Good morning, and welcome to your Sainsbury's Interim Results 2021/2022 analyst Q&A call with your host, Simon Roberts. Simon, please go ahead. Thank you. Good morning, everybody, and thank you for joining us this morning for our interim results call. I'm in sunny Glasgow this morning with Kevin, and we're really pleased that you've joined us for the call. I hope you've had a chance to see the presentation that we posted on our website earlier this morning. Three things really to take away from that, just to headline the call. First would be that one year in from setting our food first plan, we feel strong momentum across the business and our first half results really are a great demonstration of this with the strong operating performance, continued market share gains in grocery and robust delivery from our cost saving program. Now, there are a lot of well-publicized challenges clearly out there right now across supply chains and costs that are making life more challenging. We've carried the momentum from the first half over into the start of the second half, and we're confident that we're well-placed to deal with those challenges. With that in mind, as well as the fact that we still have peak trading ahead of us, a really key six weeks-seven weeks ahead, we've reiterated our outlook today and continue to expect to report underlying PBT of at least GBP 660 million for this year. With that, let's now get into the questions. Thank you. Thank you. The first question then is from William Woods from Bernstein. Please go ahead. William, good morning. Good morning. Good morning, William. Couple of questions from me. The first question on your retail operating profit and the Save to Invest program. I'm trying to understand the bridge from last year to this year. The first question is kind of what percentage of the COVID costs have come off versus last year? Then I suppose building on that, if you take the normalized view of operating profit for last year, around GBP 350 million, you strip off some of those COVID costs and add on the fuel profits and look at what savings are coming out of the Save to Invest program, it doesn't look like much of that is hitting the bottom line. Could you give some clarity on how much of that is actually hitting the bottom line? William, thank you. Kevin, do you wanna pick up on the cost? William, just on the COVID costs, we guided to COVID costs of being 10%-15% of the GBP 485 million that we saw last year, and that guidance still stands. It's first half loaded, so in the first half, we saw something in the region of about GBP 50 million of COVID related costs. That was versus GBP 291 million that we saw this time last year. Clearly a material reduction in the COVID costs. Understood. I suppose if you flow that through, it looks like Save to Invest in terms of the bridge isn't necessarily delivering to the bottom line. Is that? Well, last year we didn't have rates bill in the first half, so there's GBP 204 million that we incurred in the second half that related to the first half. That makes it quite confusing, I appreciate, when you're doing the year-on-year. Understood. Okay. William, maybe just more broadly on the cost saving program. As you'll remember, we laid out a plan over three years to deliver a 200 basis point reduction in cost. We're actually seeing the progress we expected in the first year, in a number of key programs there, and 75% of the cost coming out of the business is structural costs. The program's on track, and it's both, you know, enabling us to improve the offer but also improve our performance as we do that too. Yeah. In fact, slightly, if you took 2021 and 2021, 2022 together, we're up actually overall on the cost. We pulled some of the cost saving forward. I think it's the rates, William, that's probably making the comparisons a bit confusing. Got you. Thank you. Thanks, William. Thank you. The next question then is from Fabienne Caron from Kepler Cheuvreux. Please go ahead. Morning, Caron. Morning. Good morning, everyone. Two quick questions from me. The first one, can you share with us the level of food price inflation that you see in the U.K. market and how Aldi is behaving in this environment? The second question would be as well on inflation, but more on the wage, energy side and logistics side. Is there a way for you to give us a kind of quantification of the cost inflation you had in H1 and how much you expect in H2, please? Fabienne, thank you. Okay, let's just reflect first of all on the broader inflation in the market, and then maybe I'll ask Kevin just on cost inflation. When we look at inflation across our business in the first half of the year, it was broadly flat in grocery, a bit up in grocery products, long life ambient. We were actually deflationary in the half on fresh. And as you'll know, core to our strategy was absolutely to become more competitive. As we've traveled through the last 12 months, and particularly in the last six months, we've been working really hard to improve our value for customers. That's one of the things that's really come through in our results as we see the momentum improving. Clearly, cost inflation pressures are building. We can all see that. As we sit here today, we clearly expect inflation to build into the second half of the year from where it's been. Our strategy is to be really competitive on price, to continue to drive the cost saving programs that we are, to clearly work closely with our suppliers to ensure we mitigate headwinds as far as possible, but in the end, some prices will go up while we retain value and the pass-through will be inevitable, and we expect that to happen over the second half of the year. I think last thing to say on that is that across our scale and our ability to build volume in food means that we can, you know, negotiate improved terms with our suppliers too, and that's obviously key to offsetting some of this pressure. Kevin, do you want to talk about inflation? Just on some of the cost inflation, Fabienne. I mean, things like energy, we're protected because we hedge in advance, and our hedge actually rolls into the next financial year as well. We're well protected on energy. Freight as well. About 90% of our freight is on fixed terms that we had negotiated pre the current spikes. We're protected again at the moment on freight costs. In salary costs, it's largely in the HR logistics, and there's two things happening there. There's some one-off payments sort of for Christmas, sort of retention payments. And then there is some base salary negotiations that are going on. Overall, as the majority of our employees are sort of across the retail business, for example, you know, we set the wage rates back in sort of first quarter, calendar quarter last year, and those rates, we haven't changed. Okay, can you just come back on the behavior of Aldi? Is Aldi passing some food price inflation on commodities, for example, like milk or butter? Yeah, I think as you'll have seen, there is some upward movement of prices in some areas. Milk's been an example of that in recent weeks, where you've seen the industry begin to move prices up. You know, I think coming back to the outlook, you know, we clearly should expect food inflation to increase over the second half. You know, as a result of that, you know, some prices will go up. You know, I would expect the industry to behave, you know, rationally in this regard. There's higher input prices, there's higher operating costs. That will inevitably lead to some price increases. As I say, we're going into that environment with a much stronger relative price position than we've been in before. You can see when you look at the presentation, particularly in the areas of comparison against Tesco and Aldi, for example, how much more competitive we are year on year. Aldi, for example, around 400 basis points improvement. Clear inflation pressures, they will feed through. Holding on to our value position strategically absolutely key for us. Okay. Thank you. Very clear. Thank you, Fabienne. Thank you. The next question is from Rob Joyce from Goldman Sachs. Please go ahead. Hello, Rob. Good morning. Morning, Rob. Hey. Good morning. Thanks for taking the question. I've got sort of three. Firstly, just on the guidance, I wonder if you can help us understand the decision to sort of keep the guidance where it was. As far as I can see, your sort of interest costs have fallen by around GBP 20 million since you last guided us on that for the full year. It looks like you've pulled forward cost savings of maybe GBP 50 million-GBP 100 million on that. And I think Argos, et cetera, sounds like you think is in a structurally more profitable position. I was just wondering, you know, why there wasn't the opportunity here to maybe increase that guidance would be the first question. Second one, just on food inflation, I wonder if you could give us an idea of where your basket inflation is currently running at. That'd be very helpful. And then the third one, just in terms of exit rates, obviously the Argos 2Q, I think two-year deceleration has got a bit of attention there. Just wondering if you could help us understand what the exit rates are looking like in Argos into the third quarter, maybe on a two-year basis. Thank you. Rob, thank you. Okay, let's take each of those in turn. Starting with guidance. You know, as you say, I mean, first thing, I just wanna be absolutely clear as we started the call that we've reiterated our guidance of at least GBP 660. And as you've seen in our results, you know, we've had a strong first half of the year. I'm really encouraged with the momentum in the business. We've got good momentum against our strategy, and we're taking that momentum into the beginning of the second half. I think that's important to say. That being said, of course, you know, there's six weeks-seven weeks to Christmas, I think it's about 50 days to Christmas, and there are some uncertainties. You'd understand that we're applying some caution, given the timing of where we are, given some of the uncertainties that are out there. That's the reason why when we look at where we are, good momentum, some uncertainties, time just to take a cautious view of that period of time until we get closer to Christmas. I reiterate again, at least GBP 660. On your second question, on food inflation, just to come back to a couple of points we were just covering. I think, as I say, in the first half, we were broadly flat, a bit up on long-life grocery, and a bit deflationary in fresh. As we've said, you know, we expect that environment to change as we look ahead. In terms of where we are now, you know, we're gonna absolutely hold on to our competitive position in those product areas that are most important to customers. We're working very hard on the cost-saving program to make sure that we can absorb some of the pressure. Inevitably, there will be some pass on as prices in some areas increase. Specifically on your third question on Argos. Just going back from the Argos business, we guided to flat sales in Argos from 2019-2020. As you've seen, we had a strong first quarter, a softer second quarter. I think when we look at the second quarter particularly, two or three elements in there that would be important to highlight. The first was, you know, clearly, we've had a non-comparative position in Argos, given the fact that the number of stores that were closed the year before. Secondly, it was a softer summer, so just all of the seasonal products in the Argos business didn't benefit from the very warm weather that we had before. Thirdly, there are some supply challenges coming through. They're well trailed. You know, consumer electronics would be a good example, where there is a less availability than would be optimum, and those are starting to play through. I come back to the key strategic choice in Argos, which is we've laid a plan to significantly improve the profitability through transforming the cost base and taking a less promotional stance. When we look at the period ahead, clearly we're, you know, we're encouraged we've got that plan in place because that is supporting profit delivery in Argos. Therefore, whatever the challenges are from a supply chain point of view, we believe we can deliver a strong profit performance underpinned by cost transformation, and as I say, an improved margin position. I hope that helps, Rob. Thank you. Yeah, just one quick one. The cost savings pull forward in the program, is that where is that mainly falling? Is that in the first half or the second half? The- It's spread across the year, sort of pretty evenly across the year. Bear in mind, Rob, we have higher sales, so hence, you know, we need extra cost savings to offset some of the additional costs of driving through the higher sales. Okay, great. Thank you. Thanks, Rob. Thank you then. The next question is from Andrew Gwynn from Exane BNP Paribas. Please go ahead. Hello, Andrew. Hey, good morning. How are you doing? Yep. Yeah. Just come back to the property transaction. I think, Kevin, you talked about that during your part of the kinda preamble. Just wondering if you could explain it a bit more. I guess it fits into a broader use of cash question, you know, sort of how you're making these sorts of decisions as the business de-gears. That's kind of the first question. Sort of two questions, though. Okay. Firstly, just explain the transaction a bit more and then slot into a broader use question. A broader use of cash, sorry. The final question, just on availability in grocery, clearly some challenges kicking around. You kind of alluded on that, but just to kind of flag, presumably we're not expecting a significant impact in the second half. Thank you very much. We have a structure, Rob, which has 26 stores in it. It was set up in 2000. We've got about a 50% interest in it. We put these 26 stores in and we lease them back. The leases come to an end in 2023. Under the structure, we have the option to either sign up new 20-year leases in the structure, we can exit stores, or we can buy them. We've taken the decision in the half, as you saw, to exercise the option to buy 13 of those stores. That gives us great flexibility because we can either retain the stores as freeholds or we can lease them back on terms that we like. Clearly it has an impact on net debt, as we've talked about, because as you effectively take short leases and move them to longer leases, you increase your lease debt, as you'll know. Overall, there's another decision to be made in the second half on a further 10 stores. Really what we're doing here is taking control of the stores and then we'll keep the ones we want to keep, either on freehold terms or on lease terms that suit us. Overall, very positive because we will get cash from the structure, we'll get control over key stores that we want to have in the estate, and we'll get leases that we want. Does that help? Yeah, I think so. I mean, I can work through the numbers a bit later. Just to kind of broader use of cash question, obviously we- Yeah. You've decided to repay the convertible rather than reissue and so forth. Just a broader question. Well, I mean, our position on high hopes on cash flows is clear. It's been a big focus for us, as you know, you know, in a very disciplined way, turning profit to free cash flow. We've taken some real structural decisions on our pension scheme. We've reduced our debt and reduced our interest. The bank is self-sufficient from a capital point of view. We've pulled lots of levers to make sure that the cash flow flows through, the profit flows through to free cash flow. Then we, you know, to date, our view has been, we want to pay a dividend and have it well covered, and we want to reduce net debt. Why do we wanna do that? Improve the financial flexibility of the group, and of course, it should increase the equity value for shareholders as well. In the last three years to March this year, we're very pleased that we've delivered on average about GBP 500 million a year. That remains the focus. I think our track record on this is hopefully clear. We've raised the target a couple of times, and clearly we will be ahead of target now, because of the convertible. We'll achieve the target without the convertible. That'll pull the target forward. Obviously, the legal cases that we've negotiated. We're in a good position. Once we get to the point where we've achieved our leverage targets, the net debt to EBITDA, sort of less than 3x, et cetera, then we'll come back and talk about what's next from a capital allocation point of view. Look, we're very clear. Free cash flow is for shareholders. We remain very focused on it, and we'll continue to be very disciplined in that. Thanks, Kevin. To your second question, Andrew, just in terms of availability in grocery. You know, I think, you know, we've all seen it, you know, it's been a challenging few months. It's been tricky on a combination of supply, clearly labor, HGV drivers, the challenges upwards in the supply chain too. I think when we look ahead over the second half, two or three things just to highlight that we've done. I mean, the first thing is that I think that we've seen some stabilization in availability. You know, the team have been working flat out to make sure that we really deliver the best availability for customers we can. It's an absolute, you know, primary focus for us because in the end, supply security is key in delivering customers certainty of what they can buy. I think we've improved our position over recent weeks. As is shown actually in the presentation, you can see our customer satisfaction over the first part of Q3 has really ticked up again. It was tough at the end of the summer, you know, particularly in areas like milk and bread, some of the grocery lines, but we've seen that improve. Now, I wouldn't describe it as all solved, but I'd describe it as improving. We're confident we're doing everything we can there in that regard. When we look over the second half of the year, I think, you know, clearly our scale, all of the relationships with suppliers that we're working really close with, we're doing a lot of work on recruitment to make sure we can move product through the supply chain. Interestingly, in the last few weeks, we've actually begun to pick up product from suppliers to make sure we can guarantee availability back in the business. That's been one of the enabling factors to improving the situation. It's clearly really challenging out there, but I think we're going into what we expect to be a really big Christmas. I think for all the obvious reasons, we're expecting the customers to, you know, really wanna celebrate this year, given the events of last year. A bigger Christmas, a bigger demand curve, more at home grocery consumption, a lot of work going in to get the supply we need, the wheels on the road we need, and the resilience we need to deliver the availability that customers expect. I hope that gives some color on what's going on behind the scenes. No, that's excellent. Thank you very much. Thanks for having me. Thank you. Simon. Thank you. Thank you. The next question is from Andrew Porteous from HSBC. Please go ahead. Morning, Andrew. Morning, Andrew. Morning, team. Just a couple from me. First on the inflation side of things, I appreciate you're expecting to see inflation start to come through. Just wondering on what sort of quantum you're seeing in the supply chain. I mean, is it I mean, clearly, prices have increased, but is it at the point yet where you're sort of worried about the impact, knock-on impact on volumes as you start to pass that on to consumers? Then a second one really. Can you just talk to where Argos is trading into peak? I appreciate there are some supply chain issues there. You've referenced sort of consumer electronics. Where's your availability versus sort of broader industry on some of the key peak categories? Yeah. Thank you. Just on your first point on inflation then. I think, you know, as we look ahead, you know, clearly, we can't predict the scale at which inflation is gonna pass through. The pressures are clearly building from the supply base in a number of areas. You know, as I say, we would expect the market to pass that on, while, as I said previously, we're gonna clearly be very focused on our own price competitiveness within that. You know, I think in terms of what we're doing, clearly we're putting more volume through the business. You know, more volumes mean that in the conversations we're having with suppliers, that's helpful. But of course, you know, the pressures are clearly there, and so inevitably, that will flow through. At this point in time, we're seeing some of our competitors begin to move on price. We're clearly moving where we need to while retaining that competitive position. In terms of Argos, going into the very important peak six weeks-seven weeks of the year, you know, I think, as I say, there are some challenges in the supply chains. You know, a specific example I would give you is that we normally, in our general merchandise business, run a toy promotion, a pretty significant toy promotion this time of year. We put that back a couple of weeks because the product wasn't in the U.K. We were pleased when it landed at the weekend. It's on its way to our stores now. It will happen next week. I think consumer electronics would be an area where there is just a global shortage of products. In some other areas, we are moving the phasing of key activity to reflect when stock will land. You know, in that regard, I wrote to a significant portion of our customers last week just to help them plan so that they know when the key events and activities are happening, 'cause they're not necessarily happening in the same sequences as they would've expected from previous years. I think, you know, all of that, all of that's in place in terms of getting stock through. We've launched our Christmas ranges across GM. We go live tomorrow with our Argos marketing for Christmas. There's a lot of activity going in to make sure we can give customers what they want, recognizing that, you know, 80% of customers also are now shopping digitally in Argos. As stock arrives, we can be pretty agile in terms of making sure we serve the Argos customers, you know, in the moment as it were. I think when we look at the trading picture, there are clearly some uncertainties in the GM and food supply chain. That's the reason why when I stand back and look at the Argos performance, you know, when we look at the second half of the year, the cost transformation programs, the work we've done on margin, and I think importantly, it'll be a less promotional environment, won't it? There's likely to be less activity around Black Friday. We expect to sell more products at full price rather than at discount. In the round, that's one of the reasons why we're confident on the underlying improvement in the Argos profitability, while there will be some challenges driven by supply chain in the top line. Okay. Thank you guys. Thank you. The next question is from Clive Black from Shore Capital. Please go ahead. Morning, Clive. Morning, Clive. Morning, gentlemen. I hope Glasgow is kind to you. A question really around costs and stock and lost sales at the moment. Just in terms of some help around the magnitude of things. You know, year-on-year, I guess particularly within Argos or in non-food in general, what sort of costs are you facing in food that would have been unplanned this time last year, if you get my drift? Then secondly, do you have a feel for the sort of magnitude of lost sales as a result of supply disruptions? Linked to that, should we be concerned about H2 working capital? You know, is a load of Christmas gear gonna turn up in February, for example, that you'll have to hold or do whatever you will with. Because I guess what you're saying is without these challenges, Simon, you probably would be announcing an upgrade to guidance today. Is that right? Thanks, Clive. Well, let me take your last question first, and then we'll go through each of the specifics you've raised. Yeah, I mean, just coming back on our guidance for the year. You know, as we've said, at least GBP 660 on the basis of all the momentum that we see in the business in the first half. You know, we can see clearly going into the second half. I would just, you know, reiterate the strength of the momentum in the food business. I'm really encouraged by the fact that our improved value position means that we're growing share on a one- and two-year basis. We think it's really important, and that's being underpinned by the strength of the cost-saving program. You'll understand, I'm sure, you know, we're six weeks-seven weeks from Christmas. There's a lot to play out in that period of time. With that momentum and with, you know, all that's in front of us, it's time for a bit of caution at this point in time until we get to the other side of Christmas. We're pleased with the momentum and at least 6.60%. Just in terms of your last question. In terms of the specific elements of that, maybe just in terms of some of the costs, Kevin. Yeah. And then if I was- Probably the two areas that I'd point to that we wouldn't have expected them to be quite where they are is freight and logistics. As I say, 90% of the freight is hedged, so we do have that 10%, which we will largely pass on to consumers. Then in logistics, we have the one-off elements around Christmas retention and some of the negotiations that are going on right now, which we'll see coming through in the second half. I guess that's well-publicized. Your working capital point, there could be a little bit at the year-end. You're right 'cause, you know, we're seeing, you know, normal freight would be 24 days from Asia, it can be up to 40 days. So there will be some potential there. You know, in the grand scheme of things, it won't be a great. You know, we'll still deliver our free cash flow commitments this year. In terms of the impact of sales on stock and I guess links to the working capital point. I think in the main, as Kevin has said, Clive, you know, delays in shipping are around two weeks. You know, clearly we bring all of our Christmas stock in for around this time of year. Two weeks-three week delays are the main order of the day, which means that, you know, rather than launching, for example, all of our Christmas products on the weekend just gone, you know, a proportion will arrive the weekend after next. Still in plenty of time for Christmas. In terms of the impact on the stock, what I would say is in the categories where there is more pressure on the supply chains in GM, they are the categories clearly which are inherently lower margin. Consumer electronics, I talked about toys. Again, I wouldn't wanna underplay the significance of the challenges in supply in some areas. When we look broadly at the P&L in general merchandise, what we see is that cost is really delivering and, you know, we're on track as to where we expect it to be on the Argos plan. As I say, I think Black Friday will be, you know, a smaller event for the obvious reasons. There'll be a lot less promotion in the market. In the areas which are higher margin for us, you know, clearly those products are less of an issue. In the round, that's one of the reasons why we can be confident in the second half profit outlook for Argos, albeit with some impacts on the top line for the reasons that we're sort of describing. Thank you for that. Just finally, could you just give us a few words on the fuel market and what that's doing for Sainsbury's P&L? Yeah, thanks, Clive. I think, I mean, a couple of things to say here. I mean, clearly, you know, putting the events of a couple of three weekends to one side, two things I would say in fuel. First of all, you know, we've grown share in fuel, and we're pleased with that, and I think there's a correlation between our improved performance in grocery, more customers visiting our supermarkets and our improved share in fuel. We're encouraged by that. You know, clearly, we continue with our strategy of pricing locally and competitively, and that's working well for us. We've got, you know, a strong network of PFS, petrol filling stations, in good locations, which are working for customers and working for us. And look, of course, you'd expect me to say this. Our colleagues have done an incredible job in the fuel business over recent weeks. It was a really challenging number of days, as we'll all remember. You know, we've learned a lot through that period. I think we delivered well for customers. We're encouraged with the financial performance. As I say, the combination of being better value in grocery and gaining share in fuel is one of the things that we're encouraged by. Cool. Well done, guys. Thank you very much. Thanks, Clive. Thanks, Clive. Thank you. The next question then is from Sreedhar Mahamkali from UBS. Please go ahead. Hello, Sreedhar. Morning, Sreedhar. Good morning. Good morning, guys. Thank you for taking the questions. A couple of quick ones, actually, just to follow up on some of the discussion on Argos. First one is, I guess a concern for investors is that Argos slowed down a little earlier than expected and sort of trying to extrapolate that into next year is clearly a bit of a concern. Maybe from that point of view, if you can talk a little bit about how you're strengthening the underlying Argos customer proposition, looking beyond the short-term supply chain or tough comp issues. Is there anything that you're seeing there in terms of customer proposition? Any data points that you can share in terms of what's happening with Argos customers and the feedback you're getting and what you're doing there? That would be helpful. Secondly, specifically on the supply chain issues you've been talking about, are they getting better or worse over the past few weeks? If you can just give us an idea. The delays that you talked about, Simon, two weeks, is it getting better? Do you have any visibility on that? Actually the last one is instant grocery, so the rapid grocery delivery. I know you're active in the sort of 60-minute grocery area. You've got partnerships with Deliveroo and Uber Eats, and you've got your own Chop Chop. How are you thinking about the 10-minute grocery delivery opportunity? Is that something that you could see yourself participating in through Chop Chop or any other partnerships? Thank you. Okay, Sreedhar. Thank you. Well, let's take each of those in turn. Let's start with your questions on Argos. I think, look, I mean, a couple of important things to say. I think, clearly, you know, when we look at the second half, I hope we've given some good context in terms of the broad supply chain challenges. Underneath that, what are we doing to strengthen the Argos proposition? Well, you'll remember when we launched our strategy, three really key elements of that in terms of Argos. The first was that we are now partway through rewiring the Argos fulfillment network with the launch of around 30 local fulfillment centers. The advantage of this as we roll this out will be to improve availability for customers. In a business that is now 80% digital, our ability to serve up availability to customers and enable them to access products at speed is clearly gonna be a key source of advantage. We've opened the first two local fulfillment centers in Leeds and Bristol. We're really pleased with how that's going, and clearly that program will roll out in terms of improving both stock availability and also financially reducing working capital. Secondly, in terms of the proposition, we put Nectar into Argos around a year ago now, and we're really encouraged with the number of Argos customers that are now accessing Nectar. That gives us a way of personalizing the content and the way we talk to those customers. Thirdly, as part of the Argos platform, clearly you've seen the relaunch of Habitat. You know, as customers are actually increasingly post-pandemic and post-lockdown are looking to refresh their homes, we're really excited about the potential for Habitat at this point in time. Actually, you know, back to the point about the margin-accretive categories in the general merchandise model, you know, the strength of home and furniture for us is one of the things we really wanna push on. We think it comes at a time when there's a high level of customer interest and appetite for those products. You know, as we've rolled Habitat out, we've been really encouraged with the response we've had from customers. You know, underlying all of that, of course, it's about, you know, making sure that we're competitive where we need to be in Argos, but also, as I said earlier, recognizing the fact we're not gonna over-promote in Argos. We're making some very conscious choices about improving availability as we roll out the LFC network. As I say, both digitally and on, in product terms, improving the offer, but also being selective as we look ahead about the extent to which we promote. That's where we are in Argos. I would just finish the point by saying when we look at the second quarter, there are some important points in the comparatives that I think explain some of the performance. Just to reiterate a couple of those, as I say, the first is in the lockdown. Clearly last year we were pretty much on our own. As everyone else has opened, that's clearly now changed the comparative position. Secondly, of course, you know, we've seen a much softer summer, and that had an impact in the Argos business. Thirdly, you know, just to say that there is clearly some supply chain impact starting to come through, which we would expect to continue as we look ahead. That's where we are on Argos, Sreedhar. If we just then extend and look more broadly in terms of availability overall, you know, I think as I said in grocery, situations stabilizing. Still plenty of challenges, but I think the size and scale of what we're doing gives us confidence as we go into a big Christmas, we can deliver customers what they want, and if they can't get the exact product, then something very close to it. I think just in thinking about inflation more broadly, I think was your other question. Rapid delivery. Just on inflation before I finish that and then rapid delivery. As I said a number of times, you know, we are expecting to pass on as the pressure builds while keeping really competitive. On your point on grocery online, clearly the momentum has been really strong. We're twice the level we were pre-pandemic. You can see our presence now in on-demand. In Chop Chop, we're now seeing a you know significant scale there in just under 50 stores, and through Deliveroo and Uber Eats, just under 400 stores. A lot of that volume coming from outside of London. Look, we're listening and learning here all the time. As you'd expect, we're looking very closely at how customers are shopping. We're learning a lot about what they're putting in the basket. We're actually pretty encouraged by the basket levels here, up over GBP 30 in Chop Chop and towards GBP 25 in Uber Eats and Deliveroo. You know, as you'd expect me to say, online fulfillment, productivity of online, responding to how customers are changing the way they shop is a very key focus for us. Sreedhar, I might just add a point there. We probably at this stage see that sort of 15-minute type delivery as being something we'd work with partners. You know, we have Chop Chop, but that wouldn't be. We wouldn't see that expanding enormously, and our business focused on the sort of same day, next day. Yeah. part of the market. Got it. Thank you. Pretty much, yeah. Just on that supply chain point, I think, Simon, what I was trying to get to is you talked about two weeks-three-week delays in shipments coming through. Is that a pattern that's getting progressively better, or you still see that sort of delays persisting into next year is sort of what I was trying to understand? Yeah. No. Okay. Thanks, Sreedhar. Let me just try and clarify on that. I think, look, inevitably the global supply chain situation, you know, we don't think is gonna rectify itself in a short period of time. These issues are with us for a while. I think, you know, what we're doing is we've learned a lot through the pandemic in terms of adapting how we work, planning early, booking capacity early, as Kevin said. We're doing that, you know, in the context of an environment that we think will continue to be challenging for a while yet. Thank you. Thank you, Sreedhar. Thank you. The next question is from James Grzinic from Jefferies. Please go ahead. Hello, James. Morning, James. Good morning, Simon and Kevin. I had two really. The first one, I presume all of the hedge cover on freight and energy rolls over next year. James, the line is quite difficult to hear you. I don't know if you can get nearer the phone? You got nearer the phone. Can you hear me better now? Little bit. That's better. Thanks. All right. Okay. Yeah. My first question was around the impact of the hedges on freight and energy running over, I presume, next year. Can you give us a feel for the magnitude of the incrementing costs you will get as that happens. I understand your point on ultra convenience. Is that independent of how big that market turns out to be? Will you always do it via third party logistics providers? Or if it turns out to be a big market, will you look to internalize all of that? James, I won't be able to give you detailed numbers on freight or energy. Our energy hedge runs well into next year, so we've got quite a bit of protection there. As it rolls off, clearly, you know, we have rolling programs and it will depend on where the market's at the time. Likewise, with freight, all I could give you is some direction, and clearly we're in negotiations ongoing on freight. We would be able to do sort of, you know, long-term contracts with people at rates that are reasonably materially lower than the spot rates that you're seeing in the market right now, but they will be more than we contracted the last time because of the changes in the world. I think the comfort I would take there is, I think relatively, we will get good freight prices relative to market. I think the market will have to pass those freight costs on. It's not something. We're clearly fighting to keep them as low as possible because that's good for customers. You know, we'd expect that to pass through. Thanks, Kevin. Just on the second question on kind of immediacy ultra convenience, as you say, and I think a couple of points just to reiterate here. I mean, the first I would like to talk about the proportion of our online business in grocery today. So when we look at where we are in total volumes, we're doing somewhere around 640,000 or a bit more home delivery, 75,000 around that a week on click and collect, and around 70,000 on immediacy. Just in terms of proportion of the total volumes we're putting through, it's clearly growing at a rapid rate, but at the overall level. We're confident the platform we have in place enables us to learn fast, to scale, in locations where customers are looking to access this service, but also, you know, to clearly look at how this is gonna play out over the longer term. As Kevin said just now, you know, the key focus here really is what timeframe customers really do value and what size of basket and range they want to access. You know, it's an important and fast-growing part of the business, but it's a very small element of the total online at this point in time. If you sort of think about what's the size of our immediacy sales today, it will be equivalent to 1.5 or two of our supermarkets in total for the year, and we run 620 supermarkets. It's growing, but we need to keep into context its relative size. As I say, understanding how customers wanna shop this and how our Chop Chop platform particularly can respond is very front of mind. The other thing I would just say is we've just recently relaunched again our same-day service. It's one of the things we had to stop in the pandemic for obvious reasons, but we're back out with that now in more stores, and again, customers are responding to that well. I hope that gives some more color to the question. Thank you. Can I follow up on that, Simon? Sure. Can you hear me? Yeah, I'm just- Sure. I take the point that it's very, very small now. I guess more broadly the debate is, does the offering shape the scale of demand? If it does, and it becomes a much bigger part of the market, would you be looking to internalize that rather than have third-party logistics providers? Yeah. Look, I'm trying to give as much context as I can in the context of I mean, you can see our strategy, which is we invested ahead of the curve digitally, and we have a strong online food business. We're growing market share faster than others. You've seen how we've adapted through the pandemic as we've scaled online capacity to more than double our volume. You know, I think we've learned a lot as a business about, one, the speed and pace we can move at, and two, how customers are shopping online. Not to repeat the point, but I think it's really important we focus on home delivery and click and collect because that's where the vast majority of the volume will continue to be. Then let's remember, customers value freshness, speed, quality, and value. That's the key focus of our work in those areas. We'll keep listening and learning and watching. You know, I would just stress the point again, we're, you know, we're very present and active in immediacy through Chop Chop and Deliveroo, and we'll continue to learn and develop our thinking as that grows. Great. Thank you. Thanks a lot. Thank you. Just before we move to the next question, as a reminder, if you do have a question, it is just star then one on your telephone keypad. The next question is from Victoria Petrova from Credit Suisse. Please go ahead. Morning, Victoria. Morning, Victoria. Good morning, Simon. Good morning, Kevin. Thank you very much for taking my questions. I have two small outstanding ones. First, still on food prices inflation. Just to be clear, do you think you have already seen a peak? Are you more focused on some spot contracts or forward-looking contracts, for example, for proteins where we're seeing such a strong price inflation? My second question is on real estate. Obviously, with reshaping of the industry, which you just talked about a lot, you probably have some excess real estate. How do you think about it? Obviously, during your capital markets day a couple of years ago, you talked about subleases and various complementary opportunities for your stores. Do you have anything to add to that, maybe provide some color or maybe there are any sort of financial engineering changes in approach? Thank you very much. Victoria, thank you. I'll talk on food inflation. I heard the second point really clearly in terms of you were particularly referencing protein, proteins there. Let's just talk about that and then Kevin maybe on the property question. Yeah. I think let's just take a step back here on food inflation. I mean, I think we can all see the pressures that are there on the combination of the supply chain input pricing on commodities, you know, costs in the supply chain of production and labor, the supply chain challenges that are there in terms of moving products. You know, they're clear and we can all see them. I think in terms of where we are, you know, as you'd expect, we're working really closely with our suppliers. There are going to be some inevitable price increases flowing through. We are entering into that context in a very different value position to what we were before. It's a combination of these two things which is improved value for customers. On day in, day out products, we can deliver what customers expect of us. Clearly in areas where, you know, there is significant headwind building on commodity prices, raw material costs, cost of production, that will lead to, I think the industry rationally moving prices up. In the second half, I think we all expect that to happen. We will do that, you know, as the market moves and as I say, with a strong value position to start with. On the specific on proteins, as you say, you know, there are some value chains where the pressures are more significant. I just contrast that in our own business with the strength of the change we've made in meat, fish, and poultry. One of the key elements of our strategy was to really win secondary customers back who weren't shopping the center of the plate for it with us. You'll see in our presentation, Victoria, particularly in meat, fish, and poultry, how much the volumes have moved forward as we've improved prices. Of course- Yes ... if I'm a meat, fish, and poultry producer, one of the things I'm looking for is volume. We improve volume, and you can see on 27 of our presentation that, you know, our volumes have grown 10% against the market 7%. That provides some, you know, mitigation to the inflation pressures that are there. I hope that gives some background on that question. Kevin, do you wanna pick up on property? Yeah, Victoria. It's been an area of focus for us for some time as part of our cash agenda. Firstly, I'd say we've sold off over the last number of years assets we didn't want, sites we didn't trade from where we were sort of a landlord for someone else. We've sold off our land bank where we'd built up land as everyone else had in previous times for future development, which we concluded we didn't want to use for stores. We've been doing that. If you look back you'll see cash coming in every year for the last number of years as we've done that. That's largely complete. The second thing you'll see us doing is closing underperforming stores, and you'll see that even in this half, if you look at the detail in the accounts. You can see the number of both supermarkets and convenience stores that we've closed, and we'll continue to do that. The other thing I'd point to is the mixed-use developments, which we have talked about before, and we're probably overdue. We must give you an update at the year end. We've got one site in development. We've got a number of sites in planning, and we continue to push that through, so that we create, you know, strong cash flow from particularly assets we have inside in the London area, which are very valuable for to put homes on them. Then we get a new store at the same time, and we generate cash flow from that. That continues to be a focus from our property team. Thank you, Victoria. Thank you very much. Thank you. Thank you. Thank you. We have no further questions at this point. I'll pass back now to Simon for closing remarks. Well, thank you again, everyone for joining us this morning. Just to close by saying, of course, you know, really key period as we head into Christmas. We're in good shape. You know, some challenges out there, but I think some good momentum in the business. And as we look out over the second half, you know, we're very confident in the plans and the actions we're taking. You can see the strategy starting to deliver. You know, we're in one year of three, so there's a lot in front of us to do, but I feel we've got all the right focus in place to really drive it forward. And as you know, we're very focused on delivering for customers, and we're very focused on delivering free cash flows to shareholders. There's some good momentum, and we're very focused on the second half. At least 660. I look forward to talking to you soon, and thank you again for your time. Thanks for this morning. Bye.