank you, Grant. What a hard question. I can just give you some comments and we'll go from there. Firstly, we said 2%-3%, not 3%-4%. Be that as it may, and I quoted shelf. Actually, our promotional programs are actually relatively back to what they are on year-on-year in number of items or ranges that we promote and depth of promotions. We're not really promoting less than we have historically, although Natalie alluded to it, and certainly with our colleagues at Q-Retail, we wanna be much more thoughtful on making sure we drive up the number of winning promotions in our business. That's all. You know, we've invested materially on building the capability to do it in the first half, and hopefully we'll see some of those benefits to see the comments come through in the second half. Our promotional program is relatively stable. What you'll see is some reduced promotions in some weeks where there's just stock flow issues. You know, if you've got a stock flow supply issue on toilet paper or whatever the case may be, you have to sometimes pull those promotions just because you're gonna disappoint the customer. I don't think we've seen a less promotionally active period than we have historically, although you know, we do wanna be much more forensic and get the winner percentage up. You are seeing this movement, you know, in shelf prices, and customers are seeing. We are tracking our customers. We can see their focus on pricing and value for money. It's really a concern. In terms of relative price position, you know, again, we are, as you know, through our history, very anxious on this topic. We do track it against Aldi, Coles, Chemist Warehouse for those who are interested. We do look at it within the context of brand and our own brand, and we look at it at shelf and the promotional mix attached. We're in the guardrails, we have been for the last couple of years. Now, if you go to the going forward, I think, Grant, you know, clearly, this issue is not going to get smaller. It's going to get bigger. How we manage it through the business is, you know, one of the top three things we focus on inside the group. It's how we make sure all of our customers get their Woolies worth. There's no one simple solution to this, as you know. Our store segmentation is continuing to proceed and how we think about that and displaying and delivering value, working CORE/VALUE/UP is important to us, and they are slightly different mechanics and things we should be doing there. Everyday Rewards is really starting to deliver. Again, how we do much more through that in our one-to-one promotional platform, which is now live. Again, an investment in H1, but actually live, and we started doing that on the first week of January, where we can actually deliver real-time one-to-one offers to our customers, but we need to be much more thoughtful in the activation of that program becomes key. A third, as I said, we've done a lot of work and one of our biggest investments in the CRV line, David, in H1 was around Q-Retail and being much better at building promotional personalisation engine so that the win ratio goes up inside the group. You know, that's where we're at. We're not uncomfortable with where we're at. We would, of course, prefer that shelf price increases were effected in each and every retailer on the same day or the other retailers before us. It'll depend on the product, I think, right? Because we actually do look at that just like we do at every other number on a weekly basis. We do certainly look at that weekly. You know, it'll depend on the product, really. You'll see us probably just because of a slightly bigger red meat business, you might see us move a little bit there more than in other categories, but we're very sensitive to that issue. Thank you. The next question comes from Adrian Lemme from Citi. Please go ahead. Good morning, Brad, Stephen, and team. Yeah, just wanted to understand how the economics of Direct to Boot work. I'm not surprised that you're saying the customers love it. I mean, I use it myself and it's a fantastic service. Saves, you know, an hour or more of my time. But I'm just wondering how do the economics make sense for Woolworths? How can you improve them down the track? Yeah, it just appears to me this is a great deal for customers, but perhaps, you know, quite costly for Woolworths. Thanks. Yeah. Thanks, Adrian Lemme. Look, we can improve every part of our business and, so that is just a given, for us. What has surprised us in an economic sense, I'll let Amanda Bardwell sort of talk to some of the specifics of areas for improvement, but what has surprised us is the percentage mix we can hold through Direct to Boot with someone picking up versus home delivery. No matter how you cut it, home delivery is the most expensive thing that you end up doing for a customer, as you might imagine, primarily through the cost of a truck roll. Actually, we're getting much more efficient as we go and build in route density. One of the highlights in the half was that. Still, the cost of putting it in the boot versus driving it to the home, even post a fee you may charge the customer is materially different. Actually to see direct-to-boot grow to close to 40% is really exciting, and that trade-off makes a big difference to the overall blend and economics of our e-commerce business. In terms of improving it, Amanda, there are many ways I think we can improve it. Yes, Brad. It's a hot topic we talk a lot about with the WooliesX team and the Supers team as well. If I just wanna start with customer, if I can, because yes, we're focused on direct to boot in terms of what a customer spends with us in that channel, but we also are looking at the holistic spend of that customer, both in store and online. That's really important in terms of then looking at the choices that we make. We take that all the way through the line down to look at the individual contribution at a profit level of those individual channels and to make sure that we're making the right choices in terms of how we're encouraging and rewarding our customers to shop with us. I think that's, you know, a really important tenet of our strategy, which is all about customer loyalty. When it comes to Direct to Boot, you know, there's a lot that we can do, as Brad rightly points out, and we have done a number of things in the last six months to actually really improve our ability to pick the orders in each store. Over the last six months, together with supermarkets, we've rolled out a new picking app, which actually optimizes the path in which a team member walks around the supermarket to pick orders. We're seeing some really encouraging and very positive reductions in that walk time, which is great to see. We've also continued to improve the user interface for our team just to make it a whole lot easier. It's actually a really hard job being a personal shopper in our stores. As much as we can do to help it, help those team members operate in a faster and more efficient way and to give them some great tips on the way through. We've also just improved actually our product substitutions, which is always a hot topic. You can imagine for our team, as they're standing in front of the shelf, and we may have a product that's not available, particularly over the last six months, it's really hard for them to decide what product to substitute. Actually, we've just launched in the last three months, a substitution engine, which helps our team to actually look at a recommendation quickly and select that product. Lots more that we can also do on the experience for our customers as they're coming up to the Direct to Boot experience in our car parks in terms of notifications and the like. We're continuing to try and improve that. Look, I think we're really excited about Direct to Boot. It was a massive driver of growth for e-commerce in the first half. We see that continuing on, and we can only just continue to focus to make it better. I mean, one of our biggest capital investments in the half was actually building our drives and supersizing them, I guess, has surprised us. The more convenient you make a drive and therefore direct to boot, the more resonance you get with the customer. Our new drive is another a six-lane drive, and that really does resonate. To actually land those drives takes probably a year's planning before we could even execute against it. It's sort of been a couple of years in the making. Actually if you wanna do direct to boot, you need four to six lanes. We call them our platinum service, and you need to be directly in from ideally from the door and staging area that takes it from the store into the car park. We're learning a lot, we continue to evolve and to form in our strategy. I said personally, I always worried that we would be at 70% home delivery, 30% pickup at best. We're running 40-60 and everything we do to pick up and make it better resonates with customers, which means may even be higher than that. That materially changes the blended economics of what you're doing. Thank you. The next question from Ben Gilbert from Jarden. Please go ahead. Yeah. Morning, Dave. Second, just a question from me, sorry, just around cost, just following on from David Errington. Pre-COVID, I think you guys were still running probably heavier than your peers in terms of store level labelers, labor as a percentage of sales, group overheads, et cetera. I'm just trying to think about when you guys sit around the management sort of team and when you sort of sit at the board level, do you feel that given the CapEx you've put in and where you're going, that you're gonna start pushing costs more harder? I know you don't wanna get back in the old days where you just harvest the business for margin, but is there gonna be, do you think, a more considered focus around trying to drive costs and bring that percentage cost down over the next few years? Yeah. Thanks, Ben. Look, I think we'd make no bones that the first half we felt like we really drove our strategic agenda very successfully, but we didn't kind of get that balance back for our shareholders. You know, we make no bones about that. You know, we sort of kind of like a weird duality of all the things that we achieve, but then, you know, it goes to nothing if you don't also do the same for the shareholders. You know, we didn't get the balance right and we do intend, of course, to focus on getting that balance right in the second half. In terms of costs, though, we should be very precise on how we talk about these issues. There are investments that you're making in new businesses or new capabilities, and then there's, you know, the cost of actually running your DCs and your stores, which are where the majority, you know, for us of our AUD 8 billion wage bill, it is in there. In those cost areas, we were very deliberate in making decisions, not cavalierly making decisions, but very deliberate in making decisions around the challenges in our supply chain. Admittedly, commissioning the DCs we did in the half year, probably I'd prefer to have done it in a different time and, you know, new DC in Brisbane and so on. You know, not the ideal half to commission a whole lot of new supply chain assets. As I say, I think the replacement costs will make us feel a lot better in later years. We were very deliberate as we could see the crisis coming down the pipe to be a lot more thoughtful of making sure that we supported our four teams in our DC. Those costs weren't a surprise, that's why we called them out in early December. You know, we kind of had hoped that we'd get through the worst of the crisis, but it still kept building and that's why they sat there. You know, if you look going forward, do we feel positive about our various performance improvement plans inside the group? Yes. Do we intend to be getting much more focused on implementing them in the second half? Yes. Do we expect to see some benefits in the second half? Yes. Even more inside FY 2023. You know, we're not kidding ourselves, although this is the halfway mark in a year, maybe seven months in the year. You know, we are trying to make sure we land the year correctly and of course the other years. If I can build on some of the initiatives we have continued to focus on in stores, and Amanda alluded to the work we're doing in e-com to improve picking. We're really trying to use technology to make tasks simpler for our store team rather than just constrain costs. We've tried to as much as possible keep that work going even throughout lockdown. The online picking algorithm I think is a great example where we're getting improvements in our pick rate and making things much easier for our team. The walking distance in the store is decreased for them as they pick customer orders. After the lockdowns eased in the half, we also launched simpler planograms. That's replacing lots of, you know, black and white pieces of paper where the store teams are doing new category reviews. They now have a tablet where they can see what the shelves should look like, where to merchandise the product. We're scaling up a food temperature system called Monaco, which removes all our manual temperature checks, you know, particularly around products like hot chicken. Again, making it easier for the team. We've just started rolling out electronic shelf labels, which again is a really significant improvement for our store team. You can imagine the amount of work that goes into ticketing with the changeover the catalog every week. The electronic shelf labels now do that automatically and the team really loves them. We're building a lot of that technology into our renewals. As we're confident on the technology, we're also beginning to sell those initiatives up across the fleet. There definitely were delays to many of those programs, particularly productivity initiatives that we rely on our supply chain colleagues to help us with. We are continuing to progress them to make sure that we continue to simplify for stores and achieve productivity, but do it in the right way. Thank you. The next question comes from Thomas Kierath from Barrenjoey. Please go ahead. Oh, morning, guys. My question's on online home delivery. This year I'm a Delivery Unlimited customer, AUD 130. You guys delivered to me over 100 times. I think I saved AUD 2,000. It's a great deal for me. I guess the question is, it's probably not a great deal for shareholders. Just interested to know how, in the future, you're gonna price for this and whether there are ways that you can, other than becoming more efficient, actually charge more to reflect the higher costs of home delivery? Thanks, Tom, and it's great to have you as a very regular customer. We did enjoy the note you sent out. We think it's a great question, and I'll let Amanda talk specifically to the investment we made in Delivery Unlimited, which was a very conscious investment, and while we saw the benefits there. Just one point it behooves me to point out is the cost for using Prime in Australia is materially lower than the US. It hasn't gone up as the US has. In addition, in Australia, not only is it AUD 6.99 a month, AUD 8, but you also get free deliveries from the US. We are seeing a very aggressive investment by Amazon even today in Prime in Australia. As everyone's doing the benchmarks, please use the Australian benchmarks. You'll see the same benchmarks if you actually look at the take rates on the marketplace. We're seeing Amazon still invest materially into this market at the moment, which is in sharp contrast to the announcement we saw last week. If I then come back to Delivery Unlimited, and it is obviously a subscription, as you would know, as you would have seen from our various competitors talking about their program, I'll let Amanda talk to our logic and where we're at. Yeah. Thanks. Thanks, Brad. Look, I think with Delivery Unlimited, it is a really important part of our overall strategy, and again, it comes back to the same point I made earlier, which is we're really focused on the total value of our customers and how we can grow their loyalty, grow their engagement with us overall, and ultimately, of course, increase their overall share of wallet. What we see when a customer signs up to Delivery Unlimited is firstly, they're still continuing to shop in store, and yet they spend more with us online. Over time, what happens is actually, and we've been monitoring this for many years now, those customers increasingly spend more with us in terms of their total share of wallet. We look at that not just in terms of the spend line, but also all the way down to the profit line and look to monitor whether or not at a holistic level, both at a sales and a profit, we're in a better position and our customers are in a better position as well. I can only just say yes, we have adjusted some of the offers for our Delivery Unlimited customers. It's been incredibly well-received, and what we're seeing is significant increases in share of wallet, and I think we're really satisfied with where that program currently is, with, I think, you know, 60% increase in paid subscriptions, and a really important way of us really locking in the loyalty of those customers for the future. I mean, I'd also just finish by saying, as with most of the things we've inside Woolworths, you know, we don't need new ideas. We need to just implement everything we've got, whether it's productivity in store, scaling this up. This is all reflected in what you saw in the first half. It's a central issue, I think for every major, you know, retailer or retail ecosystem, how they, you know, provide a more cohesive, better experience for the customer across all the channels and invariably some form of Delivery Saver, Delivery Plus, whatever you wanna, whatever euphemism you choose to put to it. Actually so far, so good, you know, we've been looking at this for a long time, it actually has moved the dial in a good way for us, and we're very positive in the next few months. Tom, if you're brave enough, and I'm brave enough, if you send me your details and give us approval to use your account, we'll come back and tell you the economics on your account. Why don't we do that separately and I hope we made some money. Thank you. The next question comes from Craig Woolford from MST Marquee. Please go ahead. Good morning, Brad and Steve. Just wanted to ask a question around the cost of doing business. I think in response to that earlier question, you mentioned that staffing and supply chain costs were up AUD 350 million. I assume that relates to the food segment. On my math, that's about 7.5% cost growth. Rather than worrying about COVID and some of the indirect costs, I'm just interested in what's driving such a level of, let's call it underlying cost growth. Just as importantly, what does that look like in the second half? Is it gonna be that level of growth in underlying costs? Yeah, Craig, I mean, all these numbers are, you know, becoming so complex in the environment we're in. I think just looking year-on-year and having a look at the increase and then just looking at, you know, at that level has a lot of merit as we've talked through. If I look at what drove a lot of the supply chain costs for us in the half, it was partly driven by we were in the process of activating a whole series of new sites, and we ended up with some split sites because it was slow to do full activation. You know, we ended up with drawing on from more than one site, which caused some inefficiency in the DC as well as it actually led to split loads through transportation. Particularly true for us in Victoria, where we were transitioning chilled and frozen from Americold to Lineage and with a lot of benefits, and we'll finish that. Now, we were in the process of commissioning a Melbourne Fresh DC, and then you know we were scaling up, which has gone well, MSRDC. So there were a lot of issues around using secondary sites, primary sites, inefficiencies there, as well as splitting loads and splitting transportation. The benefit in that, of course, was if a DC went down, you had backup. There was a benefit and a safety factor. There was the rebalancing up and down the eastern seaboard as we had various issues. You know, sort of almost concertina all the way up to Brisbane. At certain points, we'd have the Brisbane DC service in New South Wales, and then we'd have Wodonga service in Victoria and so on. You had this concertinaing up and down the coast. Related to that was what range you put in or where you put your fast movers into your regional DCs and your slow movers in your NDCs, and sort of get that a bit out of sync. There was a whole range of those issues. You overlay on that shift starts, which means that you stop before someone comes in and you layer on that rapid antigen testing, which essentially takes somewhere around 30 minutes before you go into a DC for a team member to have it. You have a nurse and you have a test and it costs you. It was costing us around AUD 50 to actually execute any RAT tester in the process. That's how you get all those issues inside the DCs, as well as, you know, we've been working hard on our new warehouse management systems and transportation management systems. You don't kind of get the right benefit. If you then get to the stores, you have the same issue of just, you know, your productivity benefits as they start to come through. We had to slow down or pause those, because our stores were getting under pressure, not only through absenteeism and recruiting new team members, but then through the loads being late or coming the next day. Just the whole way you fill the shelf becomes very unpredictable, and you have to move team members around a whole ton. Then actually just in, you know, even in, particularly in Delta, but even when we got to Omicron, you have all this absenteeism at a store level, and so you start shuffling team members from other stores into new stores. I think we had to onboard; there was a remarkable number, you know, 50,000 team members in the first half of the year. The training, the inefficiency that comes through on that, just as they get used to our business, settle into what they do, whether it's in store or in e-commerce, can't do that in Primary Connect in the same way. It was all those issues that sort of collated up to do that. We could see it. You know, we measure, of course, as we should, items per labor hour, scan rates per minute, cartons moved per hour and so on. You just saw that all kind of come through and actually, you know, just sort of flatline for us, which was the issue that you saw. Is all of that stuff addressable? Absolutely. None of that stuff is structural. That just has to do with the stable operating rhythm. Once you get into some predictable rhythm, a lot of those costs, you know, come out. What we've got to be is quite thoughtful in how we wind them out. I mean, these are DCs. You know, you can't say, "Okay, well, let's stop rapid antigen testing," one day and then something happens the next day and you're back into it. You just need to be careful on the way that you glide out. Our focus in Q3 is just gliding out of that. That glide out is underway, which is why you saw it in the percentage of spend. It continues to unwind, as it should. We'll be very forceful on the unwind. You know, if we can get the unwind done by Easter, which is an aspiration, that just puts us in a great position to trade a strong Easter and not be back in stock for Easter, but actually have a great Easter and then set ourselves up for Q4. That's where the focus is. Steve. Yeah. Look, the only build I'd add, Brad, is the growth of e-commerce and the mix impact on our costs. If you look at it at an end-to-end profitability level, actually we had excellent improvement in profitability in e-commerce in the half. But it is a higher cost-to-serve channel for us. It runs at higher than a traditional sale through a store. You know, that mix impact, it's feeding into some of that higher cost in-store, if you just look at the cost line. Yeah. No, I think that's fair. The balance between e-commerce growth and store growth has been out of whack, as you might imagine during the half. That, you know, that I think is a very, very important factor. A lot of the new team members we've recruited are beginning to in-store picking, and it just is hard to get into the groove of doing that. There's no doubt. By the way, the same issue that I've just described in food, just looking at Claire and Paige, we're seeing that on steroids inside the discount department up to BIG W. Just so you know, we don't call it out as much, but it was as big an issue there as it was in food. Actually, we had similar versions of the issues with, you know, unfortunately we had a strike going into December that really put even more pressure into that. You know, we haven't quantified, but even the cost of commissioning our new meat plants in Auckland, which was fantastic, great step, is in our CODB. We don't pull it out and we haven't pulled out the commissioning cost of seafood in Brisbane either, or completing the stand up of Melbourne Fresh. All of these costs are in what I'm talking. Thank you. The next question comes from Ross Curran from Macquarie. Please go ahead. Hi, team. Just got a question around inflation. New Zealand seems to be a bit ahead of Australia on the inflation journey. Can you talk to us through how customers are reacting to inflation over there? Are you seeing adjustments in the basket? Are people preferring to shop, say, own brand to try and reduce the cost of groceries for themselves? Or how's it playing through? Oh, Ross, that's a great question. My sense is it's early days, and in particular as the New Zealand team really prepare for, you know, the Omicron spike, which is well documented in the way, you know, in New Zealand. But Spencer Sonn never gets a question, so I hope he's still online, hasn't fallen asleep, and can just give you a sense of it. Spencer, it's terrific to have him in our team 'cause he's lived in a high inflation environment. We looked around our team and we all can remember it, but it sure is a long time ago that we've operated in it, and we need to challenge all of our assumptions. Actually, promotional models are a massive issue because you assume things. I'll let Spencer see if there's any color that he can give to this one if you're there, Spencer. Yeah, I absolutely am, Brad. Wonderful to get a question from New Zealand, so thanks very much for that. Maybe just a little bit of background. We saw inflation heading up or starting to edge up a little bit before Australia. Round about September, October, we started to see inflation moving up to sort of 3%. By December, it was at 4.3%. Period to date, we're at 3.3%. Currently, as I think you'll know, CPI in New Zealand is at 5.9%, and on a year-to-date basis, our inflation is at about 4.8%. You know, all the factors are the same ones you would have heard on the call today, being driven by cost pressures or material wages, adverse weather, our particular reliance on supply chain. All of those playing through. Of course, we therefore as a team have to be acutely aware of how we offering value in this market. It's the same focuses that you've heard. In particular, just the guardrails we apply to our pricing relative to our competition. You know, very rational process in terms of how we're working with our suppliers, how we, you know, flowing those price increases through to shelf. Of course, where they are justifiable, we have to flow them through for our customers. But it's making sure that we're keeping a good balance between all of the mechanics that offer our customers good value. Our great price program, of which we've got about 3,000 SKUs, our promotional program, and our rewards program. I think from a customer dynamic and behavior perspective, we certainly are seeing more and more through our customer scores, customers focusing on value for money being a challenge for them among all of the other cost pressures that they face, not only the price of food. It's something that we're gonna stay acutely aware of. Having a competitor in this market, as many of you will know, that is singularly focused on price, as their sort of single-minded proposition in the marketplace is, keeps us honest. That's a good thing because that means we all have to stay really focused on offering the customer the best value that we can. Thanks. Thanks, Spencer. You know, Ross, in Australia, you know, online, it's still too early really to call you know, a particular trend at this stage in food. I would say, by the way, there are many more mechanics. You know, if you look at protein, affordable protein, while we've got beef and lamb you know, at records that we never thought we would see, we've actually seen softening on price increases in pork and certainly poultry, white protein as well priced. And actually depending on supply issues, actually we think protein's becoming more affordable as well. If you look at the protein, for example, it's not only you know, the price inside those categories, it's the ability for customers to trade across protein categories. Which we think is an important way of delivering value for the customer, not necessarily margin dilutive for us. There you know, we've got to think very thoughtfully and carefully by segment, by how we want to define the category and what the consumer's looking for and what solution they're looking for. I think that work all lies ahead of us. Thank you. The next question comes from Bryan Raymond from J.P. Morgan. Please go ahead. Good morning. One's just on the gross margin line. Just noticed the comment in there around better buying terms. Just keen to hear how you are managing the current inflationary environment with price increases. Are there opportunities for Woolworths to take some price alongside suppliers? Or is there other factors that are contributing to that comment in there that's driving margins up quite a lot on the gross margin line? Also just interested in the sustainability of that pace of gross margin increase. Thanks. Thanks, Bryan. You... I know you didn't mean to, but you give me the permission to talk about tobacco. I think it's very important to log that one of the reasons our GP percentage went up was the 22% decline in tobacco sales inside the group, which actually cost us in the order of AUD 80 million or somewhere between EBIT and GP, depending on how you assign cost to tobacco. Some of our percentage increase in the GP line is actually a change in mix with tobacco declining so materially. It naturally makes the percentage mix go up inside the business. I just think that's worth mentioning. We don't call it out enough, but you know, there was an AUD 80 million hit which we talked about because of you know, earnings downgrade in December. Actually, we're starting to see that stabilize now, which is, I think, positive, inside our business. It was a material change when the CPI adjustments didn't flow through in September and quite a painful reset for us. Part of our GP increase is being based on that. In terms of better buy. Look, you know, we're always engaging with our suppliers, and you know this well, Bryan, on any increase, trying to look at the absolute number and see what we can get it down to to create a more efficient business and agreement with the supplier. For every AUD 1 of increase that we get at Woolies, we tend to take somewhere between AUD 0.50-AUD 0.70 of it in. Accepted and hopefully where it does, we try and work where we can to pass through to the consumer if we think that that's the right thing in that context. We're always working through that process to engage and get the right thing done. Invariably, one of the things we're always interested in is whether the promotional program that we're running with the supplier is actually delivering what we need it to and whether we can repurpose some of the promotional monies into just better everyday prices in context of suppliers. Those comments would allude to those kinds of things that are day-to-day things that we do at Woolworths and continuing to do. I'm always very worried about all of the Woolworths scores, but actually I'm pleased to report that at the end of January, we just saw our best score in voice of the supplier from our supplier partners. It feels like our team are doing a good balance on managing that. You know, it's a very serious and very delicate issue that Natalie, Paige, Claire, we're all involved in our team. I would also add, I think the work we're doing with Q-Retail and really using data insights is really helping here. You know, segmenting our stores value core up and making sure that we get the right range into our up stores, so our customers are finding the products they want. If I use coffee as an example, you know, more space on the shelf for more range in ground coffee, local coffee, capsules. Then in a value store, we're weighting the space and the range much more towards instant coffee. That's true as well of how we're thinking about the promotional end. We're really moving to, you know, 10%-15% range differentiation from our value and up stores. That means that, you know, the premium customers are finding the products that they're looking for, but we're also managing stock loss in our value stores and really providing those products that our value customers are looking for. That's definitely helping, as is, you know, next generation promotional insight to really make sure that we're optimizing the money that ourselves and suppliers are investing. A lot of some of it Nat alluded to, you know, we invested materially with the partnership with Quantium in H1 to create an analytics roadmap. We've been lucky enough to have Amitabh Mall join us up as our Chief Analytics Officer and Managing Director of Q-Retail. The number one use case that team has been working with has been rebuilding our promotional program in partnership with all the supermarkets that are leaning into support BIG W and New Zealand. Obviously that was the key use case. You know, we're really excited by the learnings led by Natalie and Paul Harker and hoping we'll see some of those start landing in H2 and lots to be positive about. when you look at that percentage mix, don't forget about the tobacco, Bryan. Sorry to come back to it. I wish I wasn't, but it's a major issue that we don't talk about, but, you know, you should never confuse ourselves, and you should look at the GP mix. Tobacco as well as some COVID mixed benefits, so customers switching more into category wine and protein food as well. Thank you. The next question is from Shaun Cousins from UBS. Please go ahead. Thanks. Good morning. Just regarding, sort of gross margin again. Can you just talk a little bit about where stock loss was in Australian Food? I think you highlighted at the full-year result it was less than 2.5%. Where do you expect stock loss to get to, particularly given some of the technology initiatives that you've got in place to optimize that? Could we be looking at a 2% or possibly even a sub-2% stock loss once the operating environment turns to something a little bit more normal, please? Thanks, Shaun. One of the things that worries me about our stock loss performance, which has been impressive, is that it's not just been driven by the elevated sales we've had through the store, and therefore it pops back up when sales go back more normal. I mean, particularly, I think the team's done an amazing job and I'm anxious about not kidding ourselves as to what drives stock loss. At best we can tell our performance at this stage has been driven actually by a very good process and all the controls we've put in place across the business. I'm hopeful that that's not our risk. To your point, there are still improvement opportunities. You know, we think about fresh and long life very differently. Fresh is still running maybe 4.6%, and long life's 1.1% or 1.15%. We'll continue to work through those as we go forward and improve them. There's a lot of great initiatives underway. Again, using, you know, we've done some things, you know, with our welcome guides and, you know, how we think about the store, but increasingly using technology, you know, how you think about markdowns in fresh, how you think about, flow in fresh. Then just other ways we can use technology around, you know, with our, at our front end and image recognition and so on. Yeah, we don't wanna over plan. We feel like we're in a good spot. The key thing is to make sure we continue to improve and don't find a spike and when sales maybe sort of normalize to some degree. I mean, Brad, it was broadly flat in the half and stayed sub 2.5%. Yeah. Yeah, which is good. I mean, we see stores much better than that. Of course we want every store to be a top quarter store. You know, it's in the right place. Thank you. The next question is from Phillip Kimber, from E&P. Please go ahead. Hi, guys. Just a quick one from me. The P&L tax rate looked a bit low, sort of around 25%. I wasn't sure if you'd commented on that somewhere in the release or if you didn't, if you could just explain why. Oh, Phil, thank you for getting that question to Steve. He's been waiting for it for the last three hours. Steve. No, no, thanks. Look, Phil, it really just relates to a tax provisioning decision last year. We've taken some conservative settings on the deductibility of costs on the demerger, and provisions, if they wouldn't be deductible. It turned out, as we worked through that process, that they were. We effectively just have a tax overprovision from the prior year reversing. It's not a permanent difference, it's just a timing issue between years. Thank you. The next question comes from Scott Ryall, from Rimor Equity Research. Please go ahead. Hi. Thank you very much. I was wondering, in terms of the out-of-stock items, I think, Brad, you spoke about this a little bit, but I was wondering if there was a meaningful difference in performance between New South Wales and Victoria, given the very different supporting infrastructure. I was wondering if you could make some comments. Yeah. If you're not seeing big differences, why not? That's a great question, Scott, and I actually pride myself in looking through all the numbers, and I've gone along to it. Mainly because the first half of H1 was challenges in New South Wales, and then actually it flipped into challenges in Victoria. As we felt we've got New South Wales in a better place than we. That's when we started to see the challenges in Victoria. The thing that struck us on out-of-stocks, by the way, has been the variability. I remember at the height of the crisis, October, I think I flew down to Victoria, had a look at the stores. You could go to one store and it was great, and you could go to the next store and it was poor. It all had to do with what warehouse services and whether the load was late on that particular day or not. It's it is very noisy. I would say, when we get Victoria into the right rhythm, it really works for us, but we're still battling to get into that right rhythm. We have one of our most experienced operators, Andrew Hall, actually managing end-to-end stock flow and coordinating across our supply chain and our stores in Victoria. When it works, it works, but it's still, you know, we've still kind of got a few more hoops to go through. I think, but I don't know, Natalie, if you've got a better answer. Look, I think it's changed over time, depending on the circumstances and even thinking back to January, certainly the Omicron wave hit in Sydney and our Sydney RDC first, and before then moving into Victoria, so impacting our Victorian sheds. I mean, Brad mentioned Andrew Hall. Our state team in general are having twice-a-day phone calls to really react to what's happening every day. You know, different dynamics in different states. Yeah, in Victoria, we had issues before Christmas on truck driver availability, which we worked through. I would say in general, though now, if I look at New South Wales and Victoria, both states are very similar in terms of their recovery, and heading back towards, you know, normal levels of stock in store with a recovery in certain categories like toilet paper and protein to come over the course of March. Queensland is beginning to catch up as well and then WA fourth to sixth place. Scott, I was in Victoria last weekend. I visited some stores that change over time. On a Tuesday night, which is a bad time anyway. Some of the loads were late and, you know, I thought the stores just, you know, there were opportunities there. It is patchy. It, you know, and that's why we just want this predictability. When we get it, our business works, we will get the efficiencies we want, we will deliver the outcomes we want for our shareholders. Still a little bit patchy. It's getting better, but, you know, these things are still happening. Thank you. Unfortunately, we've run out of time for further questions. I'll now hand back to Mr. Banducci for closing remarks. Thank you everyone for your questions today. We get the issue on not delivering what we would want to aspire for our shareholders. We talked about it in December. We accept it. We understand the work we need to do in the second half. However, I sit here with confidence with my colleagues on the momentum we had in January, the momentum we've got, I mean, in December and January. The customer resonance we continue to have as they look through and see us doing the right thing. Actually the trust and support of our team, who know we try to do the right thing as well and we're in their hearts and minds and making sure we do the right thing for them is central to who we are. We look forward to coming back and reporting Q3 and, of course, full-year also soon. Thanks very much.