Wesfarmers Stock

Ladies and gentlemen, thank you for holding, and welcome to the Wesfarmers 2026 Full Year Results Briefing. [Operator Instructions] This call is also being webcast live on the Wesfarmers website and can be accessed from the homepage of wesfarmers.com.au.

I would now like to hand the conference over to the Managing Director of Wesfarmers Limited, Mr. Rob Scott.

Thank you very much, and hello, everyone. Welcome to our 2026 Full Year Results Briefing. I'm joined on this call with our divisional managing directors and our CFO, Anthony Gianotti. I'll start with a summary of the group's performance, followed by some comments on our strategic progress over the last year. I'll then hand over to Anthony to talk in more detail to our financials. I'll then conclude with some perspectives on our portfolio positioning and the outlook for the group. And then Anthony, the divisional MDs and I would be delighted to take your questions.

So starting on Slide 4, a slide that we'll be familiar with many of you. It sets out Wesfarmers primary objective, which is to deliver a satisfactory return to shareholders. We define satisfactory as a top quartile total shareholder return over the long term. We only believe it's possible to achieve long-term value by anticipating the needs of our customers, looking after our team members engaging with suppliers in a fair and ethical manner, contributing positively to the communities where we operate, taking care of the environment and acting with honesty and integrity. And in the last year, our businesses have continued to make good progress in each of these areas.

So turning to Slide 5. This year, we reported net profit after tax of $2.9 billion. Excluding significant items in the prior year, this represents an 8.3% increase for the year. This growth was underpinned by strong earnings contributions from our largest divisions: Bunnings, Kmart and WesCEF. The result reflects the resilience of our businesses and the strong execution of our growth in productivity agendas.

Many of you will have heard me talk about the virtuous cycle at the heart of the Wesfarmers model. By running our businesses as efficiently as possible and keeping our costs low, we're able to keep prices low for customers and continue to invest in new capabilities and platforms. This investment helps to build stronger businesses for the future, creating fulfilling jobs for our team, all while delivering better returns to shareholders over the long term. As a result of the pleasing growth in profit, the Board has determined to pay a fully franked final dividend of $1.20 a share, which brings the total dividend for the year to $2.22 per share, a 7.8% increase.

Turning to Slide 6. While we're pleased with our financial results, they really only tell part of the story. Over the past year, we've continued to invest in our existing businesses while building new businesses and revenue streams for the future. And this slide outlines these areas. So firstly, with our existing businesses, our focus is very much on reaching more customers and serving them better. Strategic partnerships with leading global technology companies have ensured that our team members have access to world-class tools that support them to be more efficient and to direct time to high-value tasks.

In agentic commerce, we've launched AI-powered shopping assistance, Buddy at Bunnings, Joy at Kmart and Ollie at Officeworks and applications that help team members, especially in retail settings to better serve our customers. Across the group, the use of AI is all aligned with our people-first digitally enabled approach, which puts our team and customers at the center. We continue to bring more value and choice to customers as we renew and expand our offer at Bunnings, Kmart and Officeworks. We're also investing in new store formats, including the Kmart Plan C plus renewals, K Home and atomica and Health. Investments in distribution and fulfillment centers and new express delivery options make our online offer faster and more reliable.

And we're also building new platforms that extend our growth beyond our existing businesses. At WesCEF the expansion of Mt Holland, which we announced in July is expected to double spodumene concentrate production, lowering unit costs and accelerating cash flows. Our growing retail media business continues to expand using the scale of our store network and customer reach to generate a new source of earnings. The new marketplace at Kmart and the developing marketplace at Bunnings are delivering very strong growth and provide customers with more choice across hundreds of thousands of additional products. And the Built Living joint venture is progressing and will deliver residential apartments faster at a lower cost and at scale through advanced manufacturing.

Now turning to Slide 7, which provides some of the divisional highlights for the year. I'll let Anthony talk to this in more detail, but I just wanted to touch on an important portfolio action through the year. On the first of July, our Industrial and Safety businesses transitioned to Bunnings Group. This brings together businesses with market-leading positions and highly complementary customer bases and will enhance customer offers, drive incremental sales and unlock cost efficiencies. And we see this as a significant opportunity for Bunnings to strengthen its commercial capabilities and accelerate growth with small- to medium-sized customers. This is another example of our focus on creating long-term value through disciplined portfolio management.

Now before handing over to Anthony, I just wanted to turn to Slide 8. And consistent with our objective, this slide sets out some of the broader progress during the year in the areas of team, community and environment. On safety, the group TRIFR has improved from 9.5 to 9.1 at year-end with WesCEF delivering a record result of 0.6. Across the group, 4% of Australian team members identify as Aboriginal or Torres Strait Islander people, maintaining employment parity. And we were proud to recently release our ninth Reconciliation Action Plan, which was our second at the Elevate level. And we've also made good progress on climate resilience, reducing group Scope 1 and 2 market-based emissions by over 20% during the year. This step change was underpinned by our retail divisions achieving their 100% renewable energy electricity targets in the 2025 calendar year.

Now with that, I'll move to Slide 9 and hand over to Anthony.

Thanks, Rob, and hello, everyone. I'll start on Slide 11, where we've provided some further details on the sales performance across each of our divisions. I'll speak to performance across each of them in more detail on Slide 12, but overall, it was pleasing to see sales growth achieved across all of our divisions in the financial year.

In our retail businesses, the group's well-established everyday low-price operating models continue to resonate with consumers supporting transaction growth across all of our businesses. Our marketplace has delivered strong growth in the year, extending our reach across e-commerce channels with gross merchandise value across Bunnings and Kmart marketplaces now exceeding $250 million. GMV in Bunnings marketplace grew more than 25%, reflecting strong demand for home and living categories and an increase in the number of vendors on the platform.

On Slide 12, at a group level, divisional earnings increased 6.2% for the year, supported by strong results in Bunnings, Kmart Group and WesCEF and positive momentum in Health. Our retail businesses continue to execute well and their ongoing focus on productivity and cost discipline supported continued investment in low prices and customer experience while also delivering operating leverage with earnings growing faster than sales.

I'll now step through the divisional results in a bit more detail. In Bunnings, sales growth of 3.9% was supported by Bunning's lowest price positioning, which underpins sales growth across both consumer and commercial customers and across all product categories and regions. Consumer sales growth was supported by strong demand for home repair and maintenance products, while range innovation and expansion drove strong sales growth in the tools, automotive, rural, pet and lifestyle categories.

Growth in commercial sales reflected resilient demand as Bunnings strengthened its proposition through faster fulfillment and specialist services. Digital sales grew across all channels with marketplace continuing to deliver strong growth benefiting from the launch of the Bunnings commercial and services marketplaces during the year. Bunnings continued to progress a range of productivity initiatives, which strengthened its cost discipline and allowed further investment in price.

Bunnings earnings, excluding property contributions of $2.45 billion represented an increase of 5% for the year. Kmart Group delivered earnings of $1.1 billion for the year, an increase of 6%. Kmart Group's strong value credentials and world-class product development continue to resonate with customers with prices dropped on more than 2,500 items during the year. Product innovation in Anko's one-up and two-up price tiers also continued to generate strong demand. Comparable sales growth in the second half reflected more challenging conditions for seasonal categories in the fourth quarter and the impact of a material deterioration in the exchange rate on Kmart's New Zealand dollar-denominated sales.

Adjusting for the New Zealand dollar impact, comparable sales growth for the second half was above the first half. Strong earnings growth reflected Kmart Group's focus on productivity and cost control, which mitigated the impact of ongoing cost of doing business pressures during the year.

WesCEF earnings increased 18.5% to $473 million for the year, driven by higher prices for nitrogen-based products and spodumene concentrate. In Chemicals, earnings decreased on the prior year due to the rapid rise in ammonia index pricing following escalation of the Middle East conflict. Given the price lag in sales contracts, this significantly impacted earnings in the second half, but will provide a benefit as index prices normalize into the 2027 financial year.

In Energy, our earnings decreased due to a lower Saudi CP price, and in Fertilizers, earnings increased on the prior year, which was supported by a strong end to the 2025 season, partly offset by increased import costs in the second half of the financial year, again due to the Middle East crisis.

In Lithium, the business delivered its first positive earnings with a profit of $40 million, which was driven by higher market pricing for spodumene concentrate and above nameplate production at the Mt Holland mine and concentrator. Ramp up of the refinery and the progression of qualification activities were affected by intermittent odor issues with the installation of mitigation measures initiated late in the financial year.

In Officeworks, sales increased 3.7% and earnings of $165 million were 22.2% below the prior corresponding period, but in line with our previous guidance. Earnings were impacted by approximately $40 million in one-off costs associated with its transformation program, largely reflecting restructuring activities and the ERP-related costs. Successful execution of the program will structurally lower the cost base and provide a foundation for improved performance. The program remains on track for completion by the end of this calendar year.

Wesfarmers Health continued to focus on its transformation program to accelerate growth and improve returns. Earnings of $92 million, excluding purchase price accounting adjustments, increased 12.2% on the prior year. Priceline Pharmacy's headline network sales increased 12.7%, which includes both retail and dispensary sales. Priceline's retail sales were supported by a positive customer response to differentiated price -- beauty, skin care and private label ranges and competitive pricing on key value lines. Digital sales also grew strongly, supported by the launch of the new Priceline Pharmacy app. MediAesthetics also delivered profitable growth, supported by a simplified operating model and digital health maintained strong momentum with growth in InstantScripts users and services.

In Industrial and Safety, excluding Coregas, earnings increased 16.9% to $76 million, supported by a strong performance in Blackwoods, which delivered growing share in a challenging market and a higher earnings from Workwear Group. As Rob has already mentioned, Blackwoods and Workwear Group have transitioned into Bunnings from the 1st of July this year. And as a result, the Industrial and Safety division will no longer continue as a separate division and the financial contribution from these businesses will be included in Bunnings result moving forward.

Turning now to Slide 13. Our other businesses and corporate overheads reported a loss of $170 million, which was in line with the prior year. The group's share of profit from associates and joint ventures increased by $42 million to $106 million, primarily driven by favorable property revaluations from the BWP Group and improved contribution from the group's investment in Flybuys, Wespine and Gresham. Group overheads were broadly in line with the prior year, while other corporate earnings decreased by $27 million. This decrease primarily reflected a lower group insurance result and the loss of BWP management fees following its internalization earlier in the year.

Other EBIT includes the operating costs and investment in OneDigital comprising our OnePass membership program, acceleration of our group AI initiatives, investment in the group's customer and data insights capabilities and the group's retail media network. Total investment across these initiatives for the year was $73 million. As we said previously, the benefits from these investments will continue to be realized through incremental sales and earnings in our businesses.

Turning to working capital and cash flow on Slide 14. Group operating cash flow finished 6.5% lower than the prior year due to deliberate investments in working capital in WesCEF and Health. These investments were temporary decisions our divisions made to strengthen availability to customers. In Health, inventory contingency was increased to protect ethical supplies against supply chain disruptions due to the Middle East conflict. Similarly, in WesCEF, investment in additional fertilizer inventory at elevated prices to minimize the impact of supply chain disruptions from the conflict in the Middle East adversely impacted operating cash flows. WesCEF also held higher spodumene inventories, which will be used as feedstock in preparation for the ramp-up of the covalent lithium refinery. Across our retail divisions, cash realization remained strong at 99%, reflecting disciplined working capital management.

Overall, inventory remains in a healthy position with good stock availability across the retail divisions. Free cash flow for the year increased 15.8% to $4 billion with lower operating cash flows offset by the proceeds from the sale of Coregas and the sale and leaseback of 7 properties following the wind up of the BPI restructure during the year.

Moving to capital expenditure on Slide 15. The group invested gross capital expenditure of $1.2 billion during the year, which was 4.1% higher than the prior year. The increase reflected major project spend across a number of our divisions, in Kmart and Officeworks, both commenced the development of new omnichannel supply chain facilities. In Bunnings, CapEx included investment in new stores and expansion projects with an increase in space growth, reflecting its focus on optimizing warehouse and smaller format stores. And in WesCEF, CapEx included spend on the Covalent Lithium project and the completion of the first phase of the expansion of the sodium cyanide facility.

Proceeds from the sale of property increased for the period, which reflected increased disposals as a result of the wind-up of the BPI structure which resulted in net capital expenditure for the year, decreasing 29% to $779 million.

For the 2027 financial year, we're expecting net CapEx for the group to be in the range of $1.3 billion to $1.5 billion. And this includes approximately $200 million of CapEx associated with the expansion of the Mt Holland mine and concentrator, which we announced in July this year. and increased investments as well in new stores, refurbishments and supply chain across the group.

Turning to balance sheet and debt management on Slide 16. The strength of our balance sheet continues to provide the group with significant flexibility and capacity to support future investment. The group's net financial debt increased to $5.3 billion which reflected the distribution of $1.7 billion associated with the capital management initiative in December last year. We continue to actively monitor the group's debt mix, and we manage exposure to variable interest rates. Lower average cost of funds for the year reflected lower cash rates for the majority of the financial year, combined with our low fixed rate bond program. Our finance costs, including the component of interest that was capitalized increased 8% to $202 million.

During the year, Wesfarmers debt-to-EBITDA ratio increased from 1.7x to 1.9x following the capital management initiative, but we have continued to maintain significant headroom against our key credit metrics. In July, S&P revised the group's credit rating downgrade threshold ratio from 2.75x to 3x debt to EBITDA, increasing the group's debt headroom within its current rating. The group retains considerable funding headroom and committed unused bank financing facilities of approximately $1.7 billion. In the 2027 financial year, total borrowing costs are expected to be higher due to higher levels of net debt, increased capital expenditure and a high cost of funds.

And finally, to shareholder distributions on Slide 17. As Rob has already mentioned, the Board has determined to pay a fully franked final dividend of $1.20 per share, bringing the total dividend to the year of $2.22 per share fully franked. This is consistent with our dividend policy, having regard to available franking credits balance sheet position, credit metrics and cash flow generation. In line with the recent practice, the group does intend to purchase shares on market to satisfy shares that are issued as part of the dividend investment plan.

And with that, I'll now turn back to Rob to cover off on outlook.

Thanks, Anthony. I'll turn to Slide 19. And as said, Wesfarmers' primary objective is to deliver satisfactory returns to shareholders over the long term. But what I wanted to do in this slide was really to -- in a time when economic conditions are quite challenging for many people, underscore the importance of when businesses like Wesfarmers are generating profits and investing in their businesses, the broader benefit that we play to national prosperity.

So we provide salary, wages and careers to more than 100,000 team members in Australia with wages of over $6 billion paid last year. Each week, our businesses serve millions of customers each seeing value and convenience in the goods and services that our team worked hard to offer. And in fact, this is probably the greatest source of value that is delivered back to the community through the amazing value we offer to customers.

Across our customer base, we also serve 2.3 million Australian business customers across Bunnings, Officeworks, Blackwoods and Workwear Group. Our divisions help raise $102 million for community organizations across Australia and New Zealand. We're also one of Australia's largest taxpayers. Last year, we paid $1.6 billion to federal and state governments. And then this year, we will distribute $4.2 billion to over 470,000 shareholders with millions more Australians invested through their super accounts.

Now turning to Slide 20. Before I discuss the outlook, I just wanted to make 3 points on how the group is positioned. First, our portfolio is strong. It consists of high-quality, resilient businesses that allow us to deliver satisfactory returns through the cycle. Second, we're making good progress on our growth and productivity agenda, which allows us to invest more in our customer offer and supports our future growth. And third, we have exposure to growing demand through our newer platforms with attractive long-term fundamentals, including opportunities in health, lithium and now modular construction and retail media. Of course, underpinning all of this is our disciplined approach to capital allocation and our strong balance sheet, which, as Anthony said, gives us flexibility to invest in our portfolio and consider new opportunities that may arise over time.

Turning to the group outlook on Slide 21. Uncertainty about -- around the outlook for inflation, interest rates and house prices continues to weigh on consumer and business sentiment. Households are facing persistent cost of living pressures and higher operating costs are affecting business confidence and investment. And we've obviously been calling this out through most of this calendar year. Despite these challenges, Australian consumer demand remains resilient and Wesfarmers retail divisions remain well positioned to deliver on our corporate objective. Our divisions will continue to mitigate cost pressures through the execution of their productivity agendas. Bunnings, Kmart Group and Officeworks are well positioned to grow profitably and win a greater share of customer wallet supported by their lowest price positioning, expanding addressable markets and their broad customer appeal.

This positioning will be reinforced by the ongoing development of the omnichannel assets and capabilities to drive incremental sales and earnings.

For the first 7 weeks of the 2027 financial year, Bunnings sales growth was slightly stronger than the second half of the 2026 financial year assisted by some unseasonably dry weather in July. Kmart Group sales growth was broadly in line with the sales growth experienced in the second half. And Officeworks maintained positive sales growth with sales growth slightly below the second half.

Now together with our joint venture partner, SQM, we remain focused on ramping up the Covalent refinery while optimizing production and sales of spodumene concentrate. Wesfarmers Health remains focused on executing their transformation program and capitalizing on health and wellness trends to further improve earnings and returns.

Overall, I'm really pleased with the group's performance and strong execution of our strategic agenda, and we're well positioned to navigate a range of economic circumstances given the strength and diversity of the group.

Now lastly, you would have seen that today, we announced that Mike Schneider will retire from his position as MD of Bunnings Group in February next year. I'd like to thank Mike for the exceptional contribution he has made to Bunnings and the Wesfarmers Group over many years. Mike will be succeeded by Rachael McVitty.

Rachael will be an excellent leader and brings strong commercial and operational experience. She is currently the Chief Customer Officer, where she leads Bunnings store network and more than 50,000 team members. Rachael has been with the group for 17 years in a variety of roles. I look forward to working with Rachael to continue to deliver Bunnings strategic agenda. And we'll also have more opportunity to celebrate Mike's amazing achievements prior to his retirement later this financial year.

So this succession process has followed the usual process adopted by Wesfarmers over years, and we're very fortunate to have such a depth of internal talent to draw on across the group. Now with that, we'd be very happy to take your questions.

[Operator Instructions] The first question today comes from Michael Simotas from Jefferies.

Good morning in WA. Good afternoon, everyone else. Look, just wanted to try to understand your view on the consumer as they face into your key retail businesses. We sort of look at the outlook commentary and some of the sort of numbers that you've given. Is it fair to say that there's been a slight moderation in demand generally, but it's happened at a fairly moderate rate. And then you've delivered some pretty good operating leverage over the last few years. Do you think in the current environment with demand and cost of doing business inflation coming, you can continue to do that over the coming 12 months?

Michael, it's Rob here. I might make some high-level remarks and I'll then hand over to Aleks and Mike Schneider, just to talk a bit more about the consumer.

If you look at our commentary on the economy, the outlook, I would say it's very similar to what we talked about at our Strategy Day and very similar to what we talked about at the half year. We're not seeing a worsening of conditions. We're actually seeing a continuation of the conditions that we've experienced through much of 2026 calendar year.

I think what's important to -- I know that you guys focus a lot on 7 weeks trading, and you try and interpret what does that mean for the year ahead. I would just give you -- I'd provide a bit of caution to how you analyze that. We did call out a couple of factors. Weather is not a reason to celebrate or commiserate results over the long term. But on a week-to-week basis, it can have an impact. As John Gualtieri can talk to, the supply of tech products can also have a short-term impact on sales.

But the point I'd like to leave with you is that we are really just seeing a continuation of conditions where customers remain very discerning around how they spend their money and very value conscious given the cost of living pressures. So I might hand over to Aleks first and then Mike Schneider to give a bit more color. And they can also talk to your question on operating leverage.

Michael, just on consumer, consistent with what Rob said, very much a continuation of the themes that I talked to at the Strategy Day. So the overarching piece is that the importance of value is continuing to grow for our customers. We continue to see them become really focused when they shop and value seeking in their behavior.

What does that mean for our business? The trend of fewer items in the basket is what we're seeing. However, the positive is our active customer base continues to grow, and our transaction count continues to grow, but we are definitely seeing customers become more deliberate in their shopping behavior.

The other one that has continued within our business is the strong value proposition of our offer and the product innovation and really extreme value within our two-up price tier continues to resonate very strongly for our customers. So when we deliver quality and aesthetic at an extreme value price point. We continue to generate really strong demand for those price tiers within our business. So we feel across all of that, we're extremely well positioned in the current environment to continue to deliver value for customers and continue to grow our share of wallet and we continue to see growth across all of our customer cohorts, whether that's demographics or affluence levels.

From an operating leverage perspective, there's a few factors within the result that are continuing within our business. So firstly, we maintained really strong pricing and inventory disciplines across the year and across the second half, which contributed positively to margin outcomes. It is an inflationary environment from a COGS perspective, but we work really hard with our supplier base to drive productivity across all of our sourcing business. We're also starting to see some benefits from the investments that we're making in shrink reduction initiatives, including our front of store gates across our store network.

And clearly, FX is in a more favorable position in terms of mitigating some of the cost inflation we're seeing, both domestically and overseas as well, including the impact of fuel, which have been a material impact in recent months.

Productivity is very much still on our agenda, and we're delivering really good productivity across our supply chain and across our store network from the ongoing digitization of our operating model, which is also continuing to mitigate some of the inflationary pressures.

In terms of the look ahead, a lot of those things are in our base and will continue to play out in FY '27. Clearly, we've called out an elevated level of investment in FY '27 related to our next-gen commissioning. So we take over the site in October which means that we have a period of dual run costs within New South Wales with no benefit because we won't start to operate the site until early FY '28. We haven't quantified the impact of that, but clearly, it's a material enough impact to call out. What it will do is it will impact our ability to deliver operating leverage to the same degree as we have in recent years.

However, I'll reiterate what I said at the Strategy Day, which is we're still aiming to grow earnings in F '27 and we are also aspiring to deliver earnings growth ahead of sales growth for the year ahead as well because of all of those other factors that I talked about. But clearly, the level of that operating leverage will be impacted by this very material one-off investment.

I'll hand to Mike now. Thank you.

So just check with Mike. Mike is actually in Melbourne today on the conference call. So Mike, I just want to check if you're connected?

Rob, can you hear me now?

Yes, that's great. Thanks, Mike.

Michael, thanks for the question. And look, Aleks, obviously gave a really extensive answer, and there's not a lot of things here that we would sort of think differently on, particularly from the consumer point of view.

I think what we've been very successful at doing over the last sort of 24 months or so is diversifying range growing in new categories. That continues to give us a strong customer acquisition pipeline. We're seeing that through the comp growth in some of those core categories. So we've been really pleased with that. I fully agree with Rob and with Aleks' comments on sort of the focus on value from the consumer. But I think that's really playing to the sort of capabilities that businesses like Bunnings have and the value proposition we put in front of our customers.

So from that point of view, and then sort of looking into the sort of immediate next couple of months, what we can see with festive, with seasonal and through the sort of spring/summer campaigns that we're in a really strong position to participate and compete strongly. And I think that will benefit customers, but also benefit Bunnings from a sort of performance point of view.

On operating leverage, we are pleased with the ongoing work that we're doing, continue to sort of demonstrate that through the work that we're doing on productivity. We're less mature than, say, a Kmart business on a global sourcing aspiration. So that's continuing to give us opportunities to deliver great value for customers, but also improve performance in the margin space. So as we look forward over the next sort of 12, 18 months, I'd anticipate the initiatives that we've got underway will continue to deliver operating leverage. But as I've said, probably every one of these results calls over 10 years, very focused on absolute returns over the long term as well, and we'll keep driving those really hard.

The next question comes from Shaun Cousins from UBS.

Another question for Mike around Bunnings and Mike, thanks for answering my questions over the years and best of luck to Rachael in the new role. If we think about Bunnings in the past has called out, macro drivers such as household disposable income, renovation activity, housing churn, housing value and formation, where the lifestyle demographic trends and technology. Several of these are quite weak at the moment, particularly housing churn and value following the federal budget.

Can you talk a bit about how that -- how these negative factors impact Bunnings sales growth? Alert to the comment you made earlier around it being a diverse business. But you've got probably a more challenging macro outlook, and what happens to Bunnings sales as you have less housing churn. It seems to have been a driver in the past and there's less of it happening now?

Yes. Thanks. Great question. Shaun, I've enjoyed your questions over the years as well. So thank you for those. But for us, I think the point on diversified business is important because we've always thought to have a very resilient business balancing discretionary and necessity spend. There's a lot of characteristics that's still very favorable in the housing space. We've got a lot more people spending a lot more time working at home, doing things around the home, so we continue to see a lot of active participation. What's also really pleasing is sort of the attachment rates of the newer categories when customers are shopping in our stores.

So coming in for a core mission and then adding on with some of the things in our more consumable sector. So that's performing well. And some markets are performing very strongly. In the Western Australian market, the South Australian market continued to perform very strongly on all the indicators we've seen and we've probably called out weaker economic performance in some East Coast markets now for a little while. So we're sort of established in understanding consumer behavior responding to that.

And I think, ultimately, at the end of the day, even though housing churn is down, we still see housing as a long-term asset in our personal portfolio. So we really want to make sure that we invest in that, and that's what we're seeing customers continue to do. We continue to see activity on alterations and additions and there still is housing churn, obviously. So we're participating in that. So I think notwithstanding some of the sort of headlines you read about, we're seeing strong participation in our core categories. and ongoing attachment to those new ones. So we'll be watching it very carefully. We're working super hard to make sure the offer is strong, but our ability to outperform the market is something we've always been really focused on and will continue to do so.

The next question comes from Adrian Lemme from Citi.

Congrats, Mike, on your pending retirement. Always enjoyed our discussions. The Bunnings EBA, I believe, expires at the end of this month and to my knowledge, hasn't been renewed yet. You may not be able to give us a lot of detail. But can you give us a steer at all as to the level of wage growth we should expect in FY '27, might it be similar to the Fair Work decision of 4.75%, please?

Yes. Great question, Adrian. We've obviously had a long history of sort of making sure that the way we structure our EA, it really benefits our team plays to the sort of permanent base that we've got, and it has for a long time and remains well above GRIA. So we're well positioned around that. We've got long discussions underway with team and obviously with the SDA as well, and they are coming to a conclusion, which is great. We got to put that in front of our team pretty soon, but we don't anticipate anything above GRIA. We think we'll be able to strike a really good balance. And we model this through the P&L over a multiyear period. So our ability to sort of absorb the increases and offset those with productivity improvements across the business are well established.

So I think our ability to handle that commercially is very strong. Our ability to reward our team is very strong and that's something we're really focused on. So I think that's sort of where we sit at the moment.

Thank you. The next question comes from Tom Kierath from Barrenjoey.

I've got one for Aleks. Just on the K Home format. It's been running a couple of months now. Can you maybe just step us through what some of the learnings are, which categories you're doing well? How are you kind of thinking about the rollout potentially?

Thanks, Tom. so we're really pleased with the early trading results of the first K Home at Box Hill. Some of the things that we've seen in there has been really reinforcing the opportunity we see on furniture and really creating a new market for extreme value price points in our furniture offer. The penetration of that within the box has been very strong, and we're seeing very strong cross-shop with furniture in a lot of the baskets in the store, which has been really pleasing. We've seen really strong basket sizes as well.

So the transactions have been good, but once customers are in the store, they're really engaging with the breadth of the offer in the store, which has been really exciting to see and we're seeing really good penetration of our two-up price points within the store as well. So there's some of the early -- very early reads that we're seeing. We clearly have a lot more to do to understand the format and the way that customers trade over the course of a year and really how we optimize our inventory offer in there, particularly for the furniture side of things, which to date has been online only and really surfacing that in store, we can see a very strong demand for it.

We're going to plan to open a second K Home store in November this year in Queensland in a very different type of catchment. And we haven't announced it yet. But I think that will be an important second data point in terms of the way that the store trades in a very different type of shopping center to the Box Hill store. And I'm sure we'll get lots of new learnings out of that, that allow us to optimize the format even further.

The next question comes from Peter Marks from Goldman Sachs.

One just on Bunnings and new categories into FY '27. Are you able to give us a bit of an update on how you're thinking about appliance as we look into FY '27 that can support that top line growth in Bunnings.

Peter, I really apologize that didn't come through very clearly. Can I just get you to ask the question again, please?

Yes. Sorry, Mike. Just thinking about how you think about category expansion into FY '27. Could you give us an update on appliances and anything else, any other categories which you've been thinking about for FY '27 that can support that top line growth in Bunnings?

Yes, great question. Similar to what we talked about at Strategy Day. We've got a number of different growth initiatives growing from the core of the business. So categories like tools and automotive and pet care. They've all gone through sort of Phase 2 and Phase 3 range expansion and innovation, which are continuing to perform well. We're just expanding our smart home category. We've got our EV charging category, our solar category. We've got rural now rolling out to 121 or so stores across the network. So all the things we sort of picked out at Strategy Day, we continue to execute on.

What's really pleasing us is that they are all resonating with customers really well, and they're all solving different problems and projects around the home. So for us, that's really exciting. And when you start getting to sort of the solar space, that really plays across both consumer and commercial. So that's performing really well as well. So I think all will continue to be drivers as we go forward as well the categories like marketplace, you heard Rob talked to that before. We've been blowing away with the growth in marketplace over the last 12 months. That strong double-digit growth has continued into this financial year.

So I've been really pleased with that as has been the takeup both of endemic and nonendemic retail media customers. So that one is still very nascent for us, but we think will be a really important earnings driver as the years go by as well. So I think foundations are good, the expanded categories are good. And I think that gives us some really positive things to chase as we head out this financial year.

Okay. Great. And any update on the appliance category in particular?

Yes, on appliances, we've got plans now signed off for the layout in about 78 or so stores, I think it is. So CapEx has been approved for that. We've got a couple of different brands. We're working with and looking forward to bringing that into market. Some of those will come in pre-Christmas and then in the second half. But if you've been in our stores, you'd have seen some promotional drops of dishwashers, washing machines and dryers. They're not brands that customers would necessarily know, but the value in them has been extreme and the take-up and sell-through has been fantastic, which really, I think validates the view that we can drive great volume in this with brands. And when you sort of sell the volumes of kitchens that we do across the Bunnings business, driving attachment rates to those makes that a really exciting category for us.

The next question comes from Craig Woolford from MST Marquee.

Just wanted to ask a question about the cost of goods outlook for the retail businesses. I think there's always a lot of moving parts, and this year is no different, but I'd expect there's currency as tailwind, how you're managing that combined with the implications on either cost of goods from raw materials or packaging and higher sea freight costs?

Craig, it's -- look, as you rightly said, there's a very -- there's a whole lot of different cost drivers across a very broad mix of products that we sell. I might let Mike kick off with a couple of observations and then go to Aleks and John.

Yes. Thanks, Rob. I think, firstly, the work we're doing in the global sourcing space, which is really targeted sort of commodity-based entry-level categories is delivering a couple of things. It's delivering us some lower COGS, which we're obviously able to deliver greater value to customers, but it's also giving us a much better look through the broader supply chain. So raw materials and those things. really helping us understand and in some way, sort of replicate the amazing work that Aleks and her team do at Kmart.

As I've said probably many times over the years, there's a mix of inflation and deflation across the board. We've got such a diversified portfolio from timber to greenlife to paint. And all of those things are growing or manufactured here in Australia, so immune from some of the global supply chain challenges. So from a COGS point of view, we're not sort of seeing significant inflation on COGS through the P&L. But obviously, we watch very closely what's going on globally, but then work very hard with our supplier partners and sourcing agents to make sure that we're really justifying any increase to cost because we're super mindful that it's challenging for our consumers out there, and we want to just continue to offer compelling value to them. I might hand over to Aleks.

Thanks, Mike. I think as I mentioned in my earlier comments, in terms of input costs across raw materials, it's a net inflationary environment. And clearly, the impacts of fuel feed into a lot of those raw materials as well. And then from a fuel and an ocean freight perspective, it is an inflationary environment, the strengthening of the Australian dollar plays a mitigating impact to all of that.

And similar to what Mike said, our sourcing teams work really, really hard with our supplier base to continue to drive productivities through our entire supply chain and look to offset those impacts as much as possible to ensure we can continue to invest in value for our customer base. I'll hand to John.

Thanks, Aleks. I think I'll break the question up in 2. So we've got a private brand business. And it's like Mike and Aleks, we've been working through. And a lot of the cost of goods sold, you've been able to negate through scale through the partnership with Anko and through the reset of our merchandise strategy.

Then if I just take a moment and talk a little bit about chips and memory. We've seen an increase in chips and memory. But the increase started last November, December, and our teams have been working with supply since that point in time to try to mitigate those cost increases. And so we've been able to secure, I think, better than market increase products for our customers as a result of the planning that we have been able to work with our suppliers. So that's kind of negated I think where the market's increased their prices. But we do have other areas where prices have flowed straight through to our cost of goods sold and working through with our suppliers.

Thanks. Just one for Aleks. Just you said that there was a net inflationary environment. Is that even after the currency and maybe the -- I guess, the implication there is that there's still hedges that need to roll off. Is that how we should think about it?

Yes. I mean I think we've talked about our hedging policy in the past. So we hedge 12 to 18 months in advance. So the spot rate impacts that you see don't flow through immediately. It's quite a progressive impact on the P&L, which is really important for us because it means we can plan our business well in advance.

My point on the net inflationary is more in terms of raw material input costs across all of the different inputs. You've got your ups and downs, but overall, raw materials are in an inflationary cycle. But equally, we worked really hard on productivity with our supplier base to try and offset as much of that as possible.

The next question comes from Bryan Raymond from JPMorgan.

Just another one for Aleks on K Home actually. I just want to extend on the prior question there. I'd just be interested to see what you're sort of looking for out of these trials, how many trial stores you might need to do before you can really push go on a broader rollout, whether it's dependent on the DC being fully up and running before you can do that if the expenditure category is dependent there and also just how you see the opportunity in terms of space in the large format or stand-alone centers which you can look to roll that format out in?

Yes. Thanks, Bryan. In terms of what we're looking to prove out, it really is the economic the format. So sales density is a really key measure that we would look at, and we would want to really satisfy ourselves that we can generate really good sales density out of this format because if we can do that, the economic equation, clearly becomes a lot easier for the rest of the store.

Outside of that clearly, we've got a lot to learn in terms of how we resource it, how we flow stock through to the store, and there will be a whole lot of operational things that we need to learn from. But sales density would be the key metric that we focus on from an economic perspective.

The second one really is how does the format perform in different catchment types? And I mentioned the second store that we're going to do is in a very different type of shopping center to Box Hill, again, given it's a brand-new format with no trading history, really understanding the transaction frequency, the basket size of customers and how all of that plays out across different catchments is going to be important for us.

On the supply chain perspective, we've sold for that through our existing facilities in Victoria, so it's not currently a constraint in terms of being able to roll out more stores over time, clearly, depending on the materiality and the number of stores in different states, we would need to look at supply chain solutions, but the supply chain at the moment isn't a constraint to doing more trial stores.

How many would we want? I think realistically, a handful of stores in different demographics and different catchment types would allow us to get confidence that the results can be replicated more broadly. We're having really constructive conversations already with lots of landlords around opportunities nationally. So I'm confident that if we can prove out the economics and we can get good commercials in terms of available space that there is a rollout opportunity when we're ready to press the button on that.

The next question comes from Caleb Wheatley from Macquarie.

I was just interested if you could provide a bit more detail in, I don't know, the "nonretail income streams." And I guess I was particularly focused on Hammer Media, I appreciate it's still quite early, but it has been sort of up and running for maybe a year or so now. But then even your comments on marketplace and the growth that's coming through there. So just kind of broader sense across the business, what's the sort of materiality of those sort of nontraditional income streams? And how are you thinking about sort of the opportunity for that to become more meaningful in a group sense?

Caleb, Rob here. I'm assuming you're meaning the nonretail businesses within the retail divisions because clearly, we have when you actually look at the higher -- some of the higher growth rates of earnings were delivered in WesCEF and Health division this year, and we would expect that to continue.

But going back to the point that you mentioned, we are still at the very early stages of our journey in terms of retail media and marketplace. We did call out that we've seen very significant growth in both, albeit off a low base. On the media side, and look, I might let Mike make a few comments because Bunnings has made some amazing progress, but it is also worth noting that we've also seen really pleasing progress with retail media in Officeworks, in the Health division and also through some of the nonendemic partnerships that we've entered into through OneReach, which Leah Balter is overseeing. So I'll let Mike talk to that.

On the marketplace side, if you look collectively at the Bunnings and Kmart marketplace, we grew marketplace sales by over 70% this year. And importantly, those sales are profitable sales for the group. And actually, the more we grow the marketplace, not only are we better leveraging the amazing traffic that we have across the group, the digital traffic we have across businesses like Kmart and Bunnings, we're also creating additional opportunities for businesses like Target and Officeworks that are participating on those marketplace platforms. And then it is creating this flywheel effect because then the opportunities around retail media are accelerated through that as well. So we are very excited about continuing to expand the marketplace sales.

But I'll hand over to Mike just to give a bit of context on some of the retail media strategy and growth.

Yes. Thanks, Rob, and thanks, Caleb. I just want to add a couple of points, too, on marketplace. So it continues to grow really well for us. It grew about 30% in the last financial year, and that sort of growth continued into the new financial year. We're now at about 310,000 SKUs and 616 partners that we're working with. And just to sort of remind everyone, this is a curated marketplace that focuses on things for the home. And that's now turning up in about 25% of all online shopping basket. So our customers really get it. It's deeply integrated into our digital ecosystem and performing really, really well. And I think that's something that continue to drive and grow in years ahead, launching it in New Zealand next month. And as Rob touched on earlier, we've got services and commercial marketplaces running. So really pleased with that.

On retail media, I think Bunnings is uniquely positioned to really drive growth here because of its branded strategy. We are a house of brands. We've got fantastic participation from our endemic supplier, so our existing supplier base. but also really strong interest, which we're working in partnership with Leah and her team at OneReach on around nonendemic and brands that want to participate. So brands like Toyota and American Express even promoting things like federal elections and things like that. We've been able to sort of really participate in lots of different ways. We've got close to 600 screens across our sort of store fleet and continue to grow that. Our Tradio retail media, radio station is performing very, very well. It's outperforming expectations on ratings.

So I think incredibly well equipped to sort of grow that. As you know, Caleb, it's only really been running for sort of 12 or so months. So not material to earnings at this point in time, but really excited to see where this goes. And I think really demonstrates as a group, what Wesfarmers can really do in this space just because of the retail brands we have, the connection to suppliers, but also the incredible customer data that we can use to generate real engagement and personalization for the customer, but real value for endemic and nonendemic suppliers as well.

Thank you. The next question comes from Benjamin Gilbert from Jarden.

Rob, just maybe you can help me around the outlook for WesCEF. There's obviously a lot of puts and takes that's sort of sitting within there. It feels like you're potentially seeing more headwinds than not in the WesCEF business ex lithium for fiscal '27. And when we put it all together, do you think there's still scope to grow given some of these cost impulse? And then second part -- sorry, just on the lithium side. You've obviously talked about the odor issues and those sorts of things and you're obviously going to have half of that contracted out for the spot. Are you still expecting quite a material uplift, obviously, given some of the pricing tailwinds netted against some of these other issues, et cetera, running for the plant.

Ben, I'll let Aaron talk to it in more detail. But we certainly weren't trying to convey a negative outlook. In fact, as Aaron will talk to, there's actually quite a number of benefits that should flow through as a result of recent capacity expansions, some recontracting benefits, et cetera. I know that we do -- just because, obviously, the business is always subject to global commodity price changes, weather impacts et cetera, we always kind of include those risk factors in all of our commentary around outlook. But I'll hand over to Aaron to talk to the specifics.

Yes. Ben, just starting with the WesCEF core portfolio, and then we'll touch on lithium. I think it's actually -- it's a positive outlook for us for FY '27 across a few factors. The first is we've published what I think is a helpful chart in the WesCEF section showing the impact of the ammonia curve. Obviously, as ammonia prices are kind of retracing and normalizing after the Middle East situation, are we going to get that benefit in FY '27. So we're already seeing that in our -- the first quarter of this financial year, that will start to drop into the earnings.

We've been on a long program in the last few years on capacity expansion. So we are well down the path on the sodium cyanide expansion where we're lifting production by about 30,000 tonnes. That will be complete at Christmas this time -- sorry, Christmas this year, and then you're going to get a full 12-month benefit in FY '28, but you'll start to see the earnings uplift in FY '27 from that.

There's also been an increase in the ammonium nitrate margins. That's been something that the wider industry has been talking about for a few years as the supply/demand imbalance is kind of normalized. There's been really strong iron ore production growth up in the Pilbara, and we have benefited from recontracting with some of our key customers. We tend to do that on a 3- to 5-year cycles. We've just renewed a material contract that will start benefiting in FY '27.

So really on that core chemicals portfolio within WesCEF, FY '27 is really a year where we start to harvest a lot of the benefits of capacity expansions and work that's been underway for the last few years. And so I see that as a positive story.

Over on lithium, as you said, we've flagged here that we expect to sell at least half of the nameplate production from Mt Holland. That is good margin business at the moment. Obviously, you saw a profitable FY '26, but that is going to step up in FY '27 for lithium because Mt Holland is running at nameplate capacity, you're getting a good cost position as a result of that at unit costs. And I'm not going to call lithium prices, but we've already made some sales, material sales for the FY '27 year in spodumene and attracting the current spot price as you're making good money on those tonnes. The second half of FY '27 will really be around the pace of the hydroxide refinery ramp-up. If that is slower than expected, we obviously have the benefit that we can offset that by selling more spodumene at profit.

And the other issues, is that -- that's just going to be the other half just in terms of the ramp, right? So if there's more delays around the ID, you can just put more into spot at spot, is what you're saying?

I mean that's the -- I suppose, the benefit of a vertically integrated operation. We have that flexibility embedded in the business model that we can quickly allocate any spare spodumene tonnes at that good profitable margins at the moment into the spot market.

The next question comes from Richard Barwick from CLSA.

I've got another question for Aleks on Kmart. Can you just clarify the planned C stores, Aleks, 20 converted in FY '26. Are you planning on adding 20 more, is it 40 more into '27?

Richard, we're planning up to another 20 this financial year. So we've already launched some incremental ones. And then in the second half, we'll look at the rollout profile as we scale the format and as we optimize based on the learnings of having an expanded number of stores across the fleet.

And that sort of conversion, Aleks, is that -- like is it disruptive? Should we be thinking about the conversions at least in FY '27 as a drag on earnings? Or is it -- are they actually additive?

No. Look, the objective through the refurb program is to try to minimize the disruption as much as possible so I wouldn't be calling any material dilution to sales or profit as a result of the conversion program.

Okay. And just to second one, you've said that you won't give us a number for the drag from the bringing in the new fulfillment center. But can you clarify, is the impact going to be contained to FY '27, or is this going to sort of flow in terms of dual running costs and stuff into FY '28 as well?

Yes. The biggest impact is this financial year because we take the facility on in October and then commence our part of the fit out, which means we're paying rent on a facility where we have 0 benefit, while at the same time, a lot of the technology investment hits the OpEx line as we get into FY '28, it will be a progressive transition from the old facility into the new one, and it will be a progressive benefit realization as well. So it's really this year where we have the material cost impact with no benefit attached to it.

The next question is from Phil Kimber from E&P Capital.

I was just going to follow on from Ben's question around lithium. Just in particular, how the ramp-up of hydroxide works. While that is in ramp-up, are you actually reporting sales at just basically no margin for that business as customers are testing the product? Or do you actually report sales, but they're basically offset by costs during ramp-up while that occurs. And just trying to understand initially how long does it take, is it -- when it's at a decent run rate and starts becoming profitable, at that point, it starts being recorded in the P&L or is it capitalized? I just -- I wasn't sure how it worked through that ramp-up period.

There's a few elements into that question. I might just touch on the qualification process and what we -- how we sell those tonnes first and then come to the capitalization piece and hopefully, that gets you there.

The first part, when you're selling lithium hydroxide, which is obviously very different to the spodumene market. There's an open spot price. We can sell that at good profits, as I mentioned, to Ben.

On hydroxide, we are going through the qualification process. But in the meantime, we have sold lithium hydroxide at very close to the index price. But because you're unqualified, there is a small discount versus the headline index price. But at the moment, that hasn't been an issue. It's a good quality product. There's plenty of battery makers and Chinese buyers that will buy that off that spot reference price. Ultimately, once we complete the customer qualification process that we've spoken about before and you start hitting your commercial quantities, we'll be then selling under our commercial agreement, which once again will follow the reference prices with other mechanisms in there.

At the moment, the refinery costs on a unit cost of production are being capitalized under the standards until you hit effectively a commercial scale of production, then those unit costs are capitalized. And the way it basically works is you have a long run estimate of what your future mature cost position should be per tonne. Any cost above that during the capitalization phase is taken to the balance sheet. So we'll need to make a decision during the ramp-up profile when we move from capitalization phase to expensing it.

Yes. And is that -- once that decision is made, is there like a catch-up on the bit that was capitalized? So you have to amortize that in one hit? Or does that sort of just stay on the balance sheet?

No, that will stay on the balance sheet and then be effectively depreciated over the life of the asset. But it's relatively small in the scheme of the initial construction CapEx.

The next question comes from Michael Simotas from Jefferies.

Just wanted to follow up on the commentary around Kmart's seasonal sales being a little bit weak in the fourth quarter. And specifically, whether the inventory associated with those categories is still being held or whether you have managed to work through it?

Thanks, Michael. As I mentioned earlier, I think we managed inventory really well throughout last financial year and really closed June with a really healthy inventory position. So we go through our normal markdown and clearance processes at the end of a season, which we have been doing and the impact would be well within kind of normal levels. So there's no abnormal clearance levels to speak of that you should be concerned about hitting the first half profit numbers.

The next question is from Adrian Lemme from Citi.

Thanks for a quick follow-up. Mike, I saw the lease extension on 62 properties with the BWP Trust was announced earlier this month. I was just curious in the context of the strong growth we've seen in industrial rents in recent years, where did rents land relative to the rest of the portfolio, please?

Relative to the rest of the portfolio broadly in line. I think the property team have got incredible experience sort of working through these. And obviously, we've got fantastic long-term relationships with our landlords as well. So there's nothing in that, that caused us any indigestion. They're long-term leases with lots of options. So very comfortable. Anthony might have something else to add that, that would really be all for me.

No, I think that's right, Mike. I mean that was really about extending the initial term of those leases and making sure that we have secured those for the longer term and very much under what we'd probably call standard Bunnings lease term. So nothing really to call out in terms of costs.

The next question comes from Peter Marks from Goldman Sachs.

Just one for Anthony, a bit of a housekeeping one on tax rates and net interest, maybe with net interest first, like stepped up to $264 million in the second half, I appreciate it's going up in '27, are you able to help like talk us through like the magnitude of that? Or any more help on that would be helpful. And then tax rate second half was a bit lower than what I was expecting. So just wondering how you're thinking about that into FY '27.

Yes. So thanks, Peter, for the question. A couple of things there. So on interest rates, we've tried to give a bit of guidance because clearly, there's been -- we benefited from certainly low interest rates. And if you look at the balance of the average rate and the average cash rate through the year, we benefited more from the interest rate reductions, then obviously, the subsequent interest rate increases were later in the year. You combine that with the fact that you then got an extra $1.7 billion, we paid out the capital management initiative $1.7 billion. So our base level of debt is higher. You combine that with the CapEx program that we've got. And that's why we've tried to just give you some guidance around the fact that borrowing costs will be higher.

There's nothing sort of fundamental -- there's no fundamental issue with that, and we were still benefiting from the fact that we have about $3 billion of bond debt that's sitting on a fixed rate of about just above 3%. So we're still going to benefit from that. but we're obviously going to have more debt that's on variable terms that will be subject to interest rate increases, which we've seen occur through the financial year. So there's nothing sort of outside of that. I think we're just calling that out to make sure that you better understand how that's likely to flow through. Sorry, I've forgotten your second question.

Just the tax rate.

Yes. So during the year, we did have a bit of a tax benefit because we had some tax losses that we were able to utilize to offset some of the capital gains we will have got from the BPI property sales. So you will have seen our effective tax rate this year was a little bit lower, not massively, but a little bit lower than we would typically have, and that really came as a result of tax losses that we were able to utilize to offset capital gains on the BPI property sales. That should normalize into '27. We do have some further BPI property sales planned for FY '27, but that will be a lot smaller, so less of an impact.

The next question comes from Bryan Raymond from JPMorgan.

Thank for taking the follow up. Now I know it's been a lot of discussion on the consumer already. But I just want to be really clear around post budget performance in Bunnings. Have we actually not seen any impact -- have you seen an impact at all in Bunnings in terms of activity around some of those more renovation linked categories, let's say, as we've seen all the data coming out around activity in new listings and in terms of borrowing and so on is down certainly into double digits. So I'd just be interested if there's been any flow-on effect that you've seen to date?

Thanks, Bryan. Great question. Yes, couple of reflections. One, notwithstanding some of the reporting that is sort of occurring around housing and lending and those sorts of things. The data that we see still strongly points to very strong levels of equity in owner-occupied properties and things like that, which gives us confidence that there's still plenty of activity being done in the alterations, additions, repairs and renovation space. We haven't -- to be a little bit more specific to your question, we haven't seen anything noticeable post budget.

Obviously, seasonally, the winter months can be a little bit quieter because of weather for projects getting started on site or even projects being done in and around the home, cold weather can make it hard for sort of painting and things like that. But I certainly haven't seen anything that's giving us any cause of concern. And as I said before, I think some of those fundamentals around people working at home more, spending more time around the home, and even not spending some discretionary money on going out and entertaining and doing more things at home, all are things that we benefit from.

So yes, I think we -- as I said before, comfortable with where we're at, at the moment. And I think we've sort of got the mix, the assortment and the value proposition right to perform better than how the market performs, which is how we've always thought about this over the long term.

Okay. That's comforting to hear. Thanks, Mike, and thanks for answering my questions over the years and best of luck.

No, thanks so much, Bryan. Really appreciate it.

At this time, there are no further questions.

Well, thank you, everyone, for that. And if any further questions, please give Michelle and the team a call. Thanks a lot.

Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.

Good morning, everyone. Thank you very much for joining us here in Sydney. And I'd also like to welcome the many people that will be dialing on -- dialing in online to listen to our Strategy Day. So I'm joined -- my name is Rob Scott. I'm the Managing Director of Wesfarmers, and I'm joined here today by many of our leadership team, including our divisional managing directors.

So I will start with some high-level comments about the group and our strategies. And then I'll be joined by our CFO, Anthony Gianotti; Head of Corporate Affairs, Naomi Flutter; and Head of OneDigital, Leah Balter, to take any questions you may have on my opening remarks. And then we'll move on to the divisional presentations and Q&A for all of our divisions.

So I'll start on Slide 4, a slide very familiar to all of you. So since listing on the ASX in 1984, Wesfarmers' primary objective has been to provide a satisfactory return to shareholders. And we define satisfactory as a top quartile shareholder return over the long term. And we believe it's only possible to create long-term value by anticipating the needs of our customers, looking after our team members, engaging with suppliers in a fair and ethical manner, contributing positively to the communities where we operate, taking care of the environment and acting with honesty and integrity. And these areas are embedded in our strategies and how we manage our businesses. And you'll hear more about this as we step through our divisional presentations through the day.

So turning to Slide 5. This shows Wesfarmers' total shareholder returns since listing in 1984 relative to the total returns from the broader market. And in line with our objective, over the last 10 years, Wesfarmers' TSR performance has been in the top quartile of the ASX 100. And since listing in '84, Wesfarmers has delivered total shareholder returns of nearly 20% per annum compound, almost double the market over that period.

Now our focus on the long term means that we're always investing in and developing our businesses with an eye to the future. And it follows that the returns that we've delivered even in the last 5 years have not been at the expense of investing in the future. Indeed, we've made significant investments in recent years in new growth platforms with the aim of improving returns over the next 5 years and notable areas, lithium, health, retail, media and Anko Global.

Now the Wesfarmers model is both focused and dynamic. It drives superior operating performances in our divisions through the concept of divisional autonomy. It also allows us to adapt to changing markets and structural changes through active portfolio management and capital allocation. And given the pace of change and disruption that we're seeing across broader markets, the Wesfarmers model is as relevant today as it ever has been before in terms of driving superior and sustainable shareholder returns.

Now turning to Slide 6. We continue to make good progress on various broader initiatives, particularly in the climate and environment space, acknowledging it's linked to long-term shareholder value creation. And notably, nearly a 28% reduction in Scope 1 and 2 emissions in the first half. For our team members, the priorities remain safety, career development, maintaining our performance culture and advancing reconciliations, with some positive examples of outcome set out on this slide.

We're also focused on building long-term relationships and partnerships with suppliers. And as our businesses grow, so too do thousands of smaller businesses. This supports jobs and broader economic growth. We also pride ourselves on engaging deeply with the communities in which we operate, and a large amount of this engagement is driven by our operating businesses with more than $59 million of direct and indirect financial contributions to community organizations in the first half.

We're also really proud that we have 2 of the top 3 most trusted brands in Australia in our portfolio with Bunnings and Kmart. And we don't take this trust for granted, and you'll hear today how we're looking to build on this in the future.

So turning to Slide 7. This sets out the Wesfarmers operating model. And once again, you should be very familiar with this slide. We have 4 overarching strategies that inform our focus at a group level and at a divisional level, and it's all about driving the delivery of our corporate objective. We seek to strengthen our existing businesses through operating excellence and a focus on the customer, secure growth opportunities through entrepreneurial initiative, look to renew the portfolio through value-added transactions and ensuring sustainability through responsible long-term management. Now it's these strategies that guide our focus and support our teams to execute their plans and the growth of their businesses across different industries. And at the bottom of the slide are our core values that obviously underpin our strategies and our ways of working.

Now turning to Slide 8. I wanted to emphasize some of the key messages that we want to share with you today. Now those that have listened to our Strategy Day in recent years and listened to our half year and full year update will hopefully feel that there's a very high degree of consistency in what we are saying today to what we have been saying. I think you'll hopefully also see some proof points of delivery on the strategies. I hope you will also sense a greater sense of both ambition and a desire to accelerate our strategies.

And as a leadership team, we are really pleased that we are building momentum through these strategies, and we are now starting to see a compounding of the benefits and also new opportunities arising today that didn't exist last year. And this is, I guess, part of the beauty of the Wesfarmers model, that focus, consistency over the long term that can ultimately drive a compounding of returns.

So the first key message is that we are accelerating the execution of our growth and productivity agenda across the group. And this is very much supported by new technologies and also leveraging the investments we've made in recent years now, data and digital platforms. Secondly, I wanted to reinforce that our portfolio of high-quality businesses continues to strengthen with new growth opportunities and also providing a very unique mix of growth and resilience.

And I think the data speaks for itself when you think about businesses, notably Kmart or Bunnings or WesCEF, our larger businesses have showed an incredibly high degree of earnings resilience through multiple cycles over the decades. And then finally, our strong flexible balance sheet provides capacity to invest. And also as a group, we have the opportunity to reallocate capital to support shareholder returns. Now while these have been consistent areas of focus for some time, as I said, we are starting to see the benefits start to translate into new revenue streams and more resilient businesses.

So moving to Slide 9. I wanted to just call out some of the key growth projects that we're advancing across the group. Now our divisional managing directors will bring this to life in more detail through their presentations. But if I was to summarize some of these growth projects, the first is very much about divisions continuing to grow and expand their addressable markets. And we've seen this over many decades within Bunnings and more recent initiatives within automotive, smart home and commercial continue to expand our addressable market. We're seeing that within Kmart through the Kid-all category and furniture, a really exciting category. And these businesses entering into categories where customers are increasingly looking for our brands to add value. And we certainly have a right to play in broader categories.

The recent announcement of our investment in modular construction through the Built Living joint venture also creates a new market opportunity that didn't previously exist. Our omnichannel assets and capabilities are a key source of competitive advantage. And with the growth of our marketplaces and our loyalty programs, our retail media businesses in express delivery, these are all starting to deliver incremental growth.

And in WesCEF, we have a track record of investing incremental capital at attractive returns across our various products. And we've made -- and Aaron will talk today about the good progress we've made completing the debottlenecking of the first phase of our ammonium nitrate plant. We're very well progressed with our sodium cyanide capacity expansion. And we're also working towards a decision on the expansion of our Mt Holland mine and concentrator in lithium in the first half of next financial year.

Now we're also finally investing -- we're continuing to invest across our store network, whilst also developing new concepts and offers to better serve customers. I guess in a world where there's a lot of focus on the digital side of retail, one should never forget the importance of maintaining inviting and vibrant store environments, which do account for the majority of our sales. And we've made some great progress there, continuing to expand and develop the Bunnings network, continuing to upgrade our Kmart stores and some exciting new formats that are in a trial phase, whether it's K Home, atomica and so forth, each which represent new and exciting ways of better serving our customers.

Turning to Slide 10. So over the last 5 years, you've heard a lot from us about our focus on digitizing our businesses. We've invested a lot in our data assets, our digital -- and also digital processes to improve productivity and to ultimately set our businesses up for long-term growth. And I've outlined some of the areas that not only have we been talking about, but we're expanding on over time. We're already seeing many of the commercial benefits from these investments.

But it's also important to know that a lot of our investment in data and digital platforms are actually foundational capabilities for the next phase of growth and productivity as we start to leverage new generative and agentic technology solutions. Those solutions are only as good as your data and your digital platforms.

So this slide, as I said, highlights some of the key initiatives that are underway, and our divisional MDs will talk about it. So the further expansion of our RFID capabilities within the Kmart Group, Bunnings continuing to develop their electronic shelf-edge labeling. And also, there's been a big focus and investment in new demand planning systems in Bunnings, Kmart and Officeworks, which ultimately will improve stock flow and availability.

Turning to Slide 11. So as I mentioned, new technologies such as agentic and generative AI allow us to accelerate our progress and deliver even better outcomes for our customers and our teams. Now there are understandable concerns in the community about the implications of these new technologies and what it may mean for people's jobs and their data. Now we are determined to provide our customers and our teams with access to the best available technologies. However, we will be considerate in our application of these technologies and adopt a value-based approach.

Now we've spent a lot of time as a leadership team in Wesfarmers in recent years talking about the principles we should adopt as we roll these new systems into our businesses. And the principle that we've committed to as a group is the principle of people-first, digitally enabled. And I'll explain a bit about what this means. Firstly, this approach is consistent with the high level of trust that the community and our teams have in Wesfarmers and our brands.

People first recognizes that we are first and foremost in the people business. Our teams will ultimately lead the changes, and we will always put our customers, our teams and other stakeholders at the center of decision-making. Now today, we'll talk about some very practical examples. And I hope that you will agree with me that we can provide very tangible evidence of how these new initiatives will fundamentally improve the service we're providing our customers, the tools that we're providing our teams and ultimately, the benefits that will accrue to our shareholders.

Now most of our team already use AI in their personal life. So they expect us to provide them with capabilities and tools to enhance their work. Now whilst there's some tasks that will be automated and there will be some jobs that will change, we can already see new growth opportunities and new roles that will be available in the future that don't currently exist.

Now digitally enabled acknowledges that digital is becoming part of Wesfarmers' DNA. We are accelerating our strategies by leveraging investments in technology and better harnessing the power and the insight from our data assets. Now our approach to the deployment of AI ultimately aligns with the Wesfarmers operating model. This isn't something new. This is a continuation and a reinforcement of the effectiveness of the Wesfarmers operating model.

Now divisions are ultimately responsible for the implementation of initiatives, owning the delivery in a way that is relevant for their customers and their teams. But we also have fantastic opportunities to leverage common technologies, best practice tools and also the benefit of strategic technology partnerships, which are very much coordinated by our OneDigital team. And we've seen really strong engagement across the group associated with that. And Leah would be happy to talk more about that in our Q&A.

So turning to Slide 12. I mentioned that I'll talk more about some of the tangible and measurable outcomes. So this slide just simply tries to articulate where we see the most opportunity for these emerging technologies in our businesses. Now these are areas that we talk about all the time, and as I said, reinforcement of our core value-adding strategies.

I mentioned that our approach will not only be focused on -- or underlined by our values, but will also be subject to the same commercial and capital discipline we expect at Wesfarmers. This is not about just chasing after the new shiny thing or focusing on technology for the sake of it. This is about enhancing the benefit for our customers, our team members and ultimately delivering a return on the investment.

We are focused on addressing existing pain points where it supports our strategies and where there are measurable outcomes that matter. This means focusing on the outcomes for our customers, our team, improving the efficiency of our businesses, all of which helps us keep our prices even lower in our retail businesses, reinforcing the importance of EDLP, supporting our margins, and also, as I mentioned, delivering returns to shareholders. We see -- we also see this as an opportunity to enhance competitive advantage.

So if I turn to Slide 13. This outlines some of the practical examples that our businesses are using at the moment to accelerate our strategies. And this is enabling us to execute faster and at a lower cost. And on the customer side, I think a really key initiative that we're very excited about. We've been the first market in Australia with agentic commerce solutions. And also, we see opportunities to provide even better customer service through leveraging these technologies.

For our teams, we've developed AI assistants to unlock personal productivity to help our team members easily access the vast amounts of information and insight across our businesses and to free our teams up to spend more time with customers and less time on repetitive tasks. And across our operations, some exciting use cases across merchandise effectiveness, marketing efficiency and supply chain optimization. So I won't cover this now because our divisional MDs will talk to this as they step through their presentations.

So moving to Slide 14. The combination of our extensive store network, our digital platforms, our distribution centers allow us to serve customers across virtually all communities in Australia and New Zealand in a way that suits them. And when we think about some of the points of difference we have across our broader retail businesses, in total, there is more than 7.5 million square meters of space across our network. Whether it be through our stores, our warehouses or distribution centers, all that are leveraged to support omnichannel sales, whether it is through our stores, our store base fulfillment, click and collect or even direct delivery. And this fulfillment capability is just one of the ways in which our retailers truly stand apart relative to some of the pure play online competitors.

Now after trialing various approaches to marketplace opportunities in recent years, our online marketplaces in Bunnings and Kmart are really starting to resonate with customers, delivering strong growth and, importantly, are also profitable. This is also about leveraging capability that has been developed as we've been trialing different marketplace opportunities in recent years.

Now this leverages the move of expanding our marketplace opportunities within Bunnings and Kmart, leverages the significant digital traffic and brand awareness and trust of Bunnings and Kmart with a curated range of brands and products that are complementary to their core ranges. Now Bunnings and Kmart now have more than 400,000 additional SKUs across their marketplaces, bringing even more choice to customers. And I'm sure that Alex and Mike will talk more about that today.

So moving on to Slide 15. I just wanted to share more of the data points that demonstrate the ways that our omnichannel strategy is creating real value for customers and our shareholders. So our various loyalty programs across the group are increasing sales by driving frequency, incremental spend and supporting cross shop activity. OnePass members are choosing to spend more and are shopping 3.4x more frequently than nonmembers.

Our marketplace capabilities, as I just mentioned, are also delivering strong results. An interesting data point is that roughly 1 in 4 Bunnings online transactions now includes a marketplace item, and 1 in 6 transactions within the Kmart Group. And that's a pretty impressive number when you think that the Kmart Marketplace has only been up and running a matter of months. On the retail media side, we now have more than 1,500 in-store screens across Bunnings, Officeworks and Priceline, and we're seeing strong growth in supplier partnerships and advertiser demand across a broadening range of sectors. And this also includes advertising from companies that are not existing suppliers, but see value in the customer reach that we can offer.

We've also seen strong demand from customers for our express delivery offer, which is now live across Officeworks, Bunnings and some Priceline stores, and this is attracting new customers and incremental sales. And as I mentioned earlier, the agentic commerce opportunities within Bunnings and Kmart are also new and exciting value-adding opportunities for our customers.

Turning to Slide 16. So over the last decade, our return on equity has significantly improved. And as I mentioned, our total shareholder returns have outperformed the market. Now not only does this reflect very strong execution within our existing businesses, it also is the cumulative impact of portfolio management decisions we have made along the way.

Now we are not a private equity company that transacts businesses every year or every month. We are investors for the long term. But we recognize that to create sustainable value through the decades, it makes sense to be actively managing the portfolio to ensure that our capital is allocated in those businesses that have the potential to deliver superior returns.

Now we've established new growth platforms through our Covalent lithium joint venture. Wesfarmers Health has also been a significant investment where we see a lot of long-term opportunity. And it's great to see Emily and the team start to deliver some real wins in that division of late. Now these provide growth -- these businesses, whether it's lithium or health, don't really feature that prominently in our P&L at the moment, but over the next 5 years, will start to have a more meaningful impact.

I mentioned the Built Living joint venture. Now if you judge the success of this business over a 1- or 2-year basis, it's not going to show much. But over the next 5 to 10 years, I think it has the potential to be quite exciting and meaningful. We've also enhanced the value within existing businesses. And on the right-hand side of this slide, you'll see the various changes we've made through store conversions within Kmart and Target and then integrating the back offices of those businesses.

This is all about us facing into structural changes that are evolving, changes in the way that customers are shopping and also taking advantage of unique assets and capabilities we have to ensure that our businesses are always remaining relevant. And we're really excited recently to announce that the Blackwoods and Workwear Group businesses will move within to the Bunnings Group. And this is another example of bringing together highly complementary customer bases and capabilities to unlock growth across small and medium-sized businesses.

Now Mike Schneider will talk more about that, but I wanted to note that this opportunity has only been possible as a result of the successful and long term and somewhat painful implementation of a new modern ERP system within Blackwoods and a material strengthening of the capabilities within Blackwood's digital capabilities. There are hundreds of thousands of technical product SKUs and world-class fulfillment solutions, which are now able to be used to better support the broader Bunnings and Blackwoods proposition in the SME market. So I'm really pleased about how the portfolio is shaped at the moment and the opportunities for the future.

So moving to Slide 17. So as a result of the developments and strategies I've discussed, the portfolio is in good shape. We're well positioned to generate superior returns through the cycle. And as I mentioned, I think we have the capacity to withstand fair degree of market volatility better than most companies.

As we sit here today, the portfolio offers 3 distinct, but complementary sources of competitive advantage. Our market-leading retail businesses with a diverse range of customers, everyday products at lower prices provides a key source of resilience across different economic conditions. Our globally competitive industrial businesses also provide products that support critical industries. And then we have exposure to the growing demand through the newer platforms and businesses I mentioned earlier.

Now moving to Slide 18. I won't spend a lot of time on this, but just to reinforce the strength of our balance sheet, the continued and ongoing focus on capital and operating discipline that is a core part of our model. Then finally, on to Slide 19. Before I close with the key messages and move to Q&A, you should have noticed today that most of my discussion has been focused on long-term value creation.

Today is not a trading update. There are plenty of opportunities we have through our half year results and our full year results to talk about trading and to share those insights with you. But today is a focus on how the investments, the portfolio management, the business transformation decisions that we are making are going to sustain better performance to shareholders over the next 5 to 10 years.

Now this is deliberately aligned with our shareholder objective. It's also a very exciting time to be operating a business when you think about the significant technological, demographic and geopolitical changes that are unfolding. And in Wesfarmers, we have a portfolio of businesses that are well positioned and an operating model that is highly agile and adaptable to such changes. And as I mentioned, we have unique data and digital platforms that will be even more relevant and important for future growth.

So let me close by reinforcing those 3 messages. First, we are accelerating the execution of our growth and productivity initiatives. Secondly, we have a portfolio of high-quality businesses with a unique mix of growth and resilience. And then finally, our balance sheet remains strong, and our financial discipline and the flexibility to continue to invest in our businesses and consider new opportunities will serve us well going forward.

So I'll now invite Anthony and Naomi and Leah to join me, and I look forward to taking your questions.

Just the question for me is around supply chain. And specifically, if you look globally, you'd argue probably some of the best supply chains globally being democratized in the sense that you've got 3PL capabilities shared, et cetera. I'm just wondering, is that something that you've considered at a Board level in terms of aggregating the back end?

And I appreciate the front-end silo structure. If you look at Amazon will do $11 billion plus this year, you've got your competitors are obviously looking to consolidate. And why isn't that something you're considering or thinking about?

Look, I think a couple of comments on that. First of all, we need to recognize that our business is an omnichannel business. And when we think about fulfillment, we also need to recognize the importance of our store network for fulfillment. That is something that the online specialists or the pure-play online companies don't have. And as I mentioned, we shouldn't overlook the benefit of the Wesfarmers retail businesses collectively possessing 7.5 million square meters of space across our stores and our distribution centers to help fulfill deliveries to customers. So I think that's the first point.

The second point is that we also need to recognize that the supply chains and the back-end processes of our businesses are very different. So when you think about the products that Bunnings sells, particularly when you start getting into areas like commercial building products, hazardous products, green life, the supply chain capabilities are fundamentally different to what one might see in a Priceline or a Kmart.

That being said, we have been collaborating across the group on some last mile opportunities, particularly focusing on parcel delivery. And that has helped with improving route densities, lowering the cost and improving the quality of delivery or the speed of delivery. You also recall that about a year ago, we announced that Kmart would start to leverage the old Catch centralized fulfillment centers to improve the delivery proposition across the East Coast of the country. And we're also starting to use those distribution centers in different ways.

The other final point is that I talked about our express delivery offer that looking at ways in which we can leverage third parties to materially improve and differentiate our delivery proposition through the partnership with Uber Eats, for example, is another great example. So I suspect that we will continue to look at ways in which we could leverage last mile. But I think it's hard to see that there is a lot of incremental value trying to more deeply integrate distribution centers across the group, given the fundamental difference of the products that we are selling to customers.

But isn't that the opportunity as well, you talk about big and bulky and doing more things like electronics, these sort of things like some of the trials here in Victoria? And Bunnings and obviously you got the Officeworks where it is fun. Is there a world where you could create a thick pillar and you effectively have a capital cost for the supply chain you pull out and you rent out space within store across stores? Because that could really accelerate the 3PL capability and open up a whole bunch of categories that leverages that point that you're talking to.

Well, look, potentially, the one point I'd make, and the MDs could add to this, is that we -- in recent years, particularly off the back of this -- the trial I mentioned around last-mile parcel delivery and collaborating with the volumes across the various divisions, we have got really good collaboration across our supply chain teams. And that has really started to increase and accelerate as a result of starting to leverage some of the new agentic solutions in supply chain. So we have a number of use cases now on the agentic side where we have cross divisional teams focusing on common solutions that we will roll out.

So look, perhaps over time, there are some opportunities. You mentioned big and bulky products. Bunnings is quite unique in terms of how they fulfill big and bulky items. And I know that our Kmart team and our Officeworks team that also have some big and bulky products also take some of the learnings from the Bunnings Group in that space. So perhaps over time, Ben, there are opportunities. But I'd say, collectively, there are so many opportunities that we have to better leverage our very unique store and distribution networks, drive route density on the parcel side and collaborate more on the technology and agentic side. That's where we see the bigger opportunities over the next couple of years.

It's Bryan Raymond, JPMorgan. Just -- I think the big difference this year versus last year's Strategy Day, at least in your opening comments there, Rob, is the focus on agentic and AI and all the different ways that will play through your organization. So I'd like to pick up on some of those points. How are you thinking more on the customer-facing side of the agentic commerce area, which you have touched on? Just interested in how you think about that from a sort of, let's call it, internal using your own data assets. You've talked about your Bunnings and Kmart tools there.

What about more like partnerships with LLMs, so with either OpenAI, Google or Claude, whoever it might be, to drive some more customer acquisition through that funnel? And how do you think about that sort of discovery research, product comparison piece? Which you haven't really touched on that, but I'll be interested if that's part of your strategy there as well.

Yes. Well, I might let Leah talk more to that, Bryan. But just the first point I'd make is that the point I was trying to emphasize today, the opportunities through agentic and generative AI, are certainly -- they are certainly new opportunities. They clearly didn't exist to the same extent 3 or 4 years ago.

But the point I was trying to make is it's not as if this is a new strategy. This is actually just reinforcing our existing strategy, but just through tools that didn't exist. So we are genuinely quite excited about it. And we just wanted to share the ways in which we are bringing these to life and try and talk in more practical terms about how is it actually going to benefit our customers? How is it going to benefit our team? And also emphasizing that we retained a very strong ROI focus.

So look, the agentic commerce area is an area where we have been within our divisions. Bunnings was the first material business to bring that to market in Australia. And it couldn't have been possible without the capabilities of our Bunnings team and the support of some of these international partners. So I might just let Leah talk a bit about how we are thinking about agentic commerce and leveraging those partnerships.

Thanks, Rob. Thanks for your question, Bryan. In terms of agentic commerce, we're looking at how customer behavior is shifting. So it's shifting from traditional search. It's shifting in terms of LLMs, it's also changing in terms of how our customers are searching on our website. So where you might have searched for, say, a hammer, customers are now searching for, say, 20 words on average in terms of the product.

As what we did last December is strategic partnerships to actually secure for all of our retail divisions access to the best agentic search technology. And as Michael talked about with Buddy rolled out first to market in Australia, we're taking that technology and rolling it out. Kmart have just launched Joy. We're rolling that out across Officeworks and then OnePass across all of the divisions. We're seeing that customers who are using agentic search are actually have a higher conversion and are spending more per shop.

And we can see that customer behavior is actually changing on the LLMs as well. And we're in through our partnerships, looking to link up our loyalty to the LLMs. And some of this technology isn't available in Australia yet, but through our partnerships, we're looking to secure that for our customers so that they can search on an LLM and go back to our website to complete the shop.

Okay. Interesting. And just as a follow-up, is there any sort of impact on the cost line from a corporate cost perspective around OneDigital cost from -- there's obviously a lot going on here. Is that going to meaningfully move the dial? Or is it all within the envelope that you've already spoken to?

There's a bit of -- I mentioned the last couple of years that we would expect that as we move from the setup phase to the delivery phase, the OnePass cost that we report at a group level ultimately decrease. We have seen over the last year, some additional investment as a result of fast tracking and implementing some of these projects. So it's likely that over the next year or so, we'll see a continuation of those costs as we're building some capability and setting it up.

But at least the evidence that we've seen is that a lot of the initiatives should deliver a good return on investment. So we're very -- so most of the -- other than some of the initial setup costs and capability costs to get this stuff going, most of the costs will ultimately just sit within the divisions and be a core part of their digital and customer-related cost base.

It's Michael Simotas from Jefferies. So look, Wesfarmers has continued to do a very good job clearly of delivering on its total shareholder return objectives. I guess, mathematically, the drivers of that are trading multiple growth and shareholder distributions. How do you think about the role of growth going forward over the next 5 or 10 years? Do you think growth needs to do more of the heavy lifting to drive those shareholder returns, acknowledging that those individual drivers are somewhat competing with each other?

Yes, yes. I think there is an opportunity to deliver better growth. I think in a few different ways. I think the first point I mentioned today, this theme of accelerating our productivity and growth agenda. We're more excited about the opportunities that present themselves today to move faster than we were a few years ago. So that hopefully should translate to a bit better growth. And growth is both through the top line and also through improving productivity, obviously.

The second thing I mentioned is that over the last 5 years, we've made some pretty substantial multibillion-dollar investments across our lithium business, our Health division, some of the foundational investment we've made more at an OpEx level in retail media. Now those business opportunities are yet to really translate to earnings. So over the next 5 years, we would expect there to be much stronger growth there.

And then as I mentioned, there have been -- there are new opportunities that our divisional MDs will talk about today that are growth opportunities that didn't exist before. So we are very focused on delivering growth, not growth for the sake of growth, growth for the sake of growth in shareholder returns.

And just as a follow-up, in the past, you've made it clear that there's a preference or better opportunity for deploying capital within the existing businesses. Is that still the case? Or is it more that you've already deployed the capital and you need to reap the benefits from here?

Well, look, we're really open on whether we deploy capital on new opportunities or within our existing businesses. We're just very objectively focused on where we see the best returns. And probably not surprising that when we're investing in our existing businesses, we see a lower risk profile. We also have greater confidence in the ability to unlock value.

And as I said earlier, that I think we are really blessed that we have a number of businesses, whether it's our retail businesses, whether it's through our data and digital platforms, whether it's through our WesCEF, our WesCEF production capabilities, where these businesses are platforms where we can invest capital and create new revenue streams through expanding addressable market through growing retail media through debottlenecking the various plants that we have within WesCEF.

So it's not -- we are seeing great opportunities to invest in those. Probably the reason why we haven't done more significant investments in external opportunities is just simply because the returns haven't stacked up. And as I said, I think we're in a fortunate position that we don't have to necessarily go chasing external growth for the sake of it when we have such good growth prospects within our core businesses.

Caleb Wheatley from Macquarie here. Just wanted to pick up on that theme of digitization, but more on the sort of back end in the data asset side. So you had the sort of 3 programs up there in terms of Flybuys and obviously OnePass and the Sister Club. How do you sort of see, I guess, the interaction and the roles of each of those programs this year sort of building the importance on the value of that data? And then particularly any update on the Flybuys side just in terms of the JV there and sort of data sharing arrangements, et cetera?

Sure. Look, I might just touch on the Flybuys side, and I'll let Leah talk more about the broader programs. And look, recognizing that each of our programs, they are highly complementary, but they all service with a slightly different purpose.

But look, we're really pleased with the Flybuys joint venture. We think that the value that we provide customers and Flybuys members across the broader Wesfarmers retail businesses together with Coles is really unique. And I think we've now structured the joint venture in a way that is working much better for the retail participants. So we have -- ourselves and Coles have an appropriate amount of access to the insights.

So -- and also, we recognize that a lot of the initiatives that were using the Flybuys data for to drive more value for members and to drive incremental sales are best undertaken closer to the customer rather than from a central Flybuys team. So that has been the data sharing capabilities and mobilizing offers closer to the customers, I think, has been a real win-win for Flybuys because it's growing the program, making the program more relevant, and it's also been great for our retail business and great for our customers.

So look, I think loyalty is a very dynamic area. What good looks like today won't be good enough next year or in 3 years' time. So we will need to keep innovating and evolving, but we're really pleased with how Flybuys is tracking. But I'll let Leah talk to the other programs and how they all feed into our data capabilities.

Thanks, Rob. Thanks, Caleb. We've got the privilege of having some of the most trusted brands in Australia and the most loved loyalty programs, and that's building up our shared data asset where we've got more than 12 million customers in the shared data asset. And we're able to give that -- access to that data back to divisions where they're able to personalize to the customers with more insights on the customer than they would from their own customers' purchases within a division.

We're also looking at how we can make that experience more seamless for customers because of the interaction between Sister Club and Flybuys, where you sort of build up points then through the link to the paid subscription with OnePass. So we're working on making that more seamless for customers.

And as we talked about earlier, with the shift to agentic commerce, we're also looking at how you can leverage agentic search, say, across the brands through OnePass and working with the divisions on that as well. So really looking to evolve the loyalty, where loyalty is the outcome where customers who are searching across LLMs or across the websites are choosing our brands and retail products.

So when you're looking at that sort of broader data bank and I appreciate for the folks on retail media and clearly, customer communication, et cetera, are you sort of comfortable with, I guess, the level of interaction and, I guess, the see-through that you have across the customer base? Or is there sort of more work that might need to be done there to sort of fully engage those relative data sets?

We're also stitching that data together with third-party data as well so that we can, as I said, give divisions -- more of an enriched view of a customer and also as customers are searching through agentic search, also adding in the contextual data as well to the view of customers to get back to the divisions as well.

Shaun Cousins, UBS. Just a question regarding investment outside of Australia. I think after the budget, you highlighted there were -- taxes were rising. And so as a result, it became possibly less attractive to investors. Should we anticipate that there could be more international investment rather than domestic investment, given the current sort of, I guess, a situation on how capital is going to be taxed in Australia?

Well, as I touched on earlier, Shaun, I would say the bigger opportunity that we see is to continue to invest in our existing businesses. We are mindful that when you invest offshore, there are different risks that you need to be aware of. And although for us, recognizing that we are largely in a -- well, we're an Australian, New Zealand and Asian-based business. The areas where we have greater confidence to invest internationally really relates to the Kmart Group because we have very significant teams and capabilities already embedded within Asia.

So the investments we're making through Anko Global and in the Philippines, I guess, are based on some very strong local understanding and capabilities. So yes, that will continue to focus on that. I think the -- when I reflect on the tax changes and what does it mean for Australian investment versus international investment, I'm probably most concerned about the second-order implication. So if you think about our businesses and our country, we are a real beneficiary of some very strong and significant resources companies. Certainly, our WesCEF business benefits from the ongoing investment in development and success of the Pilbara iron ore businesses, the gold companies and our lithium businesses.

And I do worry that a number of those companies, be they Australian companies or international companies that invest in resources or oil and gas, will be more encouraged to invest offshore by virtue of the less hospitable tax settings and regulatory settings within Australia. So I think the issue is probably more a second order impact for us in Australia rather than necessarily a deliberate shift for us to invest offshore.

Great. And secondly, regarding Health. Is that business at a scale now where it can become material for the group and the requirement for it to become material is just existing investment to develop? Or will you need to actually add more businesses to what is already somewhat of a health conglomerate sort of anyway to sort of provide it to have sufficient scale? Because when we think about the earnings trajectory we have at the moment, it's 1% of earnings, maybe goes to 2% to 3% for it to become meaningful. Either things need to go a lot better than we're forecasting or you might need to add more to it. So how do you think about that in the longer term, please?

Well, we -- the earnings at the moment, you're right that although they're increasing at a higher rate, they're increasing off a low base. And the other important point to recognize with the health earnings is there's a fair bit of investment that is flowing through the P&L that is holding down the earnings.

So look, I'm happy that we continue to grow the business off that low base and to be opportunistic as new opportunities come along. I see this as we are very -- Emily and the team are very focused on getting the return on capital up above the 10% mark as fast as possible. So that's a short to medium-term objective there. But I'm prepared -- well, we are prepared to play the long game with health. And that this is the type of business that I think over the next decade could become quite meaningful. And maybe at some point in time, new bolt-on acquisitions will arise.

But at the end of the day, I'm comfortable that so long as the business continues to improve its returns as -- I think a really key breakthrough for the health division this year is the price line franchises are really starting to perform. So it was really hard for us to scale up the network until we actually had a franchise model that was actually working for customers and working for franchisees. So that is now starting to work, and we can really start to leverage that. So there's a fair bit of organic growth that I think we could expect from the Health division, independent of any M&A.

It's Adrian Lemme from Citi. I had a question for OnePass, might be a question for Rob or Leah. A month ago, I actually got a text on my phone for 6 months free membership of OnePass. And I do frequently see a discounted half price off the $40 membership. I don't see the same kind of offers from Amazon, for example.

So I was just wondering, how you think about the program? Is it that you maybe need to give more value to customers, so you're not having to discount the program? Or should you just give it for free just to build up the data and the customers? Just interested in your thoughts on that, please?

Leah, do you want to touch on that?

Yes, sure. Last month, as you said, we did launch the 6 months free. That was partially in response to the cost of living crisis in Australia and as a way of us doing our bit for every household in Australia so that they could access free delivery and not -- and save on fuel in going to the store. That said, we did have one of the largest acquisitions, months that we've ever had. And so we did really drive subscribers.

We are looking as part of our strategy, to your point, Adrian, how we can add more value to customers. We're looking for third parties, and we're looking at how the offer can evolve. In particular, how it can evolve within the next 6 months as these customers roll off the free 6-month period and how we can really demonstrate value back to them. We do that, and we can see that if we drive customers from just shopping at one store, one retail brand to a number of divisions, we know that the churn really goes down to those customers.

And so we're sort of driving that on an individual basis to really drive their behavior. So yes, that's definitely something we're looking for, in particular before Black Friday.

This is Peter Marks from Goldman Sachs. My question is just on AI adoption across the retail businesses again. I'm just interested in your big picture thinking here. It sounds like you've really made the decision that you're going to lead in this wave of digital adoption, whereas prior waves, it felt like you were happy to sort of lag the market and test and see and adopt what worked. Just why is that? Why -- firstly, is that true? And how do you think about that? Is it because you see this as a big shift and you want to get ahead of the curve? Or do you think you've now just built the capability within the organization to adopt some of this stuff a bit faster?

Well, Peter, I think there's a couple of things. You are right that if I look back 10 to 15 years ago, fair to say, we were a bit of a slow adopter. We were slow to move on the e-commerce side. And a number of us in the leadership team were around back then, albeit in different roles, and we observed a lot of the debate in the discussion. And we're very keen to not kind of go through that again.

But at the end of the day, what is driving our focus is a commercial focus and a focus on the customer and the team. So it's not only the fact that we want to be a leader in this space, but we want to be a leader in this space because we think it is going to have measurable benefits for how we engage with customers, the support we provide our team, the ability to accelerate productivity. So there is absolutely a commercial lens on this.

And across the group, the point I mentioned about digitizing business processes over the last 5 to 8 years. We have phenomenal data assets. We have really strong digital platforms. We have thousands of very strong data, technology, digital people across our group. We're far better able to lean into this today than we were. If I kind of go back a decade ago, well, we hardly had any data on our customers. Our technology teams were quite traditional, technology infrastructure-type support teams. So I think as a team, we're better capable. We have better data and digital platforms to leverage it. And we see good ROI from the opportunities.

It's Craig Woolford from MST Marquee. I'm interested. I know it's not a big dollar amount, the Built joint venture that you talked about. Can you just elaborate what that program is about, what sort of capital we might see over time? And is it a sign of the type of future investments you make?

So what we've done with the joint venture -- so ultimately, it will be a 50-50 JV between Wesfarmers and Built. And we think that both parties are highly complementary in terms of what we bring and what they bring. We've made an initial investment of $100 million, initial commitment of $100 million in the joint venture, which will be focused on developing the first high-tech automated modular construction factory predominantly designed for residential construction, but also will have the capacity to support other commercial developments.

And that first project will be in Neerabup in Western Australia. It's been a project that has the very strong support of the West Australian government. And the opportunity we see here is that there is a significant shortage of residential properties. It is a major problem we have in Australia. And traditional construction methods, in many cases, are not commercially viable. So as a result of the significant work that the Built team have been doing in recent years, together with our team over the last year, we've identified a technical solution that is highly proven in other markets. And with a high degree of confidence, we believe will deliver 20% lower cost of construction at up to 50% faster speed of completion.

So this is, I guess, just an example of ourselves and Built looking at pain points in the market, opportunities to address supply constraints and leveraging proven international technologies and with complementary partners coming together. So look, I'd like to see other factories develop in other states, and there's already discussions progressing with other states that are very keen to try and bring this new capability to their market. And if you look at there are certain markets in Europe where this exact technology is already accounting for the majority of construction within their countries.

And when you look at the challenges around construction costs in Australia, this should be a no-brainer. But lots of work to do, and we'll obviously really leverage some of the Bunnings capability to provide support to the JV, particularly when we think about the fit out. So that will be complementary. And we think that Built is just a fantastic partner and is arguably one of the most progressed and innovative building companies, construction companies in Australia in terms of their digital capabilities. So very small investment in the scheme of the group, but something that over the long term could be an interesting investment.

Great. And is that part of the Bunnings business? Or does it sit in other in terms of this?

We will keep it in other initially, but there will be very strong connectivity with Bunnings particularly. So we'll have Bunnings representatives on the Board. And we also will have arm's length arrangements between Bunnings and the Built Living joint venture as it relates to the fit out of a lot of these developments.

If I can just squeeze in one for Anthony. The margin -- the average borrowing cost of 3.56%, what would be your marginal borrowing cost?

So in that debt position, you're probably aware, about half is fixed on long-term bonds at an average rate of about 3%. And then we've got a half in bank debt effectively at -- mostly floating. So the other half is obviously subject to what's been going on with interest rates. So I'd expect that 3.56% will move up. But on an average basis, probably closer to 4% in terms of average cost of debt.

Richard Barwick from CLSA. Got a question around OneDigital. We can -- we obviously get to see what it costs, at least the unallocated component. So my question is about how you value it. So a question for Anthony or Leah. So I'd just be keen to -- I know it's easy to say the value is demonstrated through the divisions. But from an investor and an analyst perspective, then perhaps if there's any direction you can point us and how you value it and then we might approach it as well? Because, as I say, we get to see the cost, but it's actually very, very difficult to try and disentangle the benefits and the value.

Yes. Look, it's a good question and I appreciate. Look, it is difficult for you to tell or look or see through the value that comes from the divisions. But I think what we do is we look at the kind of economic value add across the divisions. So we do and we're starting to develop a more detailed line of sight. What we are focused on is the incrementality that's creating in terms of sales growth and earnings growth in our divisions.

So you're right in that you see the costs, all of the benefits, including the retail media as well as what's happening with OnePass is all sitting in the division. So we have a, what we call a shadow P&L. And we look at where we're looking -- and we try to measure incrementality across the division. So where we're using OnePass, our royalty programs, where we're getting incremental retail media revenues and earnings from our divisions. And we look at it on a holistic basis to understand is it driving value.

I'd say it's still fairly early days in the development of that, but that's absolutely what we're focused on. We don't want to be spending more and more money on OneDigital, it's not actually adding value. Leah talked before about the insights we're now starting to create from looking at that 12 million customer base we have across the entire group and how do we actually utilize that better to provide more personalized offers to our customers.

I would say that we've started that, but this is a long-term journey. We now have a way of measuring that internally, and we're focused on making sure that over time, that incrementality is higher, and we're generating strong returns off the back of that.

Okay. And sorry. One sort of -- almost sort of follows on from there. I think you've talked before in terms of the sort of the mix of your businesses and mix of investments. And if I think about health and lithium, they have been longer term sort of spent the money and it's sort of incubating coming through. Lithium is obviously about to come through.

Health, as you said, is sort of ramping up of a smaller base. If lithium is now on the cusp of actually delivering for you in terms of earnings, then arguably, it's moved from the investment phase into a delivery phase. So does that -- do you think about that in terms of, right, your investment opportunities, again, you are prepared to perhaps go down a path and choose another one, whereby it's sort of longer dated?

Well, the great opportunity with the Mt Holland project is that, yes, we are very much in the harvesting phase of generating a return from the investment we've made, but it's an incredibly long-life mine, high-quality mine, and we are looking to invest incremental capital in the next phase of the development to double the capacity of the mine and concentrator, as I mentioned. So Aaron will talk more to that. So we still see that there's more opportunity to invest and develop that asset.

But we would expect, as I said, we do expect the earnings to start to flow through in the coming years to generate the return on the capital we've already invested. Well, thank you all very much for the questions. If we haven't covered questions you have, please feel free to chat to us through the break. And then there'll obviously be lots of opportunities to ask questions to the divisional MDs through the session. So we'll break now for lunch and be back at about a quarter to 2 -- sorry, for morning tea, not lunch. It feels like lunch time. It's been a long day. Break for morning tea. Thanks.

[Break]

Well, good morning, everyone. For those who don't know me, my name is Mike Schneider, I'm the Managing Director of Bunnings, and it's always a great joy to share our plan and ambition for the growth of the Bunnings business. At Bunnings, we have some key foundations, growing our addressable market, expanding existing categories and growing markets across -- growing across new markets and channels. We're also accelerating our productivity agenda increasingly enabled through AI, automation and data-led execution.

The momentum we have has been the result of years of disciplined execution and planning across all parts of the enterprise, along with investment in the right skills and development for our incredible team. Turning to Slide 22. 140 years ago, the Bunning Brothers saw an opportunity. They were running a successful contract building practice when gold was discovered in Western Australia. They quickly turned their know-how and relationships into a timber brick and building materials business to supply the gold rush. And in that moment, our company changed forever.

And while the rest might be history, that instinct for identifying growth opportunities anchored by a deep understanding of our customers continues to this day. With such strong roots, the Bunnings of today is a diverse, resilient organization across customer segments, channels and markets. And our focus on doing the right things the right way hasn't changed, care for our team, our customers, suppliers and the communities we serve, remaining committed to lowest prices, widest range and, of course, the best experience, underpinned by rigorous cost and productivity disciplines.

Looking to the future, we are incredibly excited by our ambition to unlock further growth opportunities, and we'll be expanding -- doing this by expanding our addressable market, growing from the core of the business and participating in new and emerging channels like agentic commerce and embracing data and tech to become more relevant to our customers. Our model is a unique blend of proven principles and disciplined execution, along with ambition for what comes next. And as our tagline reads, that's just the beginning.

Turning to Slide 23. At the heart of our business model is a simple idea, creating shared value, and we work hard to deliver for our customers every day. Customer advocacy remains high, supported by deep trust and engagement. That starts with doing the basics well every day, delivering lowest prices, widest range and a consistently positive experience across all our channels. Our large and deeply committed team are central to this, and we continue to invest in safety, inclusion, development and long-term career pathways and our strong ever-evolving culture remains a genuine differentiator and a long-term source of competitive advantage.

We're supported by a broad and diverse supplier base with over 2,000 suppliers across Australia and New Zealand. These strong long-term relationships are deeply valued, helping us deliver for our customers. And our connection to community remains fundamental with our team supporting tens of thousands of local activities every year. Together, these create sustainable long-term value for shareholders, reflected in our world-class return on capital of over 70%.

We'll turn now to Slide 24. Bunnings has established a track record of delivering sustained growth over time across a wide range of economic, geopolitical and financial conditions. Over more than 3 decades, the business has operated through the Asian global financial crisis, the mining boom and subsequent slowdown, COVID-19 and of course, the more recent geopolitical conflicts. And across these, we've adapted to ensure our business model and diverse customer proposition have remained strong. In softer conditions, we know customers lean into value, reinforcing the importance of our lowest prices, convenience, bulk offerings and breadth of range.

Our exposure across both B2C and B2B segments provides additional diversity, supporting resilience through the cycle. Being highly disciplined on capital allocation creates confidence to invest for growth and improvement across stores, supply chain, inventory, digital capabilities and team remain -- keep us well positioned to respond to changing market conditions.

We'll turn now to Slide 25. Our addressable market continues to expand. Today, across Australia and New Zealand, it's around $113.5 billion and continues to grow as we evolve our offer, channel and footprint. We've taken a disciplined approach to category expansion informed by detailed customer and market research along with global insights. We start with small test-and-learn models before scaling quickly through the strength of our team alongside new and existing supplier partners. Our expanded pet and automotive offers are great examples, along with growth in 4-wheel drive accessories, lighting, motorcycle batteries and a new cycling range.

We also continue to grow and evolve core categories supported by strong supplier partnerships. In the last year or so, the confidence shown by DeWALT and Makita through their expanded commercial tool ranges highlights how Bunnings and its suppliers, along with its customers can grow together while challenging traditional assumptions about what products will work in which channels. This year, we will launch the Einhell professional tool range exclusively in our stores.

As one of Europe's leading power tool brands, Einhell will give our trades access to a comprehensive professional range whilst leveraging the broader Ozito ecosystem across lifestyle and camping applications. We also have trials underway in categories such as paint and garden tools to explore new layouts and adjacencies. And of course, we're not stopping there. We're engaging with several strong brands to broaden our major appliance range, building on the success of our small appliance categories, which we launched several years ago. As our homes become increasingly connected, reliable Internet and data services are becoming a core part of the smart home ecosystem.

Building on our leading position across smart home electrification and tech categories, we will expand our offer to include WiFi and mobile services supporting increasingly connected homes, complementing our broader offer across energy generation, storage and usage through a compelling proposition backed by Bunnings. Beyond this, we have a strong pipeline of future category expansion opportunities, including rural, workwear, assisted living, camping and lifestyle to just name a few. We're also opening up new geographic and digital pathways, which I'll speak to shortly.

We'll turn now to Slide 26. Competition today is broader and more intense than ever, fragmented across players, categories and channels. Customers have countless options with technology making market entry easier across almost every category. So we've adapted by meeting customers wherever they are in stores, online through our marketplace, at home on job sites and increasingly through agentic commerce.

Turning to Slide 27. Our market continues to be supported by strong long-term fundamentals, many of which remain resilient across the cycle. Population growth across Australia and New Zealand continues to support housing demand at a time when supply remains constrained. Repairs, maintenance and alterations also provide a resilient demand base across homeowners, investors and increasingly renters as rental laws continue to evolve. At the same time, demographic and lifestyle shifts, including an aging population, changing household formation and growing demand for more sustainable and energy-efficient living solutions are creating new growth pathways across mobility, electrification and services. Changes in how people live and work are also creating new opportunities for the business. Greater flexibility in work patterns and increased time spent at home support engagement across a broad range of home improvement, lifestyle and project categories.

We'll turn to Slide 28. Our sustained success over more than 3 decades is anchored in our 3 core pillars. Lowest prices every day remains critical, supported by a deep supplier relationship and a disciplined focus on cost and productivity. It's never been more important to provide price transparency and trust whilst avoiding gimmicks. We invest heavily in price and our price match policies allow us to react quickly to changing market conditions. Our widest range continues to expand with over 0.5 million products available in-store, online and through marketplace, spanning home, commercial and lifestyle categories, including the brands that we know our customers know and trust.

This is also supported by best experience regardless where customers are, whether they're at home, on the job site through our team, our stores, digital platforms, supply chain and making sure that we are consistent in our delivery and execution regardless of when or where our customers choose to shop. These pillars underpin our customer value proposition and remain a clear source of competitive advantage and deep brand trust.

We'll turn now to Slide 29. Building on these strategic pillars, our culture and community connection set us apart. This starts with maintaining a safe and inclusive workplace where our team can contribute and perform at their best. Our strong links to the communities in which we operate remains a defining feature of Bunnings. In the last financial year, we helped raise close to $68 million for community groups over 77,000 local community activities. Sustainability-wise, we're now powered by 100% renewable electricity, supported by over 215 rooftop solar installations across the Bunnings network. And of course, we remain well on track to achieve net zero Scope 1 and 2 emissions by 2030.

Turning to Slide 30. As I mentioned earlier, our plan has multiple growth drivers across a diverse customer base, supported by a strong record of disciplined execution. At the core, we continue to expand our offer through range expansion, new categories and evolving how our customers shop with us. We're optimizing our network, improving layouts and accelerating space productivity. In commercial, we're driving growth through changes to loyalty and target capability investment, strengthening how we support trade and business customers. We're also building adjacencies with significant long-term potential, including the $3.3 billion home electrification market through solar, battery and EV-related solutions.

These complement our broader expansion across solar and energy storage through lighting, water and cleaning as well as EV charging. Blackwoods further adds to our range, accelerating our participation in the greater than $10 billion SME market through enhanced sales management, industrial-grade products and fulfillment capability. AI, data and digital capabilities are increasingly enabling the business by improving personalization, expediting decision-making, simplifying our operations and supporting productivity at scale. These initiatives are supported by a strong productivity focus, enabling reinvestment in our business, maintaining price leadership for our customers and supporting strong shareholder returns. Many of these initiatives are already delivering strong results, giving us incredible confidence in both our execution capability, but the opportunities that lie ahead as well.

Turning to Slide 31. Driving growth from the core comes from disciplined range renewal and targeted category expansion. While I touched on some earlier examples, this extends across our whole offer. By evolving the look and feel of our stores from a merchandising and service perspective, we can now better showcase new and existing ranges, improve our customer experience and enhance space productivity. And of course, no department or category is static or immune. Changes such as the introduction of lead-free tapware and plumbing is helping us renew ranges and bring greater style and innovation along with better value to our customers.

And similarly, our new lighting grids create more of a showroom environment, making it easier for customers to explore our ranges. We've also launched rural ranges across marketplace and 140 regional stores in Australia and New Zealand. With over 800 SKUs, including fencing, animal feed, irrigation and rural hardware, this materially expands our addressable market in our regional catchments. We continue to evolve and accelerate our range review process by leveraging AI and improved data capabilities to support decision-making and speed up execution. The same is, of course, is happening online with improved range curation and AI-enabled tools to help our customers more easily complete projects and bring their ideas to life.

Turning to Slide 32. Our store network remains a significant growth driver for the business with opportunities to expand the network and improve productivity. Over the past 5 years, we've grown sales almost 4x faster than space growth, driving improvements in sales density and return on space. This is achieved -- this has been achieved in a disciplined way through range changes and category expansion, particularly in higher consumable categories that also increase customer shopping frequency. Looking ahead, we see a strong and disciplined pathway for network growth of around 10% over the next 5 years, supported by expansion opportunities, particularly in regional areas and a pipeline of over 100 property projects spanning new replacement and upgraded stores.

A great example is our small format store optimization program. Our pilots delivered uplifts in sales and gross margin density and a rollout is now underway across the whole network. This includes reallocating space from lower productivity categories into stronger performing ranges. Curated assortments simplify our operations and reduce the need for ongoing range adjustments. And another example is the Beaumont Tile store-in-store concept, which we launched as an initial trial at French's Forest here in Sydney when the store opened late last year. The performance of the concept has exceeded expectations as has the performance of the traditional Bunnings flooring offer in the store with a planned multi-store trial now following. For those interested, a video fly-through of our French's Forest store is available on the Wesfarmers website.

Turning to Slide 33. Commercial is a key growth driver for the business with sales continuing to track towards 40% of revenue. This addressable market is large, fragmented and growing, and we see a significant runway ahead, including clear opportunities to scale our commercial operations across our 3 segments: builders, trades and organizations. To support the next phase of growth, we'll soon launch the next generation of our PowerPass loyalty program. PowerPass is a key enabler of our commercial business supporting over 1 million customers, creating a strong competitive advantage through deeper customer relationships. Our trade customers have told us they value greater recognition for their spend and more personalized experiences, and we've listened carefully.

PowerPass Pro Rewards will introduce spend more, get more rewards, along with exclusive member offers and tools and services designed to help our customers to run their businesses more effectively. We expect this to accelerate growth by increasing engagement and shopping frequency, boosting share of wallet and improving customer retention. More broadly, we have continued to strengthen our commercial offer through faster delivery, specialist service teams and AI-enabled quoting tools that are already materially improving response times, team productivity and conversion outcomes. We're also excited by the opportunity to support the Wesfarmers Built Living joint venture through the supply of joinery, fit-out and landscaping products, creating incremental growth opportunities for our trade and commercial capabilities.

Turning to Slide 34. I touched earlier on some of the opportunities from working with Blackwoods. This move will accelerate our growth with commercial customers and strengthens our opportunity to broaden our offer to business customers across Australia and New Zealand. For Bunnings customers, this also creates access to a wider range of specialist products and more tailored solutions for SMEs and commercial customers. It also strengthens our scale across sourcing and supply chain capability, creating opportunities to share expertise and leverage complementary strengths across the businesses. Importantly, Blackwoods and Workwear Group will continue to operate as stand-alone businesses, retaining their customer-facing brands and continued focus on their core service proposition.

We'll turn now to Slide 35. We're well positioned to grow through a number of compelling adjacencies to our core business. I touched earlier on smart home and solar. While solar adoption has grown rapidly, it remains complex and costly in the market for our customers. So we're seizing the opportunity to simplify that experience and improve affordability. In May, following a successful trial here in Sydney and Newcastle, the Zelora offer was also made available to our customers across New South Wales and into Victoria, Queensland and South Australia, bringing more affordable solar and battery solutions to households.

With energy costs continue to rise and demand for solar and battery solutions increasing, Zelora provides a cost-effective pathway for our customers to access home electrification without the significant upfront costs. Customers will pay through a subscription model and own the system outright at the end of a 10-year term. In the Pacific Islands, we're growing our commercial export relationships while unlocking new customer channels through Bunnings Pacific. Our digital store is now fulfilling orders directly to customers in Fiji, a market of close to 1 million people. This initiative builds on existing export demand and creates a scalable platform for broader Pacific growth, representing initial home improvement and lifestyle market of more than $1 billion.

We also see strong opportunities to expand our commercial wholesaling presence across the region, particularly within the visitor economy where hotels, resorts and supporting infrastructure are major drivers of economic activity. We'll turn to Slide 36. The Bunnings marketplace continues to scale as a growth engine for the business with gross merchandise value growing by nearly 50% per annum on average over the last 5 years. Marketplace allows us to expand range rapidly, particularly across long tail and specialist categories while improving customer choice and availability. For example, our rural marketplace range has grown GMV by more than 33% over the past year, helping us better serve customers in regional and remote areas. And it's a similar story in automotive, where GMV has increased by more than 70% since July last year.

We see significant opportunities ahead across this channel. We've now launched our trade marketplace, and we'll continue expanding into New Zealand later in the year and have plans underway for a services marketplace that builds on the dozens of installation services we already provide for trade and DIY customers. Turning to Slide 37. At Bunnings, we see AI as key to delivering the best customer experience through conversational commerce and agentic AI. The launch of Buddy in April demonstrates the speed and scale of our digital transformation, cementing us as a global retail leader in the use of this technology. Buddy is already delivering strong engagement outcomes, including more than doubling online conversion rates and increasing basket size through project-based shopping behavior.

Buddy helps our customers take on DIY projects with confidence by bringing expert advice into the home through a more personalized experience across browsing, planning and purchasing online. Importantly, the solution complements the trusted advice that our incredible team provides in-store every day, giving our customers more ways to engage with us. We also know customers are increasingly searching their products directly through generative AI platforms. In the next 2 weeks, we will be among the first retailers in Australia to launch a shoppable range through Google AI mode. Customers will be able to research products, select recommended items from our catalog and complete transactions directly through AI mode across Google Search, Chrome and the Google app.

Turning to Slide 38. Bunnings is emerging as one of the leading retailers in Australia in applying AI at scale across customer experience, commercial operations and productivity. AI is now embedded across the business, helping our team work smarter, freeing up time to focus on customers and higher-value activities. At our core, we are a people-led business, and our team remains central to the customer experience. So when we think about AI in our stores, the focus is on how tech can help our team serve our customers better. A great example is the team chatbot, which we rolled out across our store network last year. This is accessed through handheld devices, giving our team members fast access to product information, policies and service advice while helping them serving their customers on the floor.

The chatbot now answers over 1,500 queries a day and has analyzed more than 4 million product, policy and Internet entries to support the way our team engage with customers. More recently, we introduced visual search capability, which allows our team to photograph a part brought into the store and quickly identify whether we have a stock replacement. We've also introduced AI into our commercial quoting processes, significantly reducing workload and enabling same-day responses, helping our team to win more business. And we're using a new AI elasticity model to help maintain strong EDLP pricing while optimizing our inventory.

And we've introduced Janie, an AI tool developed by our team that draws on product reviews to help our merchandise team identify trends, improve product decisions and strengthen supplier conversations while also supporting our move into agentic commerce. These capabilities are already delivering measurable outcomes across sales, productivity and team efficiency with a substantial runway ahead as adoption continues to grow.

Moving to Slide 39. Personalization at scale is a key driver of customer loyalty and earnings growth. Today, around 65% of our sales are linked to a loyalty platform across OnePass, Flybuys and PowerPass, giving us a significant advantage in understanding the needs of our customers. This allows us to better understand shopping behavior and deliver more targeted offers, driving higher engagement and stronger customer lifetime value. Through our investments in data and AI, we're evolving personalization to better understand customer projects and deliver more relevant advice, content and solutions. We also see further upside from expanding these capabilities into New Zealand, where we don't have that capability today.

This represents a clear opportunity to increase engagement and drive incremental growth over time, and we look forward to launching the program later in the year. Overall, our ability to leverage data and loyalty at scale is becoming a key differentiator, supporting higher basket value, stronger conversion and more efficient customer investment. Turning to Slide 40. We are rapidly scaling our retail media platform into a higher-margin, capital-light earnings stream. The Hammer Media network now spans more than 560 in-store screens across more than 250 stores in Australia and New Zealand, including paint and tool shop screen trials in Victoria.

We're also exploring additional digital opportunities across our store and Pulse sign assets. And in November last year, we launched it, our ad server platform, enabling supplier advertising across websites and apps and strengthening our digital media capability. We've also launched our own DAB radio station, Tradio, extending our audience reach. DeWalt is the primary sponsor of Tradio Commute, an early morning drive program with brands such as Mercedes and Amex already participating as non-endemic advertisers.

Together, these initiatives and our unique customer mix are strengthening our retail media network, enhancing the propositions for both endemic and non-endemic advertisers and positioning Bunnings as one of the leading media retail platforms in Australia. We're enabling productivity -- sorry, turning to Slide 41, I should say. We are enabling productivity through disciplined investment in tech and team capability. Across our store network, technology is simplifying workflows and improving customer service. As I touched on earlier, our enterprise-wide approach to AI and the broader tech agenda is delivering significant benefit right across the business.

Electronic shelf labels, which we continue to expand across more categories, give us faster price changes, improved accuracy and reduced manual activity in store. Rostering and execution management tools are also helping to improve service, focus -- I'm going to start that again, my apologies. Rostering and execution management tools are also helping improve in-store service while optimizing team coverage and supporting our ability to offset inflationary pressures across the cost base.

And across our supply chain and fulfillment, we're investing in order management systems and productivity initiatives to improve visibility, efficiency and fulfillment capability. Across our customer contact centers, technology is helping to resolve queries faster, reduce repeat contact and improve efficiency with a strong focus on customer outcomes. Together, these initiatives are delivering meaningful productivity benefits, supporting stronger operating leverage across the business.

Turning to Slide 42. As our network and e-commerce offer continue to grow, we're evolving our supply chain in a logical and incremental way, improving productivity, customer experience and safety. Our long-term road map focused on enabling greater direct sourcing, simplifying store replenishment, enhancing fulfillment and last mile capability and leveraging technology, data and AI to drive a more connected and scalable network over time. Importantly, our approach remains highly disciplined from a capital perspective. We are focused on targeted investments that improve our network while leveraging strength in the proximity advantage of our existing store network. As our customer expectations evolve, our agility positions us well to support future growth across stores, e-com marketplace and commercial while continuing operating -- to improve operating leverage across the business.

Turning to Slide 43. Over the past 2 years, we've expanded our inbound freight model with a growing cohort of suppliers, enabling Bunnings to directly manage freight movements into stores from supplier pickup through to back dog delivery. This has reduced in-store congestion, improved safety, given us stronger fleet utilization and more predictable delivery flows. And we're now rolling this model out across more of our suppliers and categories, giving us greater control and visibility across the supply chain while unlocking further efficiencies for both Bunnings and our suppliers.

As e-commerce continues to scale, we're also building a leading fulfillment offer through expanded delivery options, including same-day, next-day and 2-hour delivery, our Uber Eats partnership and of course, 2-hour click and collect. These capabilities help us better serve customers wherever they shop, whilst leveraging the advantages of the store network being located so close to where our customers live and work.

And finally, to Slide 44. To close, Bunnings has consistently delivered sustainable revenue and earnings growth over the long term. That resilience is underpinned by an expanding addressable market, growing our core categories and introducing new channels and markets. Supporting this are long-term demand drivers that are really favorable and a diversified mix of customers, channels and categories. Looking back over the last 20-so years that I've been at Bunnings, I can't recall a time where we have been more energized by the opportunities ahead.

Some of that comes from the step changes delivered through our significant tech transformation and some from the energy and innovation we continue to see from our team and our suppliers. The success of our category expansion, new channels and new markets has further strengthened our confidence that we are well positioned for our next phase of growth. When I think about the time, cost and productivity opportunities that we're unlocking, I'm increasingly confident in both our ambition and our ability to execute.

Our offer continues to evolve. We are growing and optimizing our space. We are accelerating our digital data, AI and tech capabilities and delivering tangible productivity outcomes right across the business. Together, our growth plan positions us to build on our momentum and continue to deliver long-term sustainable and profitable growth. Thanks so much, and I'll now hand over to Aleks from Kmart.

Good morning, everyone. I'm Aleks Spaseska, Managing Director of Kmart Group. So today, I'd like to cover our strategy, the progress we've made over the last 12 months and how we are positioning the business for sustained growth in sales and earnings. Our strategy is clear. We're scaling a structurally advantaged value-led model. We're reinvesting productivity gains in price and growth initiatives, and we're doing this with disciplined capital allocation.

Turning to Slide 46. Last year, I set out a refreshed strategy focused on strengthening our core and scaling two growth platforms, digital and global. Over the past 12 months, we have made strong progress. In our core business, Anko remains central to our product strategy. We have leveraged our differentiated product development capability to expand strategic growth categories while also using our scale advantages to deliver even lower prices for our customers.

In response to ongoing cost of living pressures, we have reduced prices on more than 2,500 products just this financial year. And we expect value to remain an enduring trend and are very well positioned within this environment. Our store network also remains a significant competitive advantage. We're continuing to evolve our format to drive higher visitation and sales productivity, with 16 stores now trading in the new Plan C+ format. We have also continued to progress the transformation of our supply chain, including the ongoing construction of our Next Gen omnichannel fulfillment center while advancing productivity initiatives across the whole business.

In our growth platforms, we have accelerated progress in digital. The Kmart digital ecosystem now extends across Target and third-party marketplace sellers, supporting customer acquisition, increased traffic and stronger product engagement. We have also made significant investments in fulfillment capacity and capability, creating a solid foundation for long-term growth. And in global, our five stores in the Philippines have further validated our customer value proposition and help refine our areas of focus.

Building on the progress we have made, our future strategy remains focused on the customer and specifically, two things. Firstly, value remains an enduring trend across all customer segments, and this has become even more pronounced in recent months. Secondly, younger, digitally native consumers are growing fast in retail spend share. Engaging these customers early through the evolution of our product offer and shopping experiences is a strategic priority.

Turning to Slide 47. Our competitive position is built on a set of structural advantages that are difficult to replicate at scale. Firstly, Anko gives us a differentiated product engine, combining design, sourcing and product development capability to deliver quality products at low prices. Second, our Low-cost operating model allows us to reinvest in price and maintain value leadership. This is supported by scale, simplified ranging, strong supplier partnerships and growing productivity across our business.

Third, our Store network gives us reach, convenience and a powerful omnichannel advantage. Stores remain our largest channel, but they also play an important role in digital fulfillment. And finally, our digital ecosystem is becoming a more meaningful driver of growth, deepening engagement, expanding our addressable market and strengthening how customers shop and discover our offer. Importantly, it's the combination of these advantages that matters most. Together, they create a resilient, value-led model that positions us well to respond to changing customer expectations and supports growth over time.

Turning to Slide 48. This slide brings together the strategy we are executing across Kmart Group. At the center of that strategy is our enduring purpose, making everyday living brighter. In an environment where value matters more than ever, that purpose remains highly relevant for customers. Our retail brands, Kmart and Target, play distinct and complementary roles. Kmart is focused on delivering the lowest prices on everyday items for families. Target is focused on quality at low prices in apparel and soft home. Together, Kmart and Target can capture a larger share of the addressable market than either brand alone, while both benefit from a common operating model that leverages the combined scale of the group. We have five strategic pillars that will drive growth in sales and earnings over time, and I'll now step through the progress we've made and our priorities within each pillar.

Turning to Slide 49. Delivering better products at even lower prices remains one of our most important growth levers. Our opportunity is to grow share of wallet in a large and expanding addressable market. We are doing that by combining our product development capability with the scale advantages of the group. Over the past year, we have continued to broaden and improve our ranges in areas where we see the strongest growth potential.

As just one example, our youth apparel ranges continue to perform well, representing an increasing proportion of womenswear and menswear sales. This success has been underpinned by faster design to shelf lead times enabled by digital tools and supply collaboration. Elsewhere, we continue to build on our first mover advantage in the Kidult category. With the category continuing to grow, we see further potential from product innovation. And furniture is another good example where we see a significant opportunity to expand into a large category by bringing high-quality on-trend products to market at extreme value price points.

Within this strategic pillar, Kmart and Target played differentiated and complementary roles. As I mentioned, Target remains focused on quality at low prices in apparel and soft home, helping us broaden our reach across the total market. Across both brands, we continue to invest in digital product development capabilities to improve speed to market, optimize our ranging and further strengthen product innovation. This includes embedding AI across the product design and quality life cycle, for example, in faster insight generation, trend analysis and more streamlined supplier collaboration while keeping the human judgment and curation that differentiates our ranges.

Over time, we expect to move toward even more agentic AI applications. Underpinning all of this is disciplined focus on manufacturing best practice, automation and collaboration, which allows us to keep prices low for customers.

Turning to Slide 50. Stores remain one of our most important structural advantages, and we're investing in format innovation and digitization to improve productivity, customer experience and our omnichannel capabilities. A good example is our Kmart Plan C+ store format. We have 16 stores trading in the format today, and it is delivering improved space allocation, better visual merchandising and an enhanced beauty experience. Importantly, the format is driving higher sales through increased cross shop between departments, more items per basket and strong engagement from younger customers. As a result, we are scaling investment in the format and expect to have around 40 Plan C+ stores trading by the end of FY '27.

We're also trialing some brand-new concepts, including a K Home store, which I will cover in more detail on the next slide, and a partnership with Officeworks to trial a tech hub in a Target store, which John will cover in his presentation. Alongside format innovation, digitization of our stores remains a major priority. Our focus is on improving inventory accuracy, product availability and team efficiency while also building a stronger foundation for omnichannel fulfillment. RFID has already delivered better on-shelf availability and inventory integrity in apparel, and now we're extending that capability across additional categories and into Target.

In parallel, we're using AI-enabled solutions to improve inventory integrity in general merchandise while the broader RFID rollout continues. Earlier this year, we also completed our first RFID-enabled stock take in apparel, demonstrating a faster and more accurate alternative to our manual processes. Taken together, these initiatives are making the store network more productive and more relevant to how customers want to shop.

Turning to Slide 51. K Home is a new concept store we are trialing as a stand-alone home and furniture destination. The first one will open in Box Hill, Victoria next week, and the video behind me gives you a first look at how the store is coming together. Strategically, it is designed to test whether we can unlock a bigger home opportunity through a more immersive format that showcases the breadth of the Anko range in a way our full-line stores cannot. The store has been designed to present the offer differently with curated displays, room-based inspiration and a more immersive home environment that helps customers discover the range in a more engaging way.

There are two reasons this format is attractive. Firstly, it allows us to physically showcase a broader furniture and home range, including products that today are online only because of space constraints and strong sales densities in our full-line Kmart stores. Second, it gives us access to stand-alone locations that would not support a full line Kmart, helping us reach more customers with our low-price home offer. We will use the trial to learn quickly, refine the model and assess the longer-term opportunity. As you would expect, we will be disciplined in how we evaluate the format with a particular focus on sales density, cost structure and understanding how customers engage with the offer in this new environment.

Turning to Slide 52. Our Low-cost operating model remains a core competitive advantage, and we're continuing to strengthen it through supply chain modernization, productivity initiatives and inventory optimization. This is what allows us to keep investing in lower prices for customers while also supporting sustainable growth in earnings.

A key part of this strategy is our supply chain modernization program, which is designed to improve availability, reduce cost and build a safer and more scalable network. We have already made good progress. Centralized fulfillment for online orders is now scaled across New South Wales and Victoria, improving inventory availability, reducing complexity in our stores and supporting a better delivery for our customers. We've also upgraded our online order management system, providing a stronger foundation for future growth.

Construction of our automated Next Gen omnichannel fulfillment center in New South Wales remains on time and on budget. The site is expected to become operational in FY '28 and will be a critical enabler of a more resilient, efficient and scalable domestic supply chain over time. The cost of commissioning the facility, including a period of dual site operation in New South Wales, will be reflected in our FY '27 earnings, with benefits expected to commence from FY '28 onwards.

Alongside this, we're also upgrading our warehouse management systems across our network. Together, these investments are creating a more resilient and agile supply chain platform that can support both growth and efficiency over time. In parallel, we continue to focus on productivity, inventory optimization and cost efficiency across the end-to-end operating model. We have now scaled RFID at source to more than 60% of purchase order volume in apparel, improving item level visibility and accuracy and building the foundation for end-to-end supply chain visibility over time.

Looking ahead, AI will become an increasingly important layer of optimization across forecasting, inventory positioning and replenishment. This has the potential to further improve speed, consistency and cost outcomes across our network. Taken together, these initiatives are strengthening our low-cost operating model and improving our ability to further invest in price availability and long-term growth.

Turning to Slide 53. Digital is one of our most important growth platforms, and we're continuing to build a more compelling omnichannel ecosystem for customers. Our objective is to expand the addressable market, deepen engagement and further improve conversion. The clearest example of that is our marketplace, which brings together Kmart, Target and curated third-party products in one highly discoverable platform. The marketplace materially expands customer choice and makes it easier for customers to complete more of their shopping with us in the one place.

We now have more than 130,000 products available on the marketplace from 90 sellers, and the early trading results have been really encouraging. Since launch, 40% of our marketplace customers had not transacted with Kmart in the prior 12 months, demonstrating the strong customer acquisition through this channel. We're also seeing larger baskets from marketplace customers, which indicates the positive halo effect into our own brand offer.

The launch of Target on Kmart has also been successful as a customer acquisition channel for Target. The Kmart app is becoming the primary gateway to our digital ecosystem. Customers using the app are more engaged overall, and we see the app as the natural platform for Discovery, Loyalty and omnichannel shopping. Over time, we will continue to use OnePass, Flybuys and Kmart Group data together with AI to create a more personalized customer experience. That includes improving onboarding, tailoring content and strengthening loyalty and retention across the entire customer life cycle.

AI is also becoming an increasingly important enabler of digital growth. Today, it is helping improve search, product discovery and customer service. A good example is Joy, our AI-powered shopping assistant, which is beginning to support more intuitive shopping journeys through guided product discovery, conversational assistance, virtual try on and see it in your space experiences. Over time, agentic capabilities will play a broader role in supporting conversion, personalization and post-purchase experience as our digital ecosystem scales. Taken together, these initiatives are helping us build a more personalized, more engaging and more scalable online offer.

Turning to Slide 54. Global expansion remains one of our long-term growth platforms with the opportunity to grow Kmart Group's addressable market and build the value of the Anko brand in international markets. Our ambition is to develop Anko Global into a business of meaningful scale over time, but we are doing so in a measured and disciplined way. Over the past 12 months, the five Anko stores in the Philippines have provided important proof points on the strength of our customer value proposition. The customer response has been encouraging, giving us greater confidence that the Anko offer can resonate in international markets beyond Australia.

Just as importantly, the pilot has helped us to refine our model and better understand where we see the strongest path to profitable growth. As a result, we have sharpened our channel strategy. Future investment will be focused on Anko-branded stores where we see the greatest opportunity to build brand awareness, deepen customer engagement and create a stronger long-term platform for growth. At the same time, we will continue to support our large retail partners, which remain an important part of how we extend the reach of the Anko brand globally.

Our approach remains disciplined. We will continue to learn, refine the model and scale deliberately with a clear focus on profitability and capital discipline over time. While Anko Global will not be material in the near term, we continue to see the potential for it to become a meaningful contributor to Kmart Group over time.

Turning to Slide 55. Delivering the strategy requires targeted investment in a number of high-priority capabilities, with FY '27 to represent a significant year for investment. The largest single driver of that will be the commissioning of our Next Gen omnichannel fulfillment center in New South Wales, which is an important enabler of a more efficient, scalable and resilient operating model over time.

Beyond supply chain, our investment priorities are focused on three areas: Store format renewal and digitization, digital ecosystem capability and core technology and operating platforms that will improve speed productivity and decision-making across the group. Our investments prioritize capabilities with clear strategic relevance, sequencing spend over time and balancing near-term earnings impacts with the long-term benefits these capabilities are expected to deliver. Taken together, these investments are designed to support a more productive more scalable and higher growth business over time.

Turning to Slide 56. I'll now close with four key messages. Firstly, Kmart Group is scaling a structurally advantaged value-led model. Our differentiated product capability, low-cost operating model, store network and growing digital ecosystem position us well to respond to customer needs and grow over time. Second, customers remain highly focused on value in the current environment, which makes our low price positioning especially important. That is why we remain focused on price productivity and disciplined execution while continuing to invest in the capabilities that will strengthen the business over the long term.

Third, we're investing in a disciplined way to scale our model. FY '27 will represent a year of material investment, and those investments are targeted at strengthening our structural advantages, improving productivity and scalability and supporting sustainable growth in sales and earnings over time. Taken together, we believe this positions Kmart Group for sustainable growth in sales and earnings over time. Finally, I'd like to take a moment to sincerely thank the teams across Kmart, Target and Anko for their continued hard work and dedication to delivering for our customers every single day.

Thank you, and I will now pass to John Gualtieri.

Good morning, everyone. I'm John Gualtieri, the Managing Director of Officeworks. Having commenced in August last year, I'm pleased to be here today to present our refresh strategy.

Moving on to Slide 58. I'd like to start with some key observations from the comprehensive strategic review we conducted that has shaped this strategy. It is clear that Officeworks is a strong business built on the foundations of a trusted brand, loyal customers and a passionate team. More importantly, these are significant opportunities ahead of us.

The first is our cost base. While we have continued to grow our top line over recent years, this hasn't consistently translated into earnings growth. Standing at a pivot point with AI and digitalization, we now have the perfect opportunity to fundamentally reset our cost base. Second, we are seeing a distinct evolution in customer needs and shopping behaviors. This gives us an opportunity to strengthen our customer value proposition, particularly in the technology categories.

Third, we have a major opportunity that lies within the large and fragmented B2B and Education markets, where Officeworks is strongly positioned to scale and gain market share. Lastly, we want to evolve our culture to support our new strategic ambitions. To unlock this full potential, we have reset our strategic direction and have commenced a multiyear transformation late last year.

Moving on to Slide 59. Our transformation started with the refreshed purpose, we bring big ideas to life at low prices. This is grounded in what we're hearing from our customers that value is increasing front of mind when they shop. Underpinning this purpose are our new values, deliberately designed to reinforce the behaviors and culture required to deliver our transformation to drive a relentless focus on customers, accountability and our ways of working together.

Moving on to the five strategic priorities. Our first priority is to become a low-cost operator. This enables us to reinvest in lower prices while continuing to deliver earnings expansion. Second, we will reset merchandise and value fundamentals to reclaim price leadership. Third, as we know, customers are changing shopping habits. We want to meet them where they are, provide frictionless and connected journeys, however they choose to shop.

In terms of growth, we remain focused on the largest opportunities where we have the strongest right to win by becoming the first choice for complete tech solutions and a market leader in B2B and Education. To deliver a transformation of this scale and to win in a fast-paced digital world, we'll need to build foundational capabilities. The first is our data, digital and AI capability. Our ambition is to become a digital native retailer.

For us, being a digitally [ novel ] retailer means transforming data, digital capabilities and AI into our ultimate competitive advantage. We treat every customer interaction, operational activity as a strategic data asset, utilizing technology as the core engine for decision-making across our stores, supply chain and support office. Rather than simply using AI to chase incremental efficiencies, we are leveraging it to fundamentally orchestrate new ways of working, completely redefining how customers shop, how we sell and how we operate from end to end. Combining this capability with the Wesfarmers share data asset of 12 million customers creates a platform for a powerful and hard to replicate competitive advantage. We will also expand our talent pool, both in Australia and globally to access core expertise in retail, digital, AI and automation. I'll share more detail on the next slide.

This is our overview of our strategic framework. We expect to complete our core reset activities by calendar year 2027, providing us with a clear runway from that point forward. With that, I now will take you through each of the strategic priorities, beginning on Slide 60. Our first priority is to become a low-cost operator. Starting with our support office operating model.

Over the past 10 months, we have applied a critical lens to rightsize our organizational structure. We have already made significant progress in restructuring our Australian support office to simplify how we work. We have also reviewed our executive team with deep transformational and global retail experience, equipping us with the capabilities needed to execute this strategy with pace.

Globally, we have established the Officeworks operator Global Capability Center, or GCC, in India. As I noted earlier, global talent is a critical foundation of our strategy. This initiative not only unlocks significant efficiency, but more importantly, gives us access to world-class talent.

We will also relocate a large proportion of our customer contact operations to the Philippines. In conjunction with these structural changes and to accelerate our journey to become a digital native retailer, we are focusing on digitalizing end-to-end support office tasks. An example at our recent AI-powered coding system, which is in the early phase has already resulted in a productivity uplift of 40% across the software development cycle. In making these decisions, we are guided by Wesfarmers' principles of being people-first and digitally enabled. This allows us to build a more resilient and efficient business while keeping our teams, customers and stakeholders at the core of our decision-making.

In our stores, readily available and knowledgeable team member assistance is critical to the customer experience. To maximize our customer facing time, we're digitalizing manual tasks like rostering and inventory management, freeing up our teams to focus on delivery service on the sales floor.

Moving on to global sourcing and supply chain operations. As a major strategic move this year, we will transition our sourcing operations to Anko sourcing. By plugging into Anko world-class sourcing capabilities, we gain immediate access to its global scale, unlocking significant structural cost efficiencies while accelerating our private brand innovation and speed to market. Alongside this, we're embedding AI-driven analytics in our end-to-end supply chain, including advanced demand forecasting and optimized last-mile routing.

Lastly, we are actively optimizing our store property portfolio. We will continue to expand in profitable areas. We will also consolidate locations where it makes sense. This ensures our networks aligns with our evolving shopping habits and customer expectations while delivering optimal financial returns.

Now turning to Slide 61 for our next strategic priority. Our second priority is to reset our merchandise and value fundamentals. As I mentioned early -- earlier, our new purpose is anchored in delivering low prices to our customers. While our first priority focused on reducing our cost of doing business, this second priority focuses on improving our offer for customers and enabling us to reclaim price leadership in the Australian market.

During our recent review of merchandise performance, we identified a long tail of products that are no longer our customers' top preference. To address this, we are actively rationalizing our range and brand architecture. An example, we recently rationalized about 50% of the brands in cables and chargers category. By reinvesting efficiency gains back into our pricing, we have delivered double-digit percentage price reductions. Despite a lower ASP, we achieved a significant margin improvement driven by strong volume growth.

Across all categories, we have delivered price drops on close to 2,000 products, with more in the pipeline. We are also accelerating private brand penetration. This is a strategic advantage, allowing us to drive innovation and value for our customers. We aim to double our private brand penetration over the coming years. Simultaneously, we will build deeper, more meaningful partnerships with our core national and international brand suppliers, with a primary objective of achieving greater shared commercial accountability and outcomes.

Turning to Slide 62. Our customers' shopping behavior are rapidly changing, with about 80% of shopping missions now starting online. We must evolve to meet these new expectations of established omnichannel as a key competitive advantage. This shift isn't about keeping pace today. It is about preparing for the future and achieving our ambition to become a digitally native retailer. We are in the process of building agentic commerce capabilities across both our own digital platforms and third-party networks. Supported by partners like Google, we are preparing for a future of agent to agent commerce, where the customer's agent interacts with Officeworks agents to fulfill their shopping needs.

We're also expanding our range to new customers across both digital and physical channels. Digitally, we are scaling our presence on third-party marketplaces and driving adoption of our new mobile app. Our recent launches in the Kmart and Uber marketplace are delivering strong commercial outcomes and show a material headroom for growth. These marketplaces enable us to profitably reach new customer demographics, such as a younger convenience-driven shoppers. Physically, we are actively trying new formats, beginning with a small tech shop within a Target, with our first trial store opening last month. Looking ahead, these small format trials will inform our longer-term vision for the network.

Finally, we know the bar for immediacy has been raised. Today, over 90% of consumers consider fast delivery to mean same-day service, not just to meet but exceed those expectations. We have launched new fulfillment options, including sub-1 hour delivery through Uber. At the same time, we are continuing construction of our new automated omnichannel supply chain facility in Queensland, which will unlock a step change in productivity and immediacy.

Now turning to Slide 63. For our growth priority. Win is the first choice for complete tech solutions. We are transforming from a retailer that simply sells tech solutions into a solutions-led service-enabled technology partner. To be first choice, our immediate focus is on earning their deep trust and becoming their top-of-mind destination for genuine advice and service. I'll walk you through the details of this model on the next slide.

To support this ambition, we continue to evolve and innovate our tech range. We're expanding further into two high-growth lifestyle categories, the smart home and health tech market and the gaming and kidult market. While our primary target remains the mainstream everyday consumer who already shop with us, these lifestyle categories act as a powerful acquisition engine to attract younger and more tech-savvy demographics. By engaging these customers earlier, we have a clear opportunity to grow their customer lifetime value across our broader ecosystem.

We are prioritizing these categories because we have a clear defensible right to win, built on three core strategic assets. First, our strong partnership with market-leading international and national brands. Second, our unique ability to bundle those brands with adjacent categories and the Geeks2U service to provide a complete solution. And finally, the trust and convenience delivered by our national omnichannel network. Geeks2U plays a key role in providing complete solutions and driving customer lifetime value. To build on this, we will continue to broaden our offer to cover service required throughout the tech life cycle. We'll also launch a refreshed postpaid telco offer which complements our hardware categories and creates lasting high-value customer relationships.

Now turning to Slide 64. I'll elaborate on the details of our new in-store service model. We have fundamentally restructured our store operations model to focus on customer experience above just task and transaction. Our clear differentiated in the market will be our commitment to providing trusted service and advice that builds genuine, long-lasting customer relationships. Our first step is to increase our tech team and their coverage. By reinvesting productivity gains from store digitalization, we are deploying specifically recruited and trained tech team members into every single store.

Second, in line with our digital native ambition, we are uplifting our team sales capability and product knowledge by fundamentally change how we put them on the sales floor. Alongside updated training programs, we are deploying AI-enabled recommendation tools directly into their handheld devices. This provides them with instant access to product comparisons, solution build and advice, empowering every team member to be confident tech experts on the sales floor.

Lastly, we are launching product-agnostic team member incentives. This will ensure our team members are focused on providing unbiased, trusted advice that solves customer needs rather than just selling products. We're executing this initiative with pace, with the first tranche of stores launched and the full national rollout in FY '27.

Now turning to Slide 65. The B2B and Education sectors represent a large, highly fragmented market. Our ambition is to capture that fragmented spend and become the #1 player in the market. We know the businesses, schools and early learning centers have broader needs than our core offering. To close these critical gaps, we expand into workplace facilities and education resources categories. Furthermore, we will extend our Geeks2U service to meet the increasing tech demand from SMEs becoming the go-to partner for complete tech solutions.

We will continue to broaden our customer base, particularly in the large government, corporate and education segments, by attracting them through our strong value credentials, expanded range and service offerings. This will also be supported by a high-performance AI-enabled Sales engine in our global customer service center. For instance, we are deploying AI to monitor live interactions. It will automatically feel real-time product knowledge and services targeted upsell opportunities, empowering teams to capture demand in the moment.

In terms of strengthening customer loyalty, we relaunched our Officeworks Business Program in late 2025 and has already delivered rapid transaction and strong engagement across the B2B market. Building on that success, we recently launched our Officeworks for Education sub-brand. This creates a single unified destination for all education needs across Officeworks and Box of Books. By making the experience simple and connected, we will become deeply embedded in our customers' workflows, driving powerful and long-term stickiness.

Now moving on to the last slide. To capture the opportunities ahead of us, Officeworks has embarked on a comprehensive multiyear transformation. The first three priorities of this strategy are focused on the fundamentals. We'll become a low-cost operator, which creates the financial capacity we need to reinvest in lower prices and deliver earnings expansion. We'll reset our merchandise and value fundamentals to drive innovation and reclaim our price leadership credentials, and we will create inspiring omnichannel experiences to deliver a frictionless and connected journey.

With those strong fundamentals in place, we'll accelerate penetration in our three most significant growth categories, tech and B2B in education. Finally, this entire plan is underpinned by our team, a relentless customer-first mindset, our expanded global capabilities and the power of digital, data and AI. We are confident in our ability to deliver this strategy. We have assembled the right team. We are leveraging world-class global capabilities and partnerships, and our early initiatives are already delivering tangible results. We will execute this strategy with absolute discipline, focus, pace to unlock Officeworks' full potential.

Thank you. And with that, I'll now invite both Mike and Aleks back on stage to take questions.

I'm just going to go first. It's Tom from Barrenjoey. A fair bit has changed in the world since February since you last spoke. Can you maybe talk about what you're seeing in terms of customer behavior in store? How are you pivoting the offer? And then lastly, just on costs, what you're kind of seeing there, please? I don't know if you want to start, maybe Mike?

I've just reflected on Rob's comments about strategy day versus trading update, so I'll be very mindful. But look, I don't think the customer is any less value conscious than they were at this time last year, and perhaps that's intensified a little bit more. And there is definitely some uncertainty, but I think what the Bunnings business has been able to do is very quickly sort of understand what's going on, work very closely with its suppliers and make the pivots we've needed to make. But I think that the exposure we have as an EDLP retailer has positioned us really well to be there when the customer needs it.

We are seeing, as I said before, that sort of drift towards value. But it hasn't been sort of as much disruption maybe as I'd anticipated. I think some of that initial shock was just are stopping pausing and reflecting on the impacts, particularly fuel costs and things like that, but haven't seen any sort of material impact to supply chain or stock flow or inventory availability. And that flows through the sort of products that are on water now. So the sort of seasonal and lifestyle products for the summer 2026, '27. So from that point of view, it's very much play on for us.

Yes. Look, from our perspective, I think we've talked about value as an enduring trend. I think that's definitely strengthened in recent months. And we can see from all of our customer data, households are very much focused on cost of living. It is the #1 issue on their mind and thinking about how they make household budgets work and how they find more value is really critical.

So for us, the priority around low prices remains the really key strategic asset that we're focused on and maintaining in that environment. And I think it should position us well from a relative perspective. In terms of what we're seeing, I mean, we're still seeing our total active customer base continue to grow, so that hasn't changed. But we are seeing customers become much more discerning when they're in store. And I've talked previously about a reduction in items per basket. That trend continues to grow. So while our transactions now holding up, customers have been quite discerning about what they're putting into the basket, and we expect that to continue to grow.

We are seeing growth across all customer cohorts in terms of affluence and demographic profiles. But I would say it is getting slightly tougher at that lower end of the market from an affluence perspective while the mid- to higher affluence is holding up a bit stronger.

From a cost and a supply chain perspective, I think it's fair to say we've moved into an inflationary environment domestically and globally as well. So whether it's ocean freight, whether it's input costs for our suppliers, it is an inflationary environment. Now the offsetting impact to that is clearly the Australian dollar is materially stronger than it was a year ago. So that's playing a mitigating impact in terms of those costs. And it just means we're working even harder to continue to drive productivity, work with our suppliers to offset the cost that we can and go back to our immediate priorities, which are continuing to maintain low prices for customers and continue to invest in what are really strategic and critical growth platforms for us for the long term.

Thanks, Aleks. Very similar to Alex and Mike. Customers are becoming more savvy. They're doing a little bit tougher than what they had in the past, and they're looking for value. So for Officeworks, we've delivered 2,000 price drops and that engage strongly with the price drop. So that's been good for us.

From a demographics and who's shopping with us. We've gone on to two different -- we've gone with the marketplace on both Uber and Kmart. And there are different demographics. So we normally -- 25 to 55 is where we over-index and being in the marketplace, that's added new customers for us at Officeworks has been quite good.

From a cost -- and we're going through a transformation. So we're looking at all the different elements of cost at the moment. So we are in an inflationary period, but we're also looking at cost and productivity and some of the initiatives that we've always spoken about with AI, data, analytics is really helping us to eliminate some of those costs.

Sorry, Bryan from JPMorgan. I might just continue on with the cost theme. Just the Fair Work Commission came out at 4.75%. You also got the 18- to 20-year old cohort stepping up over the next 3 or 4 years. I'd just be interested in how each of you think about the wage cost outlook in your businesses? I recall Bunnings had an EBA where they paid above awards. I'm not sure if you got the 4.75%, if that's still the case? And if it would be possible just to run through how you see wages and if you need to cut back on store hours potentially to sort of manage that cost headwind?

Yes, I'll start. So from the perspective of our business, that decision clearly will flow through directly in terms of the wages for our store-based team members. And clearly, our first and foremost commitment is to ensure that we pay our team fairly. So from how do we manage that within the P&L, very much the same way that we manage every other cost inflation line across our P&L.

I talked through the strategy in terms of productivity is something that we've been driving really hard across our end-to-end model. And we never look at just one line of the P&L. It very much is across all of the things that feed into our gross margin as well as all of the things that feed into our cost of doing business. And I think the visibility we have as a business across all of those cost lines means we can be very targeted in terms of where our opportunities are to continue to drive productivity. And as I said, I think they're quite material across our supply chain and also across our business domestically, not just in stores, but also within all parts of our above store operations as well. So yes, no different to any other costs we've managed in the past.

I might just pick up from there, Bryan. So yes, Bunnings does have an EBA that is distinctly different from GRIA. So some slightly different outcomes, and the fact we're in the process of negotiating that EBA at the moment. And the way that our workforce is structured is quite different. But we want to make sure that we continue to differentiate as an employer of choice for our team. But part of that is also making sure that we've got other productivity savings and opportunities across the business. And I think we've done a really good job of that.

In my remarks earlier, we touched on some better rostering and some better execution management tools, which are making time in store simpler, but also more purposeful for team members. So I think our ability to offset increasing wage costs is there without any impact to our focus on delivering the best experience in store for customers.

I'm very similar, the wage increase will flow through to our team members, which is a good thing for our team members. And then we look for productivity like we do every year across our whole ecosystem to try to offset some of those increases.

Sorry, just to be clear, Mike, you guys have an expired EBA. Is that correct? And you're renegotiating? What's the wage rate increase this year for Bunnings?

We are still in negotiations. So we're working through with the team and the [ SDA ] at the moment. So -- but if those negotiations drag on, then we will pass on an increase and then true that up depending on how those negotiations go.

It's Michael Simotas from Jefferies. One for you, Mike, if I can. The chart, I think, on Slide 24, highlighting the resilience of Bunnings through various economic cycles. Just interested in terms of how you think housing specifically could play into that? So we've had a fairly weak construction environment for a while. But some of the lead indicators are suggesting that house prices may start to come under pressure, established housing turnover, potentially renovation, remodel activity. Globally, they seem to be quite strong drivers of your category. What do you think that looks like in Australia, if we do have that situation start to play out? I know in the past, you've pointed to some dynamics in local markets. So maybe you could just remind us how Bunnings has fared through times when housing gets tough?

Yes, sure. And I've seen a couple of those over my time. And I think if you look at probably the most sort of direct correlation being, say, us and Home Depot, us and Lowe's, the nature of the interest rate -- the way interest rate work for housing in the U.S. is one of the reasons why housing churn has stagnated there more so than some of the structural changes perhaps that we are going to face.

What we're seeing is even in those times where people aren't able to sort of sell a home, if they're living in that home for longer, repairs and maintenance, renovations, those sorts of things are there. And I think that what we've seen over the long term is the Australians are a believer in the home is a really important asset within sort of the family wealth structure. So for us, we sort of see continued sort of investment in alterations and additions, repairs and maintenance, those sorts of things.

And as I touched on earlier, the other thing that we're starting to see quite positively is with changes to rental laws, renters being able to do more R&M and improvement to the property, albeit minor, but that's also starting to drive some growth. But you're quite right in your points around construction, albeit that's a story of state to state. It's really strong, for example, in Western Australia, really weak in Victoria, a little bit in between here in New South Wales, but some of the other markets are quite strong.

So at this point in time, we're confident that the offer that we're delivering to customers resonates. It will allow them to continue to improve their home. There's real interest in home electrification and obviously, solar, smart home, those sorts of things, but also our expansion to other categories, I think, is giving us another layer of resilience in the model.

So if you put all that together, are you confident that Bunnings can continue to grow the top line in the environment we're heading into?

Yes. I think as I sort of said in my closing remarks, Michael, I think the plan we're putting forward is a really ambitious plan. And I think we've demonstrated now really strong capability to expand our addressable markets, and they're very logical expansions. And I only touched on some today. There's a lot more that we've got, not only that we've got in train now, but will then come after those next round of expansions come.

I think we're getting much greater space productivity out of our stores through that change in assortment. And I think the work that we're doing in commercial through PowerPass Pro Rewards and things like that to more deeply engage the commercial customer gives me a lot of confidence that we've got a great growth runway in front of us.

Craig Woolford from MST Marquee. Just a question for Kmart and Officeworks. In the remarks on Kmart, you suggested a material investment in FY '27. Can you give some quantification or understanding on what that means for the outlook for that year? Will we see earnings growth?

I think Officeworks it was a slightly different comment, but of a similar ilk that maybe you don't see growth in Officeworks until '28, maybe, if I interpreted that right?

I'll kick off, Craig. So my comments in terms of the material investment year, we're looking at total cash investment. The primary increase is really going to be a CapEx year. So as we commission the new facility next year, there will be a significant amount of CapEx that comes through FY '27 related to that.

The other part will be, as I mentioned, we're scaling the rollout of our Plan C+ format. And clearly, there'll be capital attached to that as well as the other strategic initiatives that we discussed. In addition to that, if I think about the OpEx, the dual running costs of the NextGen facility within the year, we're commissioning the new site and all the rents and costs that go with that, but we won't get the benefits until FY '28.

That's probably the year-on-year difference in terms of OpEx investment within our base. Are we targeting earnings growth for next year? Absolutely, we are. So our agenda is very much focused on continuing to drive sales growth, continuing to drive productivity initiatives and those productivity initiatives will allow us to fund the investment in price for customers and also the strategic program that we have for FY '27.

So is there a guidance on the dual running costs?

Not at this stage, but I think we'll revisit as part of the full year results and see whether we provide any at that stage.

Thanks, Craig. So as we've already mentioned, we have -- this year is a transitional year where we've taken some one-off costs. You'll start to see the benefits of those in FY '27, but we do have some additional one-off costs in FY '27 with our new DC as well as our ERP implementation. But we do see earnings growth on this year as we move forward into next year.

Shaun Cousins, UBS. Maybe just a question on K Home. I think Home & Living sales look to have been based on your TAM and your share conscious that it's different periods, but looks to have grown some 23%. Is that the way -- is that what's driving the decision to have a stand-alone format such that you can sort of further grow into that?

And is this similar to Anko in Seattle, where it was a trial with an end date? Or is this a trial that could continue on, assuming the economics are attractive?

Yes. Look, I think in terms of what's driven the growth in our overall Home & Living, Shaun, and we can get into your numbers after in terms of surrounding all the other things on those big numbers. But Home & Living has performed exceptionally well for us as a category over that period of time.

If you look back, it's growing strongly within Kmart. And within Kmart, it's been driven by continued expansion into new categories.

And importantly, it's been driven by what I talked about at the half year results as well, which is our product innovation at that up price point has meant that we've been able to enter categories and offer product innovation at extreme value price points, but that are a tier above what we've sold in the past, and that's been an incredibly successful strategy for the last couple of years.

The second part has been obviously the introduction of Anko into Target over that period as well. And that's performing really well and is a material part of the Target business. I know you've had questions about that in the past. Anko in Target is about 20% of the total Target business today. So it is a material number and Anko is a material number outside of Kmart alone. Furniture is a category we see as really exciting. So furniture is growing above the Home & Living average.

And we see that as a, first of all, a large market; and secondly, one where through innovation and technology advancements across our supplier base, it's allowing us to really bring extreme value price points into market at a quality proposition that we probably wouldn't have been able to access even 2 years ago. And that's really where we've seen the opportunity.

We leveraged online first as a way to test and the response has been really positive. So the online penetration of furniture is quite high within our business, and we see good growth in that. Interestingly, it's also one of our best performing and most dominant categories on the marketplace as well. So online is performing well in terms of Anko. It's performing well as the marketplace. Why the K Home? I think I mentioned our Kmart stores run market-leading sales density. Our space is optimized to within an inch of its life.

So the ability to create the space to give furniture what customers need, which is the opportunity to touch and feel is difficult to do without foregoing other high-returning space within the store, which is why we went down the online path. The second part is catchments. So we've got a mature store network, but we know that there are catchments where we're either overtrading or are a gap because they don't facilitate a full-line store.

A lot of that is due to zoning restrictions across different geographies. And so we see an opportunity to actually be able to access incremental catchments over and above what we can with our full-line store. We're really -- I mean, we haven't opened the store, so it's next week. But I think we're going into it with lots of reasons to be confident that it is a scalable model and that it can deliver sales per square meter and a cost structure that would make it attractive, but clearly to be proven out when we launch the first store next week.

We're already in discussions being transparent with landlords about other potential opportunities across the country, both Australia and New Zealand. So it is something that if the early trading results validate our initial hypothesis, it's something we would look to subject to property availability and being able to access commercially attractive rents, one that we would go after.

Great. And just for John, just around the transformation you're seeking to embark on in tech. Just how easy is it to get the appropriate access to brands and the ranges of -- within the brands. And then also Officeworks hasn't had a reputation for some of the technology products that you've had in the how do you go convince customers and market to that? And should we anticipate there's a degree to which you have the offer right, but then you have to sort of let the consumers know and get them to visit again.

There's a bit in that. So look, I'll start with 60% of the sales that we do today, close to 60% are actually technology sales. So already today, quite a few of our customers come to us for technology. We do have all the major brands, major leading brands in our portfolio.

And we do have more brands now that are actually talking to us kind of want to come on the journey, which is positive for us.

As we establish the ranges as we move forward, we won't have every single product from every single brand. Our job is to create ranges that make sense for customers as they come in so they can quickly make a decision with our team if they need support to actually be able to buy into the products that they need.

So I guess, in short, we are already known. We've got some high market shares in a couple of the categories is how we expand into the other categories, which will be really important. We do have the benefit of 12 million customer contacts that we have through OnePass. And we, in the past, have been able to create different platforms to be able to communicate with customers. So I don't think that will be the issue.

It's Adrian Lemme from Citi. A question for Mike, please. Look, I know you already have a strong share in Bunnings in the barbecue category and a strong offer. But there was reporting overnight that Barbeques Galore is going to close. And I'm just wondering if you can speak to the opportunity in this category particularly with respect to the chance to maybe add a control brand like a Ziegler and Brown that might fit the mid- to upper end of your range or other sort of third-party brands that you might be able to attract, please?

Yes. Obviously, firstly, our thoughts with the team that are going to lose their jobs there. It's very sad. And obviously, Barbeques Galore has been an important part of the network. And I think it just speaks to the competitive nature of the market. I think what Bunnings has been particularly successful at doing over the last 20 or so years is developing brands like Matador and Jumbuck that are well known and trusted in the market despite the fact that they're actually private label brands.

And I think that's been a real credit to the team. We continue to evolve that end of the store quite significantly. You'll see some quite different ranges in our outdoor furniture in the '26, '27 period and also starting to understand the opportunities to unlock these ranges into parts of the country where spring comes earlier or actually sort of spring is almost in winter time like the tropical North.

Where it makes sense, we'll have conversations with brands. As I've said in previous strategy days, we work hard to attract brands to the Bunnings business, and we respect the fact that some brands choose different channels. So at a point in time, you sort of get to a moment where you go, is the juice worth the squeeze on bringing the brands in. But there are some brands there that if they're interested in talking to us, we would definitely talk to.

And equally, we'd be interested in talking to some of the team because we know that there's some real depth of talent in there, and it would be great to pick up that into the Bunnings family.

And can I just pick up on that theme of attracting brands? You talked earlier about Makita and DEWALT had real success with the expansion of the tool shop. Is that encouraging other brands that maybe didn't initially partner with you to join? Or is it still too early there?

Look, I think if you spoke to either of those brands, they were blown away. And I think what it's done is really taken this traditional notion that the only place that a trade wants to shop for a pro tool range is a specialist and tipped it completely on its head. It's why we've been able to partner successfully with the Einhell business to introduce the Einhell pro range.

If you look at our European peers across Groupe Adeo, across Jumbuck, Bauhaus and OBI, it is the leading power tool brand in those markets and absolutely dominates, and we're really excited to bring that in. And I think that's what it sort of shows us is that the strength of what we're doing is actually giving some global brands confidence to actually make the investment on the other side of the world.

And again, as I said, we've successfully challenged the notion that the only place to buy a specialist tool product is a specialist store. They have a role to play, absolutely, but we've been really pleased with that outcome.

It's Peter Marks from Goldman Sachs. Just a question for John Officeworks. Just interested in what you're seeing in terms of inflation in the tech category at the moment. Maybe you can talk through like what you've seen already, what you're expecting in '27, how your customers are dealing with it? Interesting in [indiscernible] business. And then any availability issues.

So I think for everybody, there's been -- it's well documented, there's been memory and storage issues. And -- it probably started last October and it's gone all the way through. And it's still a long way -- it's got a little while to go still before that comes to an end. But we've seen price increases anywhere between 20% to, I guess, 50% at this stage.

With how we're handling it, we knew about this early on. And so we've been working with suppliers and made some investment buys over time. So we've been able to mitigate a lot of the increases that others potentially have seen up until this point. As we move forward, what we're really conscious of is making sure that we have devices, whether it's laptop phones at the right price points for customers.

So we're working with our suppliers to make sure that customers can come in, may not have the same memory or may not have the same storage as what we had a year ago, but they can have the choice and they can kind of trade up if they need to or if they've still got something at the entry price point. I probably see another 6 months of the elevated memory and the storage, and then we'll get to some type of normal after that.

And any issues on availability?

Not at this stage. No, we've been working with our suppliers forward forecasting and planning with them. There will be computers now, particularly on the computer, but generally, customers can come in, they can get themselves a computer at the entry mid or the premium at this stage.

That's great. Maybe just a quick similar one for Alex. With oil and plastic exposure in Kmart, can you give us a sense of how big that is and what you're doing to mitigate that?

Yes. I mean, clearly, there's product types across our entire range from polyester and apparel through to homewares, toys and across the board. The way that we work through that is, firstly, we make forward commitments with suppliers. So if you think about where that rolls through for the next kind of 6 months, first half of the financial year, the impacts of that won't be flowing through in terms of our cost base.

The second part of it then is as we look further out, our team are just working proactively with our supplier base in terms of, first of all, because we look at the whole product development cycle, the first question is where are there opportunities to substitute. So for example, within apparel, natural fibers start to become more attractive versus polyester fibers.

And from a customer perspective, that's a win-win in some instances. So looking at the whole end-to-end product development cycle with our supplier base to say what are the decisions we can make in terms of inputs to mitigate that?

And secondly, what are the efficiencies within our supply chain and the way that we're working with our supplier base to be able to mitigate those impacts. So our priority is absolutely to keep the cost as low as possible and therefore, to keep the prices as low as possible for our customer base.

Do you think you'll need to lift price on the back of that or you can manage it?

Look, our priority is to, firstly, drive productivity. Secondly, continue to engineer the products with our supplier base to make sure that we continue to keep our prices as low as possible. That's absolutely our #1 priority. Our second priority is to continue to drive efficiency across our entire cost base in the pursuit of being able to continue to keep prices low.

Will price adjustment be required at a period of time if this becomes sustained, that's just something we'll need to manage over time.

But our priority is to keep prices low. And we think we've got enough across all of our strategies to be able to do that, whether it's working with suppliers, whether it's looking at the product design process or whether that's driving productivity across all parts of our business. I think with the strategy we outlined today and the impacts over the next year, we can hold prices without needing to do that.

FX is clearly a really big mitigant in the short-term in terms of some of those raw material costs. Now if we go into a period of sustained inflation beyond the next 6 to 12 months, how that plays out, I think everyone in the market will be in the same boat, and we'll need to look at that. What I can confidently say is with the visibility we've got in our supply chain, we'll be the best-placed in the market to be able to work through that and deliver the best value for our customers.

Taylor Wheatley from Macquarie here again. Another one is for Alex. If I wind back 12 or so months, and apologies if I'm paraphrasing here, but I think you said something along the lines of ambitions to double the size of Kmart.

Just any updated thoughts on sort of growth ambitions for the Kmart business? And then thinking about sort of the more meaningful tangible opportunities given how much is going on, yes, what you see as the sort of meaningful stepping stones to that growth over the next 3, 4, 5 years, please?

Yes. So absolutely, that is still our long-term aspiration. And again, to use the language of last year, aspiration, not forecast in the long term, so more than 5, less than 10. But very much our strategy, our business, our team are all anchored and I think inspired by the size of the transformation and the size of the aspiration we're going after.

If I chunk down the strategy then in terms of the building blocks to do that, we clearly see still quite material opportunity to grow in our domestic market in Australia and New Zealand.

And the buckets around that are, firstly, addressable market. I think our product development engine with Anko has demonstrated we can continue to enter new categories. We can continue to innovate our ranges and innovate our products and continue to grow our share of wallet of our customer base. Our store format innovation, we're increasingly seeing and hopefully what came through today as an accelerator and an amplifier of that product strategy.

So within our existing store network, we're seeing the format unlock additional cross-shop and therefore, that statistic that we talk about around our average customer only shops about 20% of our departments, the opportunity to grow share of wallet through further engagement across our categories is a really material one, and we see our store format investment as an unlock of that.

The new concepts that we're trialing in K Home is one that opens up incremental new catchments and incremental new opportunities in something like furniture that can be quite a material contribution over time as well if they're successful. So that's one part.

The second building block is definitely digital. So our online market share is materially below our total market share as a business. And so we see really material opportunity to continue to grow online, both in terms of our first-party business, but also through the third-party marketplace.

And the customer acquisition and the additional basket engagement that we're getting through our digital strategy speaks, I think, to the size of the opportunity to continue to grow online over time, unlocking additional revenue opportunities like retail media clearly come into play as well within that digital strategy. And then supply chain transformation is really big for us.

So yes, it's a productivity play. It's one that helps us get to the earnings aspiration, but it's also a revenue opportunity as well. It gives us scale to continue to grow, but it gives us actually far greater agility to continue to improve our product availability for customers, both in-store but online.

We know online product availability is a key pain point for our customers and our supply chain investments are a real unlock of that. And then finally, global. That's -- if you take a 10-year view of our business, can global be a material contributor to that aspiration to double? Absolutely.

That's what we think and why we're continuing to invest whether it's in the stores or our retail partners overseas, and I keep saying it's not material now, but very clearly, over a 10-year view, you look at the addressable market opportunity, we do see a path to that contributing meaningfully to that aspiration.

Maybe just a quick follow-up on Anko Global. It might be a simple question, but why the Philippines? Is it sort of act as a bit of a guide to the other parts of Southeast Asia...

Yes, 2 reasons. Firstly, it's an attractive market in terms of the consumer demographics, they are quite favorable and a very large population and that's growing fast with favorable demographics. So that was one. We liked it as a market.

Interestingly, it's -- I don't know if you've been there, but from a competitive perspective, it's a very mature, very competitive, very high-quality retail market as well.

So in some ways, I think being able to prove out a successful offer in the Philippines also gives confidence around the offer translating into other highly competitive markets as well because you're up against some of the best retailers globally and some of the best Asian retailers as well, which we don't have in the domestic market.

So market was one. And the second reason was really opportunistic around our joint venture partner clearly has derisked market entry and brings a lot of valuable knowledge to the partnership in terms of doing business in the Philippines as well as they have shopping center assets in the country. So clearly, the synergy between a retailer and a property owner in the local market was a nice opportunity for us to dip our toe in.

Ben from Jarden. Just a question around electronics. And you look at the electronics category and a brand and a retail level, it's typically very concentrated with a few and I appreciate doing there and as well in terms of where it sits. But EDLP, because if you hold true to the EDLP offer, you're going to have to come in with prices significantly lower than the competitors on branded items, which I imagine the suppliers probably wouldn't like.

How are you navigating that in terms of getting the brands in? And are you finding that you're bringing pricing down in the market when you're pushing into more electronics categories?

So I think the first part would be that we are in an EDLP business. But there are times where we do get special deals from suppliers, and we pass those deals on to our consumers. So there will be times where consumers -- and take this end of financial year is a perfect time where we get the deals, we pass them on to the consumer. So -- are we compressing prices? No, we're kind of looking at market prices.

We scan the market 2 to 3 times a day. We make sure that we're the lowest price, so the customers get the lowest price. And we pass that on if at any point during the day that we find cheap -- prices cheaper.

But no, we haven't reduced prices. What we are doing is bringing in the technology category, particularly with accessories, we're bringing our own branded product, which will be at a different proposition, a different value proposition than potentially some of the national brand. And you will see some compression there in price.

Maybe just from a Bunnings Smart Home point of view, we have seen price fall in the market, which I think is a great outcome for the consumer. I think what sets Bunnings apart in that category -- and this comes from speaking directly to suppliers is the way the supplier is being treated by the business and the sort of support that's there. There is differentiation in products.

So as with anything technological, you can sort of nuance the products quite effectively. But we're also finding that a range of things now. We've got suppliers actually just wanting primarily to deal with Bunnings and almost on an exclusive basis, not completely, but certainly with unique products that are differentiated to the market. Similar to John, it's very active monitoring of pricing.

These are categories where electronic shelf labels and things like that are really helpful because you can react and respond to, say, a promotion or a sale at a competitor, and we will react in the moment to that, and then we'll revert to the sort of everyday low price after that as well.

The electronics trial you talked about, Mike, is that the Monee Ponds? Or is that going to be -- is this [indiscernible], which you got a bigger electronics offer in that? Or is this a broader trial across...

Yes, we're well through trial now. So we're into the rollout of our new smart home range. So it's about 160 new SKUs that are coming into the store. So I was in China recently talking to a couple of our major smart home suppliers, and they've been blown away by the growth of it. And I think there is a broader trend to not only smart home products, but smart security products.

And smart home isn't just cameras and locks and things like that in vacuums in watering, and lighting, all these areas. So we're sort of seeing a real proliferation of this technology across our format. and great engagement from suppliers to want to work with us and help introduce new categories and ranges into the market as well.

So sorry, the major domestic appliances you mentioned at the start.

Sorry, my apologies.

That's what coming next?

Yes, that's going to come next. So we're in negotiations with a couple of really good brands that we'll launch. We've actually expanded out into some white goods now, and we're mostly under sort of private label brands and seeing fantastic responses through our promotional campaign, which is a testimony. We signed off the concept for the appliance rollout, and that will just continue over the next 12, 18 months.

All right. I think that's a wrap. We're going to go to our next break, which is for about 20 minutes or so. Thank you very much.

[Break]

Welcome back, everyone. It's still good morning. So today, I'm going to walk through the strategic focus areas of WesCEF, but really focus on a number of the production expansions that have been underway the last few years and also provide an update on some of the future opportunities that we think we're well placed to deliver on.

So I'll turn to the first slide now. It's obviously -- it's a pleasure to be here again to present on behalf of the WesCEF team. Today, I'm going to take you through our strategic focus areas and the progress we've made on a number of those expansions to unlock the future growth for WesCEF. I'll begin with an overview here of our -- of the 4 business units across WesCEF.

Our vision at WesCEF is to create long-term value for critical industries and everyday life. This is delivered through our portfolio of leading businesses, each with strong positions in their respective value chains.

Importantly, many of the Australian industries we support have global competitive advantages and are critical to the national economy, including iron ore, gold, lithium and agriculture. Before stepping through our divisional focus areas, I'll start with a brief update on our key business segments.

Firstly, on the left, starting with lithium. We achieved first lithium hydroxide production early in the financial year, alongside consistent nameplate production at the Mt Holland mine and concentrator.

The Covalent Lithium project continues to progress towards refinery ramp-up, which I'll cover in more detail shortly. This is occurring at a positive time for the lithium market with a strong rebound in prices. In our Chemicals business, we delivered 2 major capacity expansion projects during the year. The nitric acid ammonium nitrate or NAAN plant debottlenecking and the first phase of the sodium cyanide expansion, whilst at the same time, continuing to provide high-quality supply to our customers during those expansion projects.

Next, our Energy segment, which includes our LPG and LNG production facilities as well as our Kleenheat natural gas retailing business in WA has continued to deliver award-winning customer service and drive customer growth. And then on to fertilizers. CSBP responded to significant disruption arising from the Middle East conflict, causing sourcing issues, and we had to provide alternative product from our own manufacturing facilities in Kwinana.

We also continue to work with government to advocate for opportunities to strengthen supply chain resilience for West Australian agriculture.

I'll now turn to Slide 70. This slide represents our strategic focus areas and the model through which WesCEF creates value. We have a strong track record of leveraging a uniquely positioned asset base to drive growth, combining our operational excellence with a disciplined, repeatable approach to deploying incremental capital at attractive returns. This model is underpinned by our access to the WA gas market, our continued progress on decarbonization and the strength and capability of our team members and our focus on keeping them safe. That strength was evident in the way our team responded with agility and resilience during the Middle East disruption. Across our 4 strategic focus areas, you can see the benefits of this approach, both in unlocking production upside from existing assets and in investments in new growth platforms. Firstly, lithium delivery. Our focus at the moment is on ramping up the lithium hydroxide refinery in Kwinana, sustaining and building on the performance at Mt Holland and progressing towards a final investment decision on the mine and concentrator expansion. Lithium will be a significant platform for earnings growth for WesCEF in the coming years. Secondly, on operational excellence. Our focus remains on achieving industry-leading performance across plant reliability and yield across all of our production assets. This reduces earnings volatility and positions us to capitalize on expansion opportunities when they arise. This has long been part of the WesCEF DNA and looking ahead, AI presents the next wave of opportunity to improve production growth and plant reliability.

Thirdly, customer focus. This remains central to how WesCEF operates. We continue to strengthen our capabilities as a reliable and trusted partner across all of our customer segments, including how we approach additional areas of investment. These relationships provide resilience across the cycle, flexibility in navigating challenges and the ability to capitalize on opportunities when they arise. And then finally, major project growth delivery. We see this as a repeatable capability for WesCEF.

Across our businesses, we have a rich pipeline of expansion opportunities, supported by the technical capability and track record to deliver these. WesCEF operates in a supportive environment for local manufacturing, and there is a positive outlook for our key industries. These factors give us continued confidence to invest locally and support further supply chain independence. I'll now turn to the lithium slide on 71. The Covalent lithium project continues to progress well. At Mt Holland, spodumene concentrate production will meet nameplate capacity for FY '26, a strong outcome, reflecting the focus on reliability, rate and recovery at the mine site.

At the Kwinana refinery, we achieved first lithium hydroxide production during the year, which is a major milestone for our project. Product quality has been consistently high on the chemical specification basis with low defect rates.

The customer qualification process is underway, although it has progressed more slowly than planned due to the instability in the refinery ramp-up driven by the odor-related issues.

Engineering solutions are now being implemented with construction of new emission stacks underway in Kwinana, and those are expected to be operational in the first few months of FY '27. This is expected to support a more stable ramp-up profile through FY '27 with nameplate hydroxide production targeted in the second half of calendar year 2027.

With respect to the lithium market, conditions have evolved considerably since last year's Strategy Day. Market balances tightened during FY '26 and spot prices have increased sharply due to the strong demand from energy stationary storage and supply disruptions across the industry.

Spodumene concentrate production at Mt Holland is expected to maintain nameplate capacity into FY '27. WesCEF's share of around 190,000 tonnes is anticipated to be broadly split between feedstock for the refinery and product available for the spot market. As with the FY '26 sales, we've continued to progressively forward sell into the market, the spodumene concentrate volumes for FY '27. In addition, we reached agreement in April 2026 to sell some of the gold mining tenements at Mt Holland acquired with the Kidman acquisition, taking advantage of strong gold prices.

These tenements were part of the original acquisition, and we retain access to additional gold resources. We'll continue to look at how to best realize value for those gold assets over time.

Also, as you may have seen, Stuart McNaughton will join Covalent Lithium as its new CEO on 1 July 2026. Stuart is a highly experienced mining and downstream processing executive with 3 decades of experience across global resources operations and new development projects. I look forward to working closely with him, and I'm sure he's going to make a significant contribution to the business. His appointment follows the announcement that the current CEO, Ross Martelli, has decided to retire. I wanted to acknowledge here and thank him for his outstanding contribution to the WesCEF business over the last 45 years.

Ross has been instrumental in the growth of Covalent and WesCEF more broadly and will continue to provide expertise through an ongoing advisory role. I'll now turn to the next slide, 72. The expansion project for Mt Holland is well progressed with a decision expected in the first half of FY '27. The project represents a value-accretive pathway to double the production capacity and further strengthen Mt Holland's cost position as a Tier 1 asset. The proposed expansion would double the nameplate production to around 760,000 tonnes per annum of spodumene concentrate with WesCEF's 50% share at around 380,000 tonnes.

At the same time, we're also assessing the inclusion of an ore sorter to improve the recovery from the Mt Holland asset. First product for the expansion project is targeted for calendar year 2030. The scale efficiencies and design improvements will lower our unit costs and better position Mt Holland on the global cost curve. Any decision to proceed with this decision will obviously be subject to our final Board approvals and our JV partner, SQM.

I'll now turn to Slide 73. We believe our focus at WesCEF on operational excellence and our customers is a core enabler of the earnings resilience for our business across the cycle. This slide highlights our track record in ammonium nitrate, or AN, as an example of this approach. Production levels have consistently improved over time, supported by successive debottlenecking programs that lift output beyond the original nameplate capacity in a capital-efficient way. As the chart on the right shows, our plants have maintained average availability above 90% for more than a decade. This is a level we believe is industry-leading based on our benchmarking.

Operational excellence at WesCEF is a continuous process, not a destination for us. As part of this, we see increasing use of AI as the next wave of opportunity that will offer new avenues to maximize production and improve the yield from these plants. I'll now move to our major project slide.

WesCEF has delivered on 2 major capacity expansion projects in FY '26 that have been in development for several years. We're now entering the harvesting phase where we can begin to realize the benefits of these investments with earnings expected to grow as these expansions mature. Firstly, starting with the NAAN debottlenecking project. We completed debottlenecking on the NAAN3 plant in the first half of FY '26. This increased ammonium nitrate capacity by approximately 40,000 tonnes to a total of 865,000 tonnes per annum. There is also potential to increase capacity by a further 80,000 tonnes across the 2 remaining NAAN plants at the Kwinana site.

It's another highlight of WesCEF's ability to maximize value from existing assets through targeted low capital investment. Tertiary abatement catalysts were also installed at the same time as the NAAN3 shutdown as part of that debottlenecking project, significantly reducing the emissions intensity of our production. It's a great outcome for our decarbonization journey, but at the same time, delivering strong commercial benefits by reducing the potential future liability under the safeguard mechanism.

The second project to call out is the sodium cyanide expansion, which again is a strong example of how we unlock additional value from our existing plants, delivering meaningful earnings growth and improved ROC through this targeted capital-efficient investment. With this expansion, the sodium cyanide will become one of the largest globally. It's a significant achievement when you consider back in 1988, the plant had a capacity of only 15,000 tonnes. I'm going to show a video. I'll show you the progress on the project.

[Presentation]

As we move forward to completion in around November, we're excited about the role the cyanide project is going to play in enhancing our reliability for our gold customers and continuing to create long-term value for the WesCEF business. Plant expansions and project delivery are a powerful and repeatable capability for our team and to deliver growth. We've got half a dozen or so other key project opportunities like this currently on our agenda, and you should get a sense for the longer-term growth potential we see for WesCEF.

I'll now turn to Slide 76. As I mentioned at the start of the presentation, the conflict in the Middle East has had a significant impact on key commodity pricing for WesCEF and on the international supply chains for our fertilizer team. I'll start with ammonia. We've seen prices increase sharply in the last few months, and this is expected to have a significant impact on earnings in FY '26 and FY '27. As we've noted before, our import costs reflect spot pricing, while sales contracts are based on the average pricing in the prior quarter. In the current context, the significant rise in the ammonia price will negatively impact earnings in the fourth quarter of FY '26 with the contract lag mechanism providing a benefit to earnings in FY '27.

More broadly, however, given WesCEF is a manufacturer of around half of the ammonia it uses, higher ammonia prices will flow through to higher earnings for the business. Turning to the CSBP Fertilisers. The Middle East conflict in March and April disrupted a number of international shipments with delays and cancellations impacting supply. In response, the CSBP Ferts team increased domestic production of liquid fertilizer in partnership with our chemicals business. Combining that with alternative international supply, this has helped maintain availability for WA farmers. CSBP also worked closely with industry participants and the federal government to support the establishment of the fertilizer import facility mechanism through Export Finance Australia or EFA.

And I'll turn to my last slide now. In closing, WesCEF's unique asset base and capacity to invest at attractive returns gives us confidence that we can deliver continued growth and resilience in earnings over time. We remain confident in the Covalent lithium project supported by a nameplate performance at Mt Holland and the robust long-term demand outlook for lithium. The ramp-up of the refinery, together with the initial -- sorry, the final investment decision on the concentrator expansion is expected to drive value and improve our cost position over the medium term. The expansion of the sodium cyanide business will begin to deliver benefits in FY '27 with a full year contribution in FY '28. And then the NAAN expansion will help support a tighter AN market with further benefits in the recontracting cycle.

These growth projects build on a long history of successful expansions at WesCEF, and we remain confident in both the pipeline of opportunities ahead and our capability to deliver them. Thank you very much, and I'll now hand over to Emily Amos for Wesfarmers Health.

Well, good afternoon, everyone. At Wesfarmers Health, we have a clear mission that drives our team every day to make Australians health, beauty and wellness experiences simpler, more affordable and easier to access. The health, beauty and wellness markets are large, growing and underpinned by strong fundamentals.

In Australia, we have an aging population with increasing chronic disease and consumers who are becoming more health conscious. There's growing demand for consumer-led health and beauty and customers engaging more with their health across digital platforms and devices. As a consumer health and beauty business, supported by a unique portfolio of physical and digital assets, we're well placed to deliver real value to our customers and to leverage growth opportunities across the business. Our multiyear journey to transform and grow is well progressed. We have 3 priorities: the first is growing share and scale in consumer, where Priceline Pharmacy has a unique position and our new formats are broadening our market opportunity. The second is investing in and leveraging our unique loyalty, data and digital assets to grow engagement and drive omnichannel revenue. And the third is improving wholesale performance and operating efficiency.

While there is more to do, we have great momentum and the benefits of our hard work are showing through. We see significant opportunity to grow earnings and returns over the coming years. In retail, we've continued to invest in our value proposition, and we are growing Priceline stores while also building out differentiated formats to support broader network growth. Investments in e-commerce and deeper engagement with loyalty members are driving strong omnichannel growth. Our MediAesthetics business has been transformed and is now positioned for further growth. And in wholesale, a focus on service, availability and pricing is delivering profitable growth. And while we're making good progress on reducing cost to serve through our investments in automation.

Priceline is a full-service community pharmacy with a strong retail offer that is clearly differentiated. We have Australia's largest health and beauty loyalty program, a curated range of great brands, and we're well known for terrific service and our market-leading women's health proposition. Our stores are a destination for health, beauty and wellness, so our customers can come to us for a trusted advice for everything from medicine to mascara. We have multiple growth drivers across the Priceline business. Customers are responding well to our clearer price positioning and breadth of offer with the expansion and investment in key value lines and growth in private label alongside our range of exclusive brands such as Booth and SWIISH.

We continue to attract high-quality franchise partners wanting to open new stores or invest in refurbishments to grow our network. This year, we're on track to open 24 new Priceline stores and complete 23 refurbishments. Priceline is also well positioned for the scope of practice expansion and growth of health services. Customers are responding really well to our Anything Menopause campaign, which is bringing together accessible advice and a curated product range. And we're also going to continue to invest to support the growth in online retail, which has grown over 40% in the last year.

We've made investments in our website and our new app and improved last mile options with a better click and collect experience and an on-demand delivery partnership with Uber.

New stores and refurbishments are also crucial to our network growth and have helped reinforce our position as a destination for health and beauty. We're seeing strong results in both new and refurbished stores, especially for those that are in pockets of significant population growth. And our new layouts and consulting rooms enable franchisees to deliver on an expanded health services offer. And while Priceline is our core offer to franchise partners, our new propositions such as Pharmacy 4 Less and InstantScripts Pharmacy gives them more options to grow in locations where discount-led or small format stores are a benefit.

One of the clear differentiators in our Consumer Health business is our unique combination of physical, digital, data and loyalty assets. We now have over 10 million loyalty members. And this year, we will expand the program into a health and wellness coalition. We'll relaunch the program as Pulse Rewards with an enhanced value proposition so customers can earn points and get rewarded across Priceline and our other brands such as Atomica, Silk Laser Clinics, InstantScripts and our SiSU Health stations.

And we're also making good progress commercializing retail media. We now have more than 150 suppliers on board and new digital assets coming online. Our retail media assets provide a great opportunity to showcase our merchandising offer and highlight important health trends like menopause and weight loss. Atomica is an aspirational and affordable beauty business that provides us with a growth opportunity in the attractive and growing beauty, wellness and skin care market. The format is resonating with customers who are responding really well to our service-led proposition with an average NPS above 90.

We are now opening a further 7 stores, taking the learnings from our first cohort of trial stores. And next month, our e-commerce website goes live and further integration with the new loyalty program will follow shortly after that. Private label and own brands are a significant area of opportunity across the business. Over recent years, we've invested in building our capability across brand and product development, sourcing and merchandise, and customers are responding really well. We've seen growth this year of more than 20% and much more upside to come.

In Priceline, we're growing our range in categories that resonate with customers, including FRAIM hair care, which provides salon grade products without the big price tag and iLLi, which offers a broad range of essential beauty and grooming products at great prices that our customers really love.

AestheticsRX is our premium cosmeceutical brand available in retail, aesthetics clinics online. It's been a huge success and is one of the fastest-growing skin care brands in the market. Our team is continuing to focus on building and refining the health journeys that help customers live better lives. The priority right now is on building connected services in those areas with growing needs such as menopause and weight loss.

So for example, our assets when connected play an important role for weight loss customers, all the way from discovery, consultation, pharmacy fulfillment and ongoing care. We're supporting their holistic health needs right across our businesses from dedicated consults with an InstantScripts doctor, all the way to advice on skin care and supplements when they pick up a script at Priceline. And our new app will also help to connect and integrate these journeys with the ability for customers to book health services, have a telehealth consult, manage their scripts, shop for the right products and earn rewards all in one place.

And in wholesale, we're continuing to improve the customer proposition through competitive pricing and great service. We see more opportunity to continue to reduce our cost to serve through the investments in automation in our DCs and in technology that will improve order management, service reliability and productivity.

Our upcoming core systems investment, combined with the productivity opportunities AI offers will enable us to continue to reduce our cost to serve while making ourselves easier to do business with for our customers, our suppliers and our team members. At InstantScripts, we have a proven telehealth offer underpinned by strong clinical governance. And across MediAesthetics, the hard work over the last couple of years has seen the business grow and gain share in key markets. The relationships we have with clinicians, underpinned by the shared ownership model is helping us retain great people and support network growth. Customers are responding well to the brand revitalization, sharp promotional offers, the rollouts of new treatment and a great merchandising offer that includes AestheticsRX.

So in summary, over the last 4 years, we've made significant progress on the transformation. We are excited to keep the momentum going and are focusing the business on delivering a great offer that resonates with customers and franchisees, driving operational leverage throughout our business and continuing to put in place strong foundations that will unlock further growth in digital, loyalty and private label. So in short, we see a significant opportunity to continue to grow earnings and returns. Thank you.

And I'd now like to invite Aaron up, so we'll be happy to answer any questions.

Just on the WesCEF side, just be interested in the exposure you have to spodumene prices in FY '27. You talked about 60,000 tonnes contracted of the half of the 190,000. So it's about 2/3 look like they're contracted. I'm assuming that's been progressively through the period. So I'd just be interested in sort of how we should be thinking about spodumene versus what you guys might realize in '27, please?

Yes. I'll just -- I'll start with the first 60,000 that's being contracted forward. That's been done over a number of months over the -- in the second half as prices have been rising. They're obviously -- they've now sort of seem to have come off that trend. I'd say, on average, that 60,000 will go across a couple of shipments, but it will broadly be better than today's spot price, but not nowhere near the peak. So it will be somewhere in that range for if that helps.

Out of the 190,000 tonnes that for our share next year, we're assuming at this stage that it's broadly half the spodumene spot sales, half to feed the refinery. The refinery piece, it's obviously as we come out of sorting out with this new engineering solution for the emissions, we'll have a better sense in the coming months on how that ramp-up profile and how quickly we're going to be able to feed it. So there is going to have to be some flex on that. The good news is if we do have to sell more spodumene, we're obviously making good money. And at today's pricing in that environment, there won't be an issue in trying to move that into the market.

Right. And just a follow-up to that is, if that -- half of that spodumene is going to feedstock, how should we think -- and there's ongoing -- if there's any ongoing issues on the refining side, could that get pushed out maybe into '28? Or could we see a bit of a hole there where you're not actually realizing much in terms of sales?

I think we'll always be in the market. If we've got the product, there's only limited storage, you want to continually be in the market selling. We're not going to be, I think, prolonging the stockpiles of spodumene for the refinery because we've got confidence in the Mt Holland mine and concentrator that that's now at a stable footing. So as soon as the refinery is ready to receive it, we know we've got the confidence we're going to be able to deliver into that.

Aaron Tom from Barrenjoey. A couple more. Can you help us understand the cap and collar arrangements on hydroxide? It's obviously like really hard to forecast, but the cap and collar kind of smooth things out a bit. Can you maybe just...

I obviously can't go into the specifics of individual contracts. But I would say, and I think I've said in this forum before, we do have a floor price mechanism for our hydroxide agreements. They are becoming pretty common in the industry, both for chemical, but you're starting to see more and more of the pure spodumene producers also receiving floor price protection. They were structured. They were above our cost base of production. So it provided a baseload level of return for the project. It's not something -- if it was down at those levels, we wouldn't be meeting our aspirations for the project.

On the upside, I think I've said before, they're set at levels that if we're starting to hit those levels, we would be very happy across Wesfarmers on how the lithium asset is performing. So I think that will be a very good problem to happen if that occurred in the market.

And do you have a good idea of what the cost per tonne of the refinery will be like when it's at maturity? Or are you still kind of figuring that out with obviously the ramp-up that's going to happen?

Look, I mean, ultimately, time will tell where that's going to land. I think we're very confident in the cost stack of what goes into the refinery, labor, reagents. Obviously, one of the biggest cost inputs and why we're so proud of what's being achieved at the mine is obviously a feedstock cost of spodumene and not having to ship that to China.

So I think for us, the real focus at the moment will be getting the yield or the recovery. So the number of spodumene units required to deliver a hydroxide unit is probably the #1 yield focus for the plant. The second biggest impact on the cost base will be fractionalizing the cost of getting our tonnages up. And I think that's what you're really seeing the challenges with other players that are in the Australian refining market is you've got to get the tonnage to be competitive.

Caleb from Macquarie here again. Just had a question for Emily on retail media in the health business. How are you sort of thinking about the scope for additional growth to come from here? And particularly with respect to the franchise model from a pharmacy point of view, what's the sort of outlook for investment versus returns versus reinvestment just alongside Wesfarmers compared to your franchise partners?

Yes. Look, I think this has been our first year where we're bringing together all the assets. So in franchise company stores and right across all our digital assets, we've got screens in our stores and really connecting our digital assets. I think the changes that we'll make with our loyalty program really kind of give us a lot more traction with suppliers. So we've been pleased with the responses so far. But we do see that it will continue to grow. I mean, I think for us, we already work with suppliers on a range of things that they do to support us and our franchise partners, and this will just be another element in the toolkit. So feeling really positive. But like anything, it will take time to build, but we're trying to bring all the assets together so that we're really leveraging the opportunity to its full capacity.

And on the return side, to the extent that you are getting returns at the moment, how are these shared between.

Yes. So look, that is a shared model that will morph and evolve over time. So I'm not going to go into the exact split here, but yes. We're very happy with how it's going so far.

Shaun Cousins, UBS. Just a question for Aaron. Maybe just to discuss the chemicals and the access to ammonia in the fourth quarter. I'm just curious how you went about getting ammonia given Yara was offline for a period of time.

Did you have to pay the international spot? Or was there a risk you actually had to pay more than the international spot? I'm interested around how you actually -- there's a fourth quarter '26 headwind that you identified, but in the event you had to pay more, you might not be able to recover that. So just around how you handle the ammonia access issues.

Yes. So our agreement with Yara obviously, their key source of supply is from the Burrup plant, but Yara is a large ammonia producer with a number of facilities worldwide. And they're a large -- they own their own shipping fleet, large trading participant in the ammonia business. So I think for the first part of that crisis, we relied heavily on their international network to be able to continue to provide supply, and we have that under our contract framework. So I would assume for the purpose of modeling that basically we pay the international import parity price for our business. We also managed to shift our shutdown so that we could continue to produce or maximize the ammonia production from our own facilities for that period of time as well to navigate that.

And a few years ago, ammonia expansion was a growth project. Can you talk a bit about where that's at and if that was an issue with gas content, gas -- the Dampier Bunbury pipeline or if it was the price of gas or if there were EPA issues, just that when you took us to Kwinana some years ago, that was one of the key sort of projects, and you're very good at delivering that, but you're a little silent on that in this presentation.

Yes, certainly no issues with -- I think you mentioned gas content and those -- and Dampier Bunbury pipeline, no issues around that. It's really -- it's still a live project within assessment. We've actually received the EPA approval. So no concerns around ultimately building the facility in Kwinana. It's really the commercial kind of vectors of like a long-term stable WA gas price that you can assume.

I think building large capital items in Kwinana, we're pretty attuned to the escalation costs that we've seen across the strip at the moment. And then the other, I think, difficult to forecast is sort of where government policy is going to land on -- across carbon and how Australia fits in with international carbon pricing and regulations because ultimately, that's -- we have to be competitive on those fronts as well.

Craig Woolford from MST Marquee. Just coming through on the lithium side. With the expansion, just trying to get a sense of how significant the reduction in average cost per tonne could be with that expansion, maybe a sense of what a fixed and variable in that part of the business and the push to expand the lithium mine.

Yes. I think you should have a look at some of the other companies that have kind of gone before us, and you can really get a sense of the scale benefits when you look at some of the large producers up in the Pilbara, both Wodgina and PLS, obviously, larger operations and how they've fractionalized the fixed costs in mining. We've always positioned Mt Holland. I've said at this forum before that it's kind of at the upper end of the second quartile cost position. The good news is, I think post expansion, Mt Holland will return back to being kind of well inside the second quartile for hard rock producers.

Got it. And Emily, just on the wholesaling component of health, there's an intimation that there's a cost benefit that will help margins or return on investment for that part of the business, but also how much is going to be required in terms of revenue growth in wholesale to ensure that it delivers a satisfactory return?

I think the investments that we've been making in our warehouse over -- our warehouses and automation over the last couple of years are really paying dividends. So we have started to see this year the cost per unit start to decline. So we're feeling more confident that we'll be able to manage the profile, the cost profile. I think in terms of total revenue, we are, I think, high single digits. I mean a lot of the wholesale revenue is determined because the prices are fixed by drug prices. So we need to maintain, I would say, consistent revenue growth.

The challenge for us is, obviously, we're on an earnings uplift journey. So the real trick is really the fractionalizing our costs. We've got our next warehouse opening in Adelaide in October and Perth next year. So that journey, it's good to see the performance that we're getting out of the new ones, but that journey will play out over the next couple of years.

It's Michael Simotas from Jefferies. One for you, Emily, if I can. You spoke a little bit about being able to attract franchise partners into Priceline on the back of the economics. Is there anything you can give us in terms of some sort of detail on how much you've managed to improve the 4-wall economics of Priceline? And I'd be interested as well in the difference between the franchise Priceline pharmacy boxes versus the corporate Priceline stores and what the future of those corporate Priceline stores is in the business?

Sure. There's a few things in that. So Priceline is a strong brand and it's growing. So if you look at the results that we're getting just in the pharmacy channel at the half, we were achieving 14.5% growth. And the Priceline format really wins when we're leveraging both our health expertise and our differentiated front of store. The work that we've done over the last couple of years on value and transforming that front of store offer, whether it's investment in price, new and exclusive ranges, the expansion of loyalty program is really driving fantastic foot traffic to that part of the business and customers are noticing and franchise partners are noticing.

But it's our ability to really lean into over the last year, the health component because what matters to a franchise partner is they're trained to be health care professionals, and they really like that complementarity that comes with being a full-service community pharmacy. So we -- this year, we did a huge campaign we called it Anything Menopause where we've trained all of our health professionals as well as our front of store in this really complementary program where customers are kind of coming in, talking to pharmacists and then also able to access front of store.

Those initiatives have been really well recognized by our franchise partners and are really the reasons that people are both investing in current refurbs and wanting to come to us. So we feel really confident that franchise partners are seeing the returns. We've also increased and in exchange for them coming with the journey on things like investment in price, we're also sort of increasing the rebates to them. So it takes a little while, but you start to see that sort of self-fulfilling circle. All of our Priceline corporate stores are profitable. Over the last 2 years, we've trimmed the network. We've made them really perform well. They're getting great e-commerce growth.

So the offer is working in those stores as well. We -- Atomica is our sort of, I suppose, new beauty pilot stores. But as I said, we're really pleased with how they're going. We're very happy for our corporate stores to continue to do what they'll do. We'll put new stores down where they make sense basically.

And can I just ask a quick follow-up for Aaron. I just want to make sure I understand the dynamic given the number of moving parts in the WesCEF business. So we can push aside the expansion projects and the earnings that they'll add. But in terms of the dynamic that the Middle Eastern conflict has caused around fertilizer shortage having to self-manufacture more fertilizer as well as ammonia price. So that's clearly a headwind for FY '26, and you've called that out. Does that then become a tailwind for the business on an aggregate basis once you add up all of those factors in '27?

Yes. I think as per my slide, it's pretty clear for the biggest impact out of those is the ammonia price curve. That's why we called that out. With respect to fertilizer, I'd say it basically has brought it back to being more of an average season for ferts. We were set up for a really strong season in Western Australia because of the strength in July and August last year.

Basically, there was demand destruction and there's going to be impacts for import prices, et cetera, for this current season. But coming through to FY '27, I can't call a fertilizer season this early for next year, but one thing that is clear is a stronger ammonia price is good for WesCEF as a manufacturer. And then we also get the benefit of that quarterly lag mechanism.

Ben from Jarden. One for Emily. Just interested in the Pulse, the new loyalty program. And I'm just interested in when you look forward 5, 10, 15, 20 years, what do you see the health business being? Do you see it being this broader ecosystem we could look at an amalgamation of United Discovery, whatever offshore? I'm just trying to understand what next. Do you need an insurance platform? Do you need to go into GP centers? Presumably, hospitals will be something you wouldn't look as too capital intensive.

This feels like a big opportunity, but there's still a few missing pieces of the puzzle. And when do you have the confidence to plug those pieces in, I suppose the question?

I might just answer those separately, if that's right. So on loyalty, -- as I said in my earlier remarks, we've got 10 million people in Sister Club. It's been an important platform for the Priceline brand and has actually really helped drive engagement with customers and franchise partners because we've been investing in it. So for example, since we bought the business, we've seen scan rates go from about mid-40s to 60% because we're attaching more and more value to the program, whether it's through promotions, sort of our goody bags.

And so we just saw this opportunity across our health business to really turn it -- take it to the next level and turn it into a health and beauty and wellness coalition. So really giving our members and customers just more ways to earn. We've obviously changed the name based on a whole lot of research and lots of feedback, which probably won't surprise a lot of people in this room, but we had a lot of feedback that it was a little bit gendered.

And actually, when you go to my earlier remarks, we're a full-service community pharmacy. I'm sure that if I came and spoke to half of you in this room, you could tell me all your latest health statistics. So we want to be able to serve all customers. We're incredibly proud of our Pink heritage and the fact that we really are playing a significant role in women's health, but we need to service everyone. And so changing the name really allows us to lean into that sort of coalition. So hopefully, that's quite logical.

In terms of what's next, I mean, I think I'll come back to something that Rob said earlier. I mean, we've got opportunities in the business. So what is my job today is to really grow earnings and returns in the business that we've got. We've got lots of opportunities to expand our addressable market, some of which I outlined right across our businesses today. We'll continue to look at other opportunities in health. Some of them will make sense. Our focus would be on things that are incremental or would enhance one of the existing businesses today. But really, it will depend on the opportunity, how much they cost and be subject to any returns, normal returns metrics.

So do you see yourself as a health retailer, first and foremost, it happens to have a bunch of services around it that helps enhance that? Or do you see yourself longer term as a broader health ecosystem, appreciating the ecosystem.

Yes. Look, I think we are a health and beauty business today. We've got elements of some platform investments through our digital health businesses that will allow us to play more into the health ecosystem, but we're not in necessarily any hurry to bring those to life.

So I don't think we need to be so definitive. It's really about seizing the growth opportunities we've got today, continue to improve earnings and returns and taking the opportunities as they present themselves in the future.

Sorry, last one on those. In terms of the willingness of the Board to provide capital into health business at the moment, is there a willingness? Or are you still bedding everything down with the DTs, et cetera, you're talking to lawyers, et cetera?

I think I'll go back to what Rob said this morning. If we can demonstrate to whatever investment that we provide, whether it's systems investment, investment into digital or certainly our DCs, and they've shown good support around making significant investment in DCs, they've got to generate a return.

So we're not -- we're subject to all the same criteria that everybody else is subject to.

It's Peter Marks, Goldman Sachs. Just another one for you, Emily, on Priceline. How are you thinking about the pharmacy category growth from here? Obviously, it's been very strong in recent years. There's some GLP-1 tailwinds. How do you -- I guess when you look forward, do you think that's sustainable? How do you think about inflation in the category and the launch of oral GLP-1s?

Yes, sure. Look, I think we're fairly optimistic about the health category and especially pharmacy overall. And that's driven by a couple of things. I think GLP-1s have been a fantastic tailwind, absolutely. But if I look at Priceline and I look at our script growth, we're outgrowing the market in script growth. And it's not just GLP-1s, it's across all of our drug categories. And why is that? It's because the population is aging and people are taking more preventative medications such as blood pressure medications to really live with chronic conditions.

So I think the aging population will be a natural -- another natural tailwind that will support category growth. The growth of things like GLP-1s will continue. And the reason they'll continue to drive strong demand is that they work and they're having really positive health outcomes for the people who are taking them. And that gives us an opportunity to really play into the fact that we're this full-service community pharmacy.

So if you're on a GLP-1, your pharmacists can come and talk to you about you should be taking other vitamins or supplements. So I think investment, whether it's drug investment, health investment and the aging population will drag the whole category forward and being able to complement that with up-to-date ranges and really relevant offers in the front of store means that I think kind of a good category from that perspective. And it's also relatively a bit resilient at times where cost of living pressures, things like medicines have actually become cheaper. So we've talked a lot about inflationary pressures. Actually, pharmacy is the one category where prices have come down, which is obviously supported by the government.

Just a follow up on that one. How are you thinking about inflation? Or are you seeing, I guess, in the front of store?

Look, I think very consistent with what everyone else has said. We're fundamentally a very affordable and value-focused sort of front-of-store offer. We want to make sure that we keep our prices as competitive as possible because that's really important to customers. But I think in the core retail part, it's very similar to what you heard here today.

Scott Ryall from Rimor. I just want to follow up on your comment on demand destruction on the fertilizer side. And I just get a little bit more color around whether the agricultural customers that you're talking to, is it priced now? Is it priced through the season? Is it a risk around availability? Do you see risk around availability of product itself over the next 6 months? And if I was to tell you that the Middle East situation finishes now, how long is it until all these things are flushed through the system, please?

That would be great news for the world if it wasn't to finish now. Just I think you got to probably put your mind back to late February, early March, which is a critical time. I'll just focus on WA agriculture because I don't really -- we don't sell into the East Coast. But that's obviously a critical time for growers to be choosing how they're going to lay out their farming program, what crops they're going to actually target for that year and their fertilizer program. And it was right at that moment that obviously, the crunch hit.

On top of that, they're also facing certainly in WA, we were really worried about diesel supply in our mining business, but also for our agricultural customers being able to commit to diesel to actually come and pick up fertilizer product, let alone what they were going to do for harvest time later on in the year. So there was definitely, we think, a maybe 5% to 15% kind of reduction, whether it was the type of crops planted or what was actually whether paddocks were left fallow for the year, there was a component that we think of demand that will be gone for FY '26.

In terms of availability and your question there, actually feel pretty good about that. The combination of us as the largest player in Western Australia, what we did with our manufacturing footprint, being able to pivot to alternate product supply, then working with the government and EFA on this facility, there isn't a shortage of urea at the moment. It's available. Prices are coming back down, both for import, but also what we're then able to pass on to growers in the market.

Okay. Great. And so I guess in terms of if the Middle East situation continues, you're comfortable now that you've been able to put out the fires and keep supply moving subject to some.

Look, I think you can't take that volume of fertilizer or close off that area of the world and think it's not going to have an impact in the long term if that was to sustain because it's a material producer of nitrogen into the market. But at least in the short term, Australia and Australia's capacity to pay and what's economic for our farms because they are well placed on a global supply chain, we've been able to secure availability and make it work for everyone.

Okay. Well, thank you, Emily and Aaron. Thanks, everyone, for joining us here today in Sydney. That brings us to the end of the session. I hope you found it -- the day informative. Any questions that you may have in the room or online, please feel free to reach out to Michelle and the Investor Relations team. And we do actually have lunch now available for those that want to stay here. And our leadership team will be here for a bit longer.

So look forward to answering any further questions you may have over lunch. But thanks again for joining us, and speak soon.

Ladies and gentlemen, thank you for holding, and welcome to the Wesfarmers 2026 Half Year Results Briefing. [Operator Instructions] This call is also being webcast live on the Wesfarmers' website and can be accessed from the homepage of wesfarmers.com.au.

I would now like to hand the call over to the Managing Director of Wesfarmers Limited, Mr. Rob Scott.

Thanks very much, and hello, everyone. Welcome to our 2026 half year results briefing. I'm joined here today in Perth with all of our divisional Managing Directors and our CFO, Anthony Gianotti. I'll begin, as I always do, with a summary of the group's performance, highlights across the portfolio, and then Anthony will talk through the financial results in more detail. And I'll conclude with some comments on group outlook, and then all of us would be very happy to take your questions.

So starting on Slide 4, a slide that will be familiar to most of you. Wesfarmers' primary objective is to deliver a satisfactory return to shareholders. We define satisfactory as a top quartile total shareholder return over the long term. And we recognize that we can only achieve this if we continue to anticipate the needs of our customers, look after our team members, engage with suppliers in a fair and ethical manner, contribute positively to the communities where we operate, take care of the environment and act with integrity and honesty. And over the last half, our teams and our divisions have made great progress in each of these areas, and you'll hear about this through the presentation.

So turning to Slide 5, the financials. This half, Wesfarmers' net profit after tax increased 9.3% to $1.6 billion. This growth was underpinned by strong earnings contributions from our largest divisions, including Bunnings and Kmart, alongside significant improvement in our newer growth platforms of Lithium and Health. And I'd really like to thank the Managing Directors of these divisions, Mike Schneider, Aleks Spaseska, Aaron Hood and Emily Amos for what them and their teams have delivered in a challenging operating environment.

Now our results really reflect strong operating performance and disciplined execution of the group's strategies. Productivity initiatives helped our businesses navigate these challenging market conditions as higher cost of living pressures continue to weigh on many households. Our businesses performed well in this environment, making good progress digitizing business operations and using technology to mitigate cost pressures and to keep prices low for customers.

Our retail businesses continued to expand their addressable markets and improve in-store space productivity, whilst WesCEF progressed key expansion projects. As a result of the higher profits, the Board has determined to pay a fully franked interim dividend of $1.02 a share, which is a 7.4% increase on the prior year. Overall, I'm pleased that we've been able to deliver strong growth in profit while keeping prices low in our retail businesses.

This reinforces our long-standing commitment to delivering a win-win outcome for customers and shareholders, especially at a time when inflation is persistent. For some businesses, low prices can result in margin erosion. But for businesses such as Bunnings and Kmart, low prices drive sales growth and support operating leverage with earnings growing faster than sales.

Turning to Slide 6, which provides some of the divisional highlights for the half. I'll let Anthony talk in more detail to divisional performance, but I wanted to make a few comments. All of our divisions with the exception of Officeworks grew earnings in the half. The strongest earnings growth was delivered, as I said earlier, by our new growth businesses, namely Lithium and Health. And these businesses have made good progress in the last half and are still very much at the early stages of realizing their potential. In Officeworks, the earnings decline was largely a result of costs associated with its business transformation program.

These changes are tough to make, and we've shown in the past that we're not afraid to make proactive changes and to take a long-term view to help our businesses realize their potential. We have given the new MD, John Gualtieri, a mandate to make these bold changes. And as one of our most experienced retail leaders, he understands and has driven retail excellence through his roles in Kmart over many years. John can talk in more detail on the program and its strategies to unlock future growth and earnings.

Turning to Slide 7. At Wesfarmers, we recognize the alignment between long-term shareholder value and sustainability performance. The group's TRIFR improved year-on-year from 9.9 to 9.6 with Bunnings delivering continued improvement in performance through its multiyear injury prevention program. We contributed $59 million in direct and indirect support to communities across Australia and New Zealand. And it was also really pleasing to see that scope -- group's Scope 1 and 2 market-based emissions fell by more than 27% half-on-half, largely as a result of our retail businesses achieving their 100% renewable energy target in 2025. And this is a significant milestone demonstrating how the group's ambition to build climate resilience aligns with stronger business performance.

Now turning to Slide 8. You can see the summarized financial performance of the group. I'll now hand over to Anthony, who can talk to this in more detail and provide more context on balance sheet and cash flow.

Well, thanks, Rob, and hello, everyone. On Slide 10, we've provided details of the sales performance across the group for the half, but I'll speak to both sales and earnings across each of our divisions in a little bit more detail on Slide 11. At a total level, divisional earnings increased 6.8% for the half, supported by strong results in Bunnings, Kmart Group and WesCEF and good momentum in Health. In Bunnings, sales growth of 4% was supported by growth across all product categories, operating regions and in both consumer and commercial segments.

Strong consumer sales growth reflected resilient demand for home repair and maintenance, pleasing performance from new and expanded ranges and growth in digital sales. Sales growth across all customer types in the commercial segment reflected the strength of the offer during a period in which residential building activity has remained subdued. During the half, Bunnings completed the rollout of its new warehouse tool shop format now in 283 stores, which continued to support the higher sales in the tools category.

Bunnings benefited from productivity improvements enabled by rostering and supply chain initiatives and further investment in technology, supporting reinvestment in price, range and customer experience. Overall, excluding the net impact of property contributions, Bunnings earnings increased 5% to $1.39 billion. Kmart Group delivered earnings of $683 million for the half, an increase of 6.1%.

Kmart Group continued to benefit from its strong value credentials and the uniqueness of the Anko product range, delivering growth in customer numbers. Product innovation in Anko's one-up and two-up price tiers generated strong customer demand with home and general merchandise categories performing consistently well over the half. Higher sales growth in Kmart was partially offset by lower sales in Target, which was impacted by more difficult trading conditions in apparel, particularly in seasonal categories and the forced closure of a Target distribution center in Queensland due to a severe weather event, which impacted availability.

The earnings result was supported by disciplined pricing and inventory management in a competitive environment and an ongoing focus on productivity, which mitigated cost of doing business pressures and supported margin. WesCEF's earnings increased 18.1% to $209 million, benefiting from a positive contribution from the lithium business for the first time. In Chemicals, earnings were broadly in line with the prior year as lower ammonia earnings were offset by ammonium nitrate, which benefited from strong WA mining demand.

In Kleenheat, earnings decreased due to a lower Saudi CP price, while fertilizer earnings benefited from improved margins. In lithium, earnings of $6 million reflected strong operating performance from the mine and concentrator with the plant achieving above nameplate capacity towards the end of the half as well as a more favorable pricing environment. Following the achievement of first product at Covalent's lithium hydroxide refinery, commissioning activity has been pleasing with the refinery producing high-quality product, demonstrating that the underlying process is operating as intended.

Production ramp-up has been affected by intermittent odor issues with engineering works to address the issue underway and due to be completed by mid-calendar year. While the ramp-up continues, excess spodumene concentrate is being sold profitably.

In Officeworks, sales increased 4.7%, while earnings of $68 million were $19 million below the prior corresponding period, in line with our previous guidance. As Rob has already mentioned, during the half, Officeworks commenced a significant transformation program as it transitions to a low-cost operating model to support low prices for customers and long-term earnings growth.

Earnings were impacted by $15 million in one-off costs associated with the program, largely reflecting restructuring activities and ERP-related costs. The balance of the earnings decline on the prior year was largely driven by clearance activity completed to support the introduction of new and expanded product ranges as well as lower sales in the furniture category.

In the second half, the transformation program is expected to continue with a further $25 million in one-off costs, reflecting continued restructuring activity and higher ERP spend. Importantly, successful execution of the program will structurally lower the cost base and provide a foundation for improved performance with benefits to positively impact earnings in the 2027 financial year.

At Wesfarmers Health, earnings of $38 million included $7 million of amortization expenses. Excluding these expenses and restructuring costs in the prior period, earnings increased 9.8%. Priceline Pharmacy's headline network sales increased 14.4%, supported by network expansion and a strong customer response to key initiatives executed during the half. These included the promotional campaigns, investment in everyday value lines, differentiated skin care and beauty products and an expanded private label range. MediAesthetics delivered profitable growth, supported by an improved operating model following network consolidation and digital health maintained strong momentum driven by growth in instant script services.

Wholesale delivered a material improvement in performance, supported by new customer acquisitions, increased volumes from existing customer pharmacy partners and continued demand for weight loss and high-value drug categories. In the supply chain, lower cost per unit were supported by increased automation in the DC network and the delivery of productivity initiatives.

In Industrial and Safety, excluding Coregas, revenue increased 1.3% to $869 million, supported by Blackwoods' growing share in a challenging market. Earnings were broadly in line after adjusting for $7 million of restructuring costs in the prior corresponding period, supported by proactive actions taken by both Blackwoods and Workwear Group in the 2025 financial year to reset their operating models and reduce their cost base. Pleasingly, Workwear Group secured new strategic customer commitments in the defense sector with these commitments to commence in the 2027 financial year and expected to support improved financial performance.

Turning now to Slide 12. Our other businesses and corporate overheads reported a loss of $71 million which was a $17 million improvement on the prior corresponding period. The key driver of this improvement was upward property revaluations in the BWP Trust and the contribution from BWP increasing from $35 million in the prior corresponding period to $52 million in this half. Group overheads increased by $8 million to $86 million, while other corporate earnings were broadly in line with the prior corresponding period.

Other EBIT includes our continued investment in OneDigital, including the OnePass membership program, the group's shared data asset and retail media network. This investment was slightly higher for the half, reflecting the establishment costs for the group's retail media business. As noted previously, the benefits from these investments through incremental sales and earnings are reported through our divisional results.

Turning to working capital and cash flow on Slide 13. Our divisional operating cash flows were broadly in line with the prior corresponding period and divisional cash realization remained solid at 103% for the half. The divisional cash flow results reflected disciplined net working capital in WesCEF, which was partially offset by Bunnings' investment in working capital to support the rollout of its new tool shop format and further category expansions. At a group level, operating cash flows decreased 3.3% to just under $2.5 billion, primarily due to higher tax paid. Free cash flows increased 35.6% to $2.75 billion, largely due to the proceeds received from the sale of Coregas and the sale of Wesfarmers 100% interest in BWP Management Limited, which occurred during the half.

Moving to capital expenditure on Slide 14. The group invested gross CapEx of $619 million during the half, which was 4.2% higher than the prior period. The increase reflected further investment in new omnichannel supply chain facilities in both Kmart Group and Officeworks, partially offset by reduced spend in WesCEF following the completion of the construction of the Kwinana lithium hydroxide refinery in the 2025 financial year. Net capital expenditure decreased by 44% to $311 million after allowing for the BPI sale proceeds of $274 million. For the 2026 financial year, we're expecting net capital expenditure for the group, excluding BPI sale proceeds of between $1 billion to $1.3 billion.

Turning to balance sheet and debt management on Slide 15. Following the capital return to shareholders, which we executed at the end of the half, the group's balance sheet continues to provide significant flexibility and capacity to support investment in growth and productivity initiatives. Net financial debt increased to $4.9 billion following the distribution of $1.3 billion in fully franked ordinary dividends and a further $1.7 billion associated with the capital management initiative.

We continue to actively monitor the group's debt mix and manage our exposure to variable interest rates. The average cost of funds for the year decreased from 3.8% to 3.6% and the weighted average debt term to maturity remained at 4.5 years. Other finance costs, including capitalized interest, decreased 14.4% to $83 million for the half. The reduction in finance costs reflected the lower cost of funds and a lower average debt balance throughout the period.

Higher net debt as a result of the capital management initiative paid in December will result in higher average net debt and higher finance costs in the second half. While Wesfarmers' debt-to-EBITDA ratio increased from 1.7x to 1.9x, we retained significant headroom against key credit metrics, and we've maintained our strong investment-grade credit ratings with both Standard & Poor's and Moody's. The group retains considerable funding headroom. And at the end of the half, we had available committed unused bank financing facilities of around $1.3 billion.

And finally, to shareholder distributions on Slide 16. As we previously noted, the capital management distribution of $1.50 per share was approved during the half and paid in December. This distribution is consistent with our shareholder focus by providing surplus capital back to shareholders in a tax-efficient way and has enabled a more efficient capital structure while still maintaining balance sheet capacity to take advantage of opportunities as they arise. As Rob mentioned, the Board has determined to pay a fully franked interim dividend of $1.02 per share, and this is consistent with our dividend policy, which has regard to available franking credits, our balance sheet position, credit metrics and our cash flow generation. In line with our recent practice, the group does intend to purchase shares on market to satisfy shares issued as part of our dividend investment plan.

I'll now hand back to Rob to cover off on outlook.

Thanks, Anthony. So turning to Slide 18. Before we discuss the outlook, I wanted to make 3 points on how the group is well positioned to deliver on our objective. First, our portfolio of high-quality businesses offers a unique combination of growth and resilience. Our retail divisions have broad customer appeal, strong value credentials and a demonstrated capacity to scale. Our globally competitive industrial businesses provide key inputs to strategically important industries. And we're well positioned to benefit from growing demand in the health and lithium sectors.

Second, we are accelerating the execution of long-term growth and efficiency opportunities across the group. We're expanding addressable markets, investing in store networks, leveraging omnichannel assets and capabilities and progressing capacity expansion projects in WesCEF. And finally, the strength of our balance sheet supports continued investment across the portfolio and helps us remain agile in responding to risks and opportunities that arise.

Turning to Slide 19. I wanted to spend a couple of slides just outlining a bit more how we are looking to accelerate our growth and productivity agenda before turning to the outlook. I think this is particularly important given our aspirations to deliver a top quartile TSR that accelerating our growth opportunities is critical. But also in the current inflationary environment we face in Australia, accelerating productivity benefits has never been more important.

Over the last 5 years, many of you have heard us talk about our elevated focus on productivity and many productivity benefits achieved to date have been through digitizing business processes. While this has been successful, new technologies such as generative and agentic AI create an opportunity for us to accelerate our progress. And the great news is that this isn't about reinventing our strategies. It's about executing our existing strategies much faster at a lower cost while delivering better outcomes for our customers and teams.

So this slide outlines the areas where we see the most opportunity, areas we talk to you about all the time. And I'm excited about how we can use this to extend our EDLP leadership in our retail divisions to support customers and grow earnings. Since in a world of agentic commerce, value will continue to be a point of differentiation. There are understandable concerns in the community about the implications of new technologies to people's jobs, their data and the service they receive from companies. And we're very mindful of the high levels of trust that the community and our teams have in Wesfarmers and our brands.

So our approach will very much be driven by the principle of people-first, digitally-enabled. People first recognizes that it's our team that will lead the changes, and we will always put our teams, customers and other stakeholders at the center of decision-making. We're investing to train all 120,000 team members so they can be part of our journey. Their judgment, teamwork and empathy will continue to be a point of competitive advantage.

Importantly, we'll also adopt a responsible approach to AI through data governance. Digitally-enabled acknowledges that the acceleration of our strategies will occur by leveraging investments in technology as well as the strategic partnerships I mentioned. Our approach is very much consistent with the Wesfarmers operating model. Our divisions are responsible for implementation, owning delivery for their customers and teams, and we've already seen great progress across our divisions.

And then with the support and access to common technology and tools through OneDigital and our strategic partners, all with the shared objective of delivering satisfactory returns to shareholders.

So turning to Slide 20. This slide sets out our current areas of focus and the KPIs and outcomes associated with the areas of focus as we leverage these new technologies. And as you can see, it's all about enhancing customer experience, supporting team member productivity engagement and driving long-term earnings growth. And we've highlighted a few of the opportunities that are already in play across the group. We'll be talking more about this at our Strategy Day, but I just believe it's a very important point to emphasize in the current environment as we look to accelerate our growth and productivity agenda.

So now turning to the group outlook on Slide 21. We recognize the impact of inflation and the recent increase in interest rates on households and businesses. In this context, our retail divisions play an important role in the community with their commitment to offering everyday low prices. Their focus and progress driving productivity allows us to deliver market-leading value whilst also delivering returns for shareholders. At a macro level, Australian consumer demand is solid, but cost of living pressures are being felt unevenly and continue to impact many households.

Uncertainty regarding the outlook for inflation and interest rates is also affecting consumer and business sentiment and while operating expenses continue to weigh on business confidence and investment. So looking ahead, our retail divisions are very well placed to drive profitable growth supported by strong value credentials, expanding addressable markets and continuing to focus on the customer experience. As I've said, there are many areas within our control to accelerate growth and productivity. For the first 6 weeks of the second half, the group's retail divisions continued to trade well. Bunnings and Officeworks sales growth were broadly in line with the growth experienced in the first half of the financial year, and Kmart Group sales growth was stronger compared to the first half, supported by its ongoing commitment to value.

Turning to Lithium and WesCEF. As Anthony mentioned, the Covalent Lithium joint venture's refinery is producing high-quality hydroxide, and we're excited to report positive earnings from our lithium JV for the first time. And the production ramp-up is expected to be extended for the refinery with work underway to address the intermittent odor issues that were mentioned. In the meantime, WesCEF has the flexibility to sell spodumene concentrate in excess of refinery requirements. And based on customer contracts for the majority of our spodumene in the second half, earnings in the second half are expected to be profitable and slightly above the first half.

The Health division will continue to build on its strong momentum, focusing on accelerating growth in its consumer business and expanding on recent gains and improvement in wholesale. Across the group, the divisions will maintain their cost discipline and continue driving productivity to mitigate inflationary pressures, which enables us to provide low prices for customers and deliver shareholder returns. And we remain committed to investing to strengthen our businesses and accelerate the growth and productivity agenda I mentioned.

So with that, we'll now be very happy to take your questions.

[Operator Instructions] Your first question today comes from Adrian Lemme with Citi.

I think the rise in currency at the moment is quite topical. So I was just hoping the key businesses could talk to how these benefits may flow after hedging, how you're looking to balance these benefits to EBIT versus passing them on to customers, given it's still a very competitive environment.

Thanks, Adrian. I might get Aleks and then Mike can add some additional comments.

Thanks, Adrian. Obviously, for us, a stronger Australian dollar is always helpful. The one thing to remind us all about, though, is the fact that we have a pretty clear hedging policy in place. So we tend to hedge up to 18 months in advance for our U.S. dollar purchases, which means the spot rate improvements that you see in the market take some time to flow through our P&L. However, clearly, it's better to have that as a deflationary outlook than not.

We tend to think about it within the overall mix of our margin profile as well. So it's one factor which impacts amongst other things, like the raw materials inputs and our CODB inflation. And we're always looking at it in the context of our pricing policies as well. So to the extent that it provides opportunities to continue to invest in lower prices for our customers, that's absolutely our priority, and you've already seen us talk about increasing our level of price investment as we head into the second half. We've recently dropped prices on just over 1,000 products across Kmart, which we think is really important in the current environment as customers are really, really focused on value. And we think, particularly in the current interest rate environment, that continues to be really important as part of our overall pricing strategy.

And Adrian, just to sort of build on what Aleks said, very similar perspective from a Bunnings global sourcing point of view. So that's sort of accounting for around about 30% of our range, but incredibly focused there on entry-level products and commodity products. So the real focus on value is strong, slightly different for our supplier base. And obviously, we just continue to work with them because hedging policies will vary supplier to supplier, but always looking for opportunities to extract value from that to both drive our productivity agenda, but also support our customers.

The next question comes from James Meares with UBS.

It's Shaun Cousins here, sorry. Just a question for Aleks just regarding Kmart. Revenue growth slowed from, I think, at the AGM running in line or thereabouts with the second half '25, which was 5%, let's say, the first 17 weeks, and it's down at 3.2% for the half. Just some questions on the back of this. While I don't expect you to break up the sales sort of by week, but did sales grow in the remainder of the half? Or did they fall?

And then could you maybe specifically for Target, could you break down the relative impact of that? You've called out apparel and the DC closures. I mean, did Target grow in the -- revenue grow in the first half? Or did it fall? And then regarding Kmart, was growth negatively impacted by competition from peers like Temu and Shein and how did the supply chain handle that? Just Kmart was running at a good rate and the result on a revenue line was stepped down. So just curious around the outcomes and digging into that, please.

There's a bit in that. So I'll try and go through each of the individual components. Clearly, Q2 set back for us relative to Q1 and the trading update we provided at the AGM. There's 3 key drivers of that. The first one, which we've talked to is on the 28th of October, we lost the Queensland DC for Target. Now that impacted not just availability within Queensland, but also across the entire East Coast because we were down to one DC in Victoria, really trying to service all of the East Coast. So it really did have quite material impacts on our availability in our key trading period for Target.

The second component is we really saw a later start to summer relative to the prior year. And so our performance in seasonal apparel categories was impacted in the second quarter. Target received a disproportionate impact of that just given the nature of the product mix within the Target business.

And then the third factor I'd talk to is if we look at that November period, in particular, it was highly promotional from a market perspective. And I'd say we saw kind of longer, deeper discounts running within the market. Now our model is not to participate in that. We're very focused in terms of everyday low prices for our customers throughout. And so while we maintain good pricing disciplines over that November period, that contributed to good profit conversion for our business, but it did impact our sales. So they're probably the 3 impacts in Q2.

If I talk to the positive within that, our Kmart performance was good throughout the half. And as we mentioned, we saw a really strong customer demand for our one-up and our two-up categories in particular. So the extreme value that we continue to provide in those price tiers is really resonating strongly with our customers, and that delivered good growth throughout the half and into that key December Christmas period where customers really responded to our value proposition.

Our home and general merchandise categories, again, performed consistently well throughout the half. And if you look at our trading update, we've talked about the first 6 weeks of this half, now always cautious to extrapolate from 6 weeks. It's a short trading period. But our trading momentum has improved and apparel has been a key driver of that. Specifically, to answer your question of was Target positive or negative in the half, the DC impact was quite a material one on Target. So if you were to exclude the impact of that, the business was broadly flat year-on-year in terms of sales growth for the half, but the availability issues did mean our sales for Target were below the prior year.

Your next question comes from Michael Simotas with Jefferies.

Just a question on Bunnings. We've now had about 5 years of average sales growth running around 4%. And that's a period where you had a couple of fairly substantial and successful product or category launches as well as the relaunch of the tools shop. Through the cycle, would you hope to grow sales faster than that? Or is that a reasonable mid-cycle type growth number? And at sales growth of around 4%, is that enough to consistently get some operating leverage through the system? Or does it get difficult maintaining or growing margins with that backdrop?

Yes. Thanks, Michael, great question. On sales, obviously, we are absolutely committed to growing the top line. And I think that the investments we've made in expanding our addressable market, both from the core. So if you think of categories like tools, but also through adjacent categories and new growth categories, I think that's been a real hallmark of our ability to continue to sort of broadly outperform the market as we see it.

The thing to bear in mind is the period that you sort of described has also been very similar from a very flat to challenging commercial environment. And I think our ability to successfully grow commercial sales in that environment is a real credit both to our sort of merchandise and sales teams. And I absolutely believe that as the housing market recovers, we're incredibly well positioned for quite significant growth on the commercial side of our business. And I think it just underscores the incredibly resilient business model that we've developed at Bunnings, that mix of discretionary necessity across both consumer and commercial.

On leverage, the short answer is yes. But the longer answer is that it absolutely remains a balance. Fundamentally, we have to earn the right to be chosen by our customers. They deeply, deeply understand value, and there's absolutely no room for any trickery in that as we know. We're doing that through enhancing and expanding our offer. Our teams are buying better through our supplier partners and our global sourcing program continues to ramp up, which is really exciting for us. But we're also investing significantly in price. So in the half just completed, we invested over $120 million into price, which is quite up on about the $108 million, $109 million from the prior corresponding period.

So the reason that we can do that, Michael, is because our productivity agenda is really diverse, and it's giving us the opportunity to make those investments and continue to deliver through our productivity agenda to the bottom line. So when we think about that, our store productivity changes, supply chain support centers, which I know Rob touched on, are always -- are all working really well, but there's lots of runway still to come with those. And with technology powering quite a lot of things there, we're really excited by that.

But at the end of the day, we remain absolutely focused on our customer. We know we've got to continue to expand addressable markets and come Strategy Day, I think we'll be able to sort of share some quite exciting changes in the way we're thinking about a couple of core categories, but also some new growth categories as well. And I think we've got a really great track record on delivering that over the period. So I'm confident in our long-term growth outlook from a total earnings point of view, but it really does come back to making sure that when it comes to winning the customer, we're well positioned for that because without that, the rest becomes very difficult.

Your next question comes from David Errington.

Rob, can you -- I think Aleks and Mike have explained beautifully issues in Kmart and Bunnings. I think that's really well covered. Can you describe now what's going on in Officeworks? Can John give us a bit of an overview there? Because I must admit, when you look at JB Hi-Fi's performance and they're really doing very, very well. It looks like Officeworks have been left behind. And now you're trying to get it on a low-cost model, transition to a low-cost model. What's the game plan with Officeworks at the moment? I don't quite understand where you're at, how long it's going to take.

And as a bit of a follow-up, these productivity initiatives that you're trying to drive, whether it be in Officeworks or whether it be in your other businesses with all this AI, is that an impediment to earnings? Or is that a tailwind to earnings? I mean when I say as an impediment, the transitions that you're having to do, whether it be in Officeworks or other transitions, I was listening to Mike, I'm just worried that this -- all this new technology that's coming on, you're wearing costs in your businesses rather than enjoying benefits from this transition of new technology.

I don't know if you understand the question there, but I'm just wondering is one thing that's holding you back a little bit is you're wearing more costs in transitioning than you're actually benefiting from the new technology coming in.

Sure, David. Well, look, I'll answer the Officeworks question, and then I'll let John talk to it in more detail, and I'll also touch on your question around cost of transition around leveraging these new technologies. So look, coming back to Officeworks, over the last 5 or 6 years, Officeworks has -- it's performed -- I'd say it's performed okay. We've grown our earnings. We've grown -- obviously grown the business. We now have a greater business in the technology category. But the reality is that we see a lot more potential in Officeworks, and there are areas where we felt Officeworks was lagging behind our other market-leading retail businesses. A low-cost operating model is part of it. It's not the only part of it. There are other aspects of merchandising processes, digital engagement, ranging new categories that go to the broader offer, and I'll let John talk to all of that.

But look, I want to give John a bit of a leaf pass just for the moment that one of the things that we have shown over the years, David, as you know, is we're not afraid to lean in and make proactive changes where we see an opportunity to step change performance. So I've given John the license to go hard, make the changes that he needs to, not to be overly focused on short-term earnings. So get through what you need to get through this year to really set the team and the business up for the future. So look, John is halfway through that process. He'll talk more about it at the Strategy Day. He can give you a few -- a bit of an update now on how it's progressing.

But look, I think this is all about -- and I'll let him talk to relative performances and how he's thinking about technology. But we're making these changes because we see opportunity and potential.

The final point -- and look, when we get to the other divisions, we'll be able to talk more specifically to how they are leveraging technology to accelerate their productivity agenda. And I might actually get once John's answered the Officeworks question, I might let Mike just give some practical examples for you. But one of the really exciting things about what's available with new technologies and what's available through our strategic partnerships, David, is that this is -- it's not large CapEx, super large cost of investment to drive the change. We are able to leverage quite cost-effective solutions here.

As part of our strategic partnerships, we've been able to negotiate some very competitive terms and rates and also access to investment funding and expertise that's not otherwise available in an Australian context. So look, we'll be able to demonstrate to you how this is flowing through to improvements in the business. We were very deliberate in putting that slide in our pack showing you exactly what the KPIs are that we are working towards because quite frankly, if we cannot see the commercial value of these initiatives or if we cannot see a discernible benefit for our customers, we won't be doing it. So I'll now hand over to John. And then after that, I might let just Mike talk to some of the more practical opportunities on the technology side.

Thanks, Rob. Thanks, David. Coming into the business with a fresh pair of eyes, I see significant opportunity for the Officeworks business to really realize its growth potential and bring performance up to retail best practice. But in terms -- the opportunities are clear. It's transforming our tech offer and service model, scaling our B2B and education and also strengthening the omnichannel customer experience.

For us to unlock these strategies, we really do need to kind of transition to that low-cost operating model, and it's important for 2 reasons. The first is to provide low prices for customers, and they really are looking for low prices at the moment. And the second is to support more substantial earnings growth over the longer term. With the transition, which we've started in half 1, it's got many different elements, but probably the first has been the restructuring activities to reset the cost base, and that's really focused in on simplifying the business. And it's been focused at a above store, replacing an ERP to improve efficiency. Our ERP is over 20 years old. And by replacing that, it does create a whole lot of efficiency moving forward, strengthening the talent and capability, constructing a new automated DC in Queensland, which will actually help with throughput and lower cost of throughput over time, but also improving sourcing and expanding branding as we move forward.

So the major work that we did in half 1 was around restructuring of the support office and simplifying. It helps us remain competitive for the long term. The new ERP about the operational efficiency and also the distribution center that I spoke about. I think if I just focus a little bit on I guess, technology and how we're going to compete in technology. We've made good progress on our strategy to transform the tech offer. And there's a whole lot more that we need to do in this space to actually become retail best practice.

Today, we roughly -- our sales are made up of around 60% in the category of technology. So we've got a right to play. We see strong growth in the coming years as homes become more connected. Today, there are about 22 connected devices in a home. And over the next 5 years, that's going to double to 44. So there's lots of room for growth. But as I said, the only way that we're going to be able to achieve the results that were required by structurally lowering our cost base to actually be able to deliver, I guess, it's a more sustainable model, but also lower prices to our customers.

Sorry, David, just to give you the opportunity to follow up if you had any clarification questions for John before I hand over to Mike.

No, it just seems like it's the starting of a journey. That's probably the only clarification. It's a journey that you're committed to it, and it might be just you're going through this period where you just have to reinvest back into the business. That's what I thought it was answered it excellently, but it just looks like it's a journey rather than a one-off. That would be my only clarification.

Look, I think that's right, David. And I think just the point I'd mention from a portfolio point of view is we definitely share John's optimism about the opportunity here. We do see -- this is a business across technology, office products, education, arts and crafts. It's a very broad market, and we really want to go after this with some intent, and we want it to be a best practice operator. So look, time will tell, but we'll be able to -- you'll be able to track the performance in the coming halves. I might hand over to Mike just to get to the practical issues to your question around AI and so forth.

Thanks, Rob. David, I think as Rob said, there's not -- they're not insignificant costs, but they're not huge costs when we start to think about the transition to AI deployment. And really, from a Bunnings point of view, that's largely built on what's getting to close to a decade of really high-quality disciplined work to develop the architecture, the tools, the systems, the process and the training to be able to accelerate the things we want to do. And we've moved beyond AI experimentation into scale deployment right across the enterprise now. And that approach combines a traditional -- combines traditional AI, so machine learning, generative AI, agentic AI workflow and low-code automation. And all of that continues to drive our really deep productivity focus. And to the sort of response I gave Michael earlier, it's giving us a lot of confidence around how we can continue to drive productivity and obviously, leverage.

We've got team member productivity tools like our AI price markdown tool, which has now been integrated into internal apps. That saved our team around about 100,000 hours of duplicated team effort, helping to simplify what we do in stores and allow our team to focus more on serving their customers. Our team chat bot is live across our store network. In the half just finished, it's answered close to 100,000 questions, reducing team time for looking for policies and procedures and the like.

In our support function, we've got 620 or so live agents and 95% active Copilot usage across support functions. So Rob touched on this focus on training earlier. We're really committed to that. You'll have seen no doubt in our Bunnings app, the Bunnings Ask AI, which is allowing customers to have conversations with our app, and that's helping to drive the really strong lift that we've seen in our online performance in the first half.

We're trialing some things in AI for our trade customers, and we'll share that at Strategy Day. And I think if you sort of thought 10 years ago, Bunnings was sort of the slow learner in the digital space. We're right at the forefront now of launching with Google, our AI platform, Gemini Enterprise for customer experience, which will really allow us to play in the agentic commerce space and really be one of the first retailers in Australia to be able to do that. So I think you can sort of see the leapfrogging work that's there, but they're very practical tangible examples, and we'll be driving that really hard in the years ahead.

Well, thank you all for your answers. They're really, really impressive, and it's great to see a company really driving for the longer term rather than just trying to meet short-term earnings hurdle. So thank you all for your answers. Excellent.

Your next question comes from Bryan Raymond at JPMorgan.

I want to check on Bunnings as well. Just trying to understand the shape of the sales growth. And I think Michael mentioned earlier about the tool shop, and there was a -- obviously, that's a meaningful change within the stores. I'm just looking at your bricks-and-mortar growth at about 2.6% in the half. I'd be interested in terms of the phasing that you saw from the tool shop in the PCP. I recall it was about 49 stores completed in 1H '25. I think that might have been towards the back end of the half, but I'm not sure. I'd just be interested if you strip that out, what growth would look like because you're about to start cycling it. And I do look at that as probably one of the more meaningful improvements you've seen from a bricks-and-mortar perspective in the Bunnings stores for some time. So yes, I'm not sure if you can shed any light on that dynamic.

It's a good question, Bryan. Like I think it's certainly going to play an important role for us, and I think it demonstrates to our team, to our customers, to our suppliers that we can really innovate within existing space and space productivity and stock turn in there has been great. The partners that have had the confidence to really back us like Makita and Stanley Black & Decker have reaped really significant benefits, and it's really given us credibility with the trade as well. I think the pro customer is really responding very strongly to that.

I think there's going to be still some time to sort of understand what it looks like on an annualized basis. But I'd actually sort of reflect on the fact that if you looked at our barbecue outdoor leisure category this season, it was really strong. Our festive performance was really strong. Our automotive launch has been really pleasing. We're gearing up for Round 2.0, which will launch from around about March with some great new brands coming online. So I do think it's a bit of a full court press across the warehouse, but noting, as I made in my comments to Michael earlier, the continued challenge of commercial. It's continuing to grow, but it is softer. And we're really anticipating some great opportunities as the housing market recovers.

Okay. Just as a quick follow-up on that. Is the tool shop continuing to grow? Like where you did some of those earlier ones, are they continuing to penetrate as trades or those that are sort of after that more premium experience from a tool perspective. Are they -- is there still growth underlying coming through? Or is it a step change and then you to cycle over it and then that growth kind of goes once we get to, say, 2H '26?

I don't think that's going to be the case, Bryan. I think we've not only seen power tool growth. We've seen tool accessories and those sorts of things grow because as we -- I think as I touched on it at Strategy Day last year, we took out automotive from the tool shop. That gave us the opportunity to introduce over 1,000 new SKUs in there. And our merchandising team never stands still. They're always focused on new products, new categories. We'll have a couple of really interesting things to talk about in terms of brand and expansion cum Strategy Day. So constant renewal and evolution, particularly in our core categories is a really sort of deeply ingrained disciplined at Bunnings.

Your next question comes from Tom Kierath at Barrenjoey.

Just a couple of questions on the Health division. Firstly, just the 14.4% growth, is that mostly comp growth? And then second, can you maybe just help us understand what's driving that? Obviously, GLP-1s are a popular one, but maybe growth outside of that particular category, please?

Yes. Sure, Tom. Thanks for the question. So that 14.4% is the Priceline headline sales number. We don't -- we haven't traditionally released our like-for-like sales growth. But what you can assume is it's a couple of points behind that. So we're really pleased with the growth of Priceline in the half, really driven by a couple of things. The investment we've been making in the overall value proposition and I would say, some very strong execution of key promotional activity and the introduction of expanded and new ranges. So we've benefited from network growth.

We've also benefited from strong performance from refurbishments. We've invested over the period in value. So that's everything from price reductions to enhancing benefits for our members in loyalty program, an expanded private label offer. So this ongoing investment that we've been making in our value proposition is really starting to resonate. I think the thing to note in that number is we're a full-service community pharmacy. So it's not just for example, the beauty range that's performing well, it's health and beauty are growing kind of in equal amounts.

And one of the ways that we've really been differentiating ourselves is this investment in health. So everything from products to a very significant investment into women's health with a menopause campaign. That's resonated really strongly not only with our customers, but also with our franchise partners. So every part of the shop, if you like, from the dispensary to the health category to the beauty category is in growth.

From a dispensary point of view, whether it's in Priceline or wholesale, weight loss drugs are definitely driving growth. But if your question is, is all the growth as a result of weight loss, it's not. In the wholesale business, weight loss drugs are definitely in growth, and they're definitely contributing positively right across the industry. But when you look at medicines, a couple of years ago, we had strong growth in COVID antivirals. We're now seeing these weight loss drugs start -- more than compensate for the loss of that. So I think the nature of drugs is that new drugs come in and other ones go off -- sort of roll off, but they're clearly here to stay, and they definitely are driving some headline growth right across the industry.

Can I also ask on Infinity and just how I guess, confident you are that you'll retain those stores in the Priceline network?

I think -- look, it's really hard to speculate on what's going to happen. We've worked really for a really long time with the Infinity Group, to help them get themselves back into a better financial position. But at the end of the day, they took on sort of too much debt, and we really lost trust in their ability to resolve the issue. So there's a really transparent process being run by the administrators.

The important thing to note is that the stores are trading, they continue to trade and our franchise agreements remain on foot. You can see from the results today that Priceline Pharmacy and the brand is really resonating with franchise partners and we're comfortable kind of with our overall position, but we're not going to sort of speculate on what's going to happen because we're just sort of midway through a process at the moment.

Your next question comes from Caleb Wheatley at Macquarie.

I have another question on Kmart Group, and I appreciate some of the shorter-term commentary a bit earlier. But just wanted to come back to some of those key categories you called out at the Strategy Day last year and how you're sort of feeling about the opportunity there and the product development has happened over the last few months, particularly kind of the apparel, general merchant home and living were called out as some fairly meaningful opportunities. So yes, any updated thoughts or how you feel you're tracking towards taking a greater share in those categories would be great, please.

Yes. Thanks for the question, Caleb. Look, I think if I look at our results through the half, what it has done for us is it's reinforced just the strength of the Anko product development capability, and we continue to be able to leverage that to extend our ranges in existing categories to enter new categories as well as to continue to deliver really extreme value for our customers, as I mentioned, at those one-up and two-up price tiers, which we're seeing really strong demand for. The strategic categories that we've been talking about in terms of whether it's youth apparel, cleaning, furniture, kid, we continue to see really strong growth within those over the half. And I think that reinforces our confidence around our ability to continue to grow the addressable market as we move forward.

I think the thing I'd add to that is we still see quite considerable opportunity to continue to grow our share of wallet with our customers as well within the existing product ranges. So one of the things that we talk about historically is our ability to drive cross-shop across key departments and we know that our average customer shops far fewer departments than our best customers do. What I've been really encouraged by is the performance that we've seen out of our Plan C+ stores, where we're seeing really good items per basket and transaction growth, and this is really being driven by a high level of cross-shop within the store.

So I'm confident that through the store investments we're making, we're finding ways to unlock the opportunity for customers to explore more of our range. Online is another one. It's a really big part of our strategy. We know our online market share is considerably below our total market share across all of the categories that we participate in. We're seeing good growth. We're investing quite heavily to improve the customer experience. We've still got a way to go on that, whether it's through fulfillment or just our digital experience. But our customers are responding well. We continue to grow the number of omnichannel customers we have. And what we do see is when customers interact through one of our digital channels and in particular, with our app, the in-store sales growth increases subsequent to that. So again, customer share of wallet through our digital strategy is really key for us.

And then the last one I'd mention would be our marketplace, which saw us also launch Target on kmart.com.au. Very early days, but we're pleased by the early performance of that. It's allowing us to further extend our addressable market into branded product categories where brands are important, but it's also actually seeing customer acquisition continue to be driven by that. It's been quite interesting to see the performance of Target on Kmart, where we've been able to see a large proportion of the customers that are shopping Target on Kmart are new to the Target brand, and they are now shopping the Target brand more frequently than they were before.

So across a number of our strategies, we're very focused on growing our addressable market in totality through our product development capability in Anko, but secondly, continuing to grow our share of wallet within the existing product categories that we participate in as well. So I hope that covers your question.

Your next question comes from Craig Woolford at MST Marquee.

I just wanted to explore the topic of operating leverage essentially, particularly as it relates to Bunnings and the Health division. With Bunnings, the EBITDA margin, excluding property, was down slightly. You talked about that price investment, which I've calculated about 17 basis points. Are there any other margin headwinds we should be cognizant of in that Bunnings business? And the question for Health is fairly similar. Ultimately, you had 8.4% sales growth, 9.8% EBT growth adjusted for the amortization and restructuring. It's a little surprising there wasn't stronger leverage in that business, too.

Craig, it's Mike. I'll kick off and then hand to Emily. But as I said to Michael earlier, we've got an array of tools and sort of hopefully, what you heard in my answer to David was similarly on the AI front, there's an enormous range of things now going starting to drive productivity. And we see, particularly in the work that we're doing in supply chain, some significant productivity improvements right through the supply chain from inbound supply chain in the way we flow stock to stores and freeing up labor and making it safer and more productive for our team through to outbound with our investment in rapid fulfillment centers and the work we're doing with delivery partners.

On a sort of a margin front, we continue to work hard to identify the products across our network that make more sense for Bunnings to be sourcing directly, and we're doing that in partnership with suppliers where we're really relying on them to drive innovation and brand and work with us on the more technical products building materials and consumer goods. So that's sort of giving us some opportunities to buy better and improve margin as we go forward. But there's this arbitrage between making sure that we're really present for the customer. And I think you've heard both Aleks and I refer to the importance of value in all of this. But we've got to have the productivity agenda right to be able to have that optionality. We've got to be able to win the customer, and we've got to be able to reward our shareholders.

Absolutely, both stakeholders are critically important and being able to do that over the long term, I think, is what's really important. And we're doing that in what remains a pretty uneven and challenging market, particularly on the commercial side. So I think as commercial continues to come back, our opportunity to really sort of drive top line performance and flow more of that to the bottom line is going to be there. And we're really excited by the productivity initiatives that we have underway. So our confidence and our conviction is very high on not only what we've got in front of us, but our ability to execute that and deliver for those key stakeholders. Sorry, Craig.

Is there any -- there must have been some other cost headwind that you may want to call out given lots of positives you talked about there, but ultimately, there was margin improvement and you've given us a 17 basis point price investment with some other [indiscernible] on costs that impacted the first half.

Yes. Craig, I'm a bit confused. I guess the EBIT margin, excluding property, actually lifted for the half and we actually had better leverage. So I'm not sure what was your question in relation to reduced leverage?

Yes, I've got the EBITDA margin roughly flat, but maybe I'll...

Yes, I guess we're focused on EBT margin because, I guess, bearing in mind that with the accounting standard and leases, you need to look at the interest component, which is only in relation to leased assets. and the right-of-use assets. So overall, excluding property, we actually saw leverage improve. So 5% growth in EBT. EBT margin actually grew from 12.9% to 13%.

Craig, it's Emily here. Thanks for the question. I think if you go back to our strategy, we're really focused on moving our business into higher margin, less capital-intensive parts of the business, really focusing on our growth in consumer. If you look at our results and just look at the one-offs that we had last year, it was actually a 21% profit uplift. And I think what that is showing is that we are starting to see some operating leverage come through. We've always been pretty clear that this is a multiyear transformation journey, and we have been investing in our supply chain. And we've got a new warehouse opening shortly. We've just opened a new warehouse in Cairns and another one opening in Adelaide.

What's been pleasing in this half, certainly from our wholesale business is we've really started to see the benefits of the automation investments come through. So we're getting good top line sales growth. We're improving our service delivery to customers, and we're actually lowering our cost to serve, and that is really coming through in that kind of core part of our business. And that's really important over the coming years to deliver this continuing sort of operating leverage as well. So that's going to be a key enabler. But we're midway through, if you like, the deployment and those benefits will kind of roll out over the coming years.

Your next question comes from Richard Barwick at CLSA.

I've got a question for Aleks just on Anko. Just note the bottom of the outlook slide, you're talking about a review of the global expansion strategy and very focused on branded stores. So there's a couple of questions sort of caught up in that. Are you thinking more JV stores like you're doing in the Philippines? Would you entertain going 100% owned? And what does this mean for the existing sort of wholesaling approach you have been up to is that being abandoned? Or is it just saying that you're considering both the priorities on the retail?

Yes. Thanks, Richard. There's a bit in that, so I'll try and answer the different components. I think if I go back to when we started, we started with 3 models to really test the Anko Global strategy. We had white-label partnerships. We had wholesaling to retailers. And of course, we had our direct-to-consumer business through our Anko-branded stores in the Philippines. I think what we have now is a period of operating history across each of those 3 that's allowed us to sit back and really assess as we look forward, where do we see the most material opportunity for sales and earnings growth and where do we see a clear path towards being able to generate an acceptable return on capital on our investment.

And what we've concluded from that is really out of the 3, we think that Anko-branded stores are where we see the greatest sales and earnings opportunity in the future. That doesn't mean abandoning the wholesale piece entirely. We're very focused on continuing to support our retail partners, and we've got some good partnerships in place. But in terms of where we want to really focus our capital and our energy for the Anko global strategy, that's really around the stores.

In terms of the stores specifically, we've got 5 trading now in the Philippines. That's through a joint venture arrangement. And one of the 5 has now cycled 1 year since it opened. I guess why are we encouraged by the performance of that business model is 2 things. One is the sales per square meter that we've been able to deliver has been in line with our expectations, and it reflects a really good customer response in the local market. And then the second part is for the store where we have cycled 12 months since opening, we're seeing good comparable sales growth, which gives us confidence around the ability to continue to improve sales density.

It is a completely new format for us. So we've still got a lot to learn in terms of how we optimize the operating model, and that's really what we're focused on over the next 12 months to gain even further confidence around future investment and what the path to an acceptable return on capital look like. But I think an encouraging start.

In terms of how to think about it is we're very much focused on being measured in our investment approach, and we will be led by the evidence and the trading performance. We'd like to be in a position in the next 12 months where we look to open another 5 stores in the Philippines, and then that will give us additional trading information to inform any future investment plans. In terms of more broadly beyond the Philippines, I think if we can really prove out our model here and have an operating model and a format that's generating good returns, then the opportunity more broadly across Southeast Asia is one that we would look to evaluate over the longer term, whether that's through wholly owned stores or JV partnerships, I think, would be dependent on the specific markets that we look at. But for the time being, we're very much focused on making the Philippines a success.

Your next question comes from Ben Gilbert at Jarden.

I appreciate the detail you guys are giving on the call, so it's pretty helpful. But maybe just one for you, Emily. Just interested in your comments just around the performance of Priceline and that acceleration that you've seen through the half. Do you think that you're seeing market growth is strengthening? Or do you think you're taking some share in market? Because there's been some discussion around when we're going to start cycling through GLP-1, for instance, when are we going to get to that point where the comps get more challenging. Just interested in maybe first one, how you're seeing the market? Do you think you're taking share at a faster rate? Or do you think the market has held or accelerated through the half?

Thanks, Ben. I think your question on the market, look, the health -- the pharmacy market, I think, is in growth. I think the whole category and sector is in growth in general. It really is a reflection of the aging population and the complete consumer trend that really is focused on health and well-being. So I think there's really good underlying macro trends in health. I think definitely, weight loss is really boosting script volume, but our businesses are not just scripts, they're front of store. So I think the growth that we've got, I think, is definitely through the investment in the front of store category.

I think the market data is sometimes hard to see. I think we're growing at least in line or probably slightly ahead in certain categories would be our view. And your specific question on weight loss, like there's no question that it's in double-digit growth year-on-year from a drug perspective. I think the demand will continue to grow as the effects really play out on people's health in the broader community. I don't quite know. I'm sure no one does. It will slow down at some point as we cycle it. But as a category, I think it will continue to be a strong contributor overall.

Just your opportunity to get more stores into your network, either under the Priceline banner or through just leaning in through to bring them across. I appreciate there's a bunch of stores probably coming available over the next 12, 18 months from some of your competitors. How competitive is that process? Have you got any ambitions around store growth targets in terms of the network that you're supplying to?

Yes, sure. I think we definitely have an ambitious store network growth pipeline. I think it is always really competitive. The pharmacy market really relies on switching. So you've got to convince someone to join your brand. What we've been doing is really investing in our brand. And our results, I think, are really -- the investments we've made are really paying off because our customers and franchise partners are really pleased and seeing the growth. So it's a dual answer. We've been investing in the proposition and making sure that we've got a model that really works for franchise partners. And then while it is competitive, we're pretty confident that we're going to be able to continue to expand the network.

Your next question comes from Phil Kimber at E&P Capital.

I just want to ask a question about the Covalent business and in particular, the lithium hydroxide plant. You called out having a few issues that you're working through and the ramp-up will be slow. We've seen one of the other players sort of step away from the market. Longer term, I mean how are you thinking about this project and the ability to be competitive in the global market sitting in Australia in the lithium hydroxide plant?

Thanks, Phil, for the question. I think you just got to, first of all, step back and look at the original investment thesis, which was obviously to produce a vertically integrated project. So first phase was to obviously get the mine and concentrator built and get that to nameplate capacity. We've been going at that for just over 2 years now since we opened the mine and shown a very consistent performance improvement over that period where we're now consistently month in, month out, starting to hit nameplate capacity for that plant. And I think we need to acknowledge that for the team out there on site that once you start doing that, you're starting to fractionalize all of the costs on the spodumene side, and we're starting to narrow the gap with the more mature hard rock spodumene producers here in Western Australia.

So Mt Holland is starting to come into where it should be as a globally competitive hard rock producer just given the size and grade of the deposit. We obviously then came into completing construction of the refinery and really commenced that a similar kind of ramp-up and commissioning pathway for that plant, which has actually shown really promising signs, and we can compare -- we often get compared to the other West Australian refineries. I think the early signs for our project have been really positive in producing battery-grade product, which we announced we'd commenced that in August last year.

Wesfarmers and our joint venture party, SQM have actually now sold hydroxide into the market just to further prove that it was battery grade product. We were pleased with the pricing we achieved on those tonnes. We do have a short-term issue that we're working through that Rob touched on, on the [indiscernible] side of things. We're confident we've got an engineering solution that we can put in place there by the middle of the year. And then really, that allows us to recommence and get back on that ramp-up pathway.

Between now and that period, we are constrained in how much spodumene we're going to be able to feed the refinery. I think by the May Strategy Day, we'll be able to give a good update on how that engineering solution is going and be more definitive on the timing. But the good news is because of that performance back at the mine site and getting the cost down and really by then, we'll be running at nameplate capacity much more consistently. Any tonnes that we won't be feeding the refinery, we'll be able to make good money in the market at these current prices, obviously, if they hold.

Yes. Can I ask just a follow-up on the -- I think there's a bullet point there saying costs incurred during the ramp-up will continue to be capitalized until commercial production is achieved. So does that effectively take some what otherwise costs would have been in the second half, which you're now saying will be slightly more profitable than the 6 in the first half and sort of push them into '27. So is that part of the reason why you're profitable in the second half? Or is it more around the pricing environment, which is way better now?

So it's a couple of factors. So the capitalization piece, we'd always assume that the refinery was going to still be in a ramp-up path for the second half. So there's currently no change to capitalization approach there. That's well defined on when the refinery has to ultimately be producing at a commercial scale before that will flip over into expensing. The real driver, to be honest, for the profit improvement has been 2 things. One, the mine consistently hitting nameplate capacity, lowering costs. We've been happy with that and the rising price environment.

Your next question comes from Scott Ryall at Rimor Equity Research.

I'd like to just a follow-up to that. So you've answered the first half of it. So I'm just wondering, just can you give us an update on when you believe you will start capitalizing and when ramp-up is done, please?

Scott, yes, it's Anthony here. I think it will depend largely on what the ramp-up profile looks like. As Aaron said, we need to get to a stage where the refinery is operating commercially. And at that point, we will start obviously expensing. But as Aaron said, I think you can assume for the rest of this financial year that we will continue to capitalize costs. As Aaron said, we'll give you an update at the Strategy Briefing Day on where we're at in relation to the solution around the odor issue, and that will give us a better line of sight around the ramp-up profile of the refinery and then what impact that might have on our capitalization or not.

And are you thinking when you operate commercially, is that the way you're thinking about it, is that a proportion of nameplate capacity or something like that?

Yes, it would be getting towards nameplate capacity. I'm not saying we would wait until we got to nameplate capacity. But certainly, we need to be on that path. And I think given the sort of extension because of the odor issue, then that's why I think you can assume for this financial year, we'll be -- continue to capitalize those costs.

Your next question comes from Shaun Cousins at UBS.

Just further regarding Officeworks maybe for John. You were early in your tenure when you called out the $15 million to $25 million of costs. There's now an extra $25 million of one-off costs. Will there be any one-off costs in '27? Or is -- or will all of that be sort of quarantined to '26? And just more generally, how will you go about building the reputation of Officeworks as leading technology, particularly what do you need to do to get access to better brands? I mean that you don't have the best brands in technology, you don't have a store format or a team that know how to sell or a brand that's known for selling latest technology if we were to compare you, say, to JB Hi-Fi. I'm just curious about what you need to do? And have you got enough cost savings to fund that investment? Because it looks quite a significant challenge to improve your credentials with customers in that broader technology and television space as well, please?

Yes. Thanks, Shaun. What I might do is just break up the costs, I think, for this year and how they translate first half, second half and how they'll land in '27 and onwards. So I think if you take in half 1, we had $15 million in restructuring costs, partially driven by the ERP and the simplification of our structures. As we move into half 2, we go into a larger -- there's higher ERP costs due to the phasing of the program, and there's additional restructuring costs also.

So the FY '26 year is a transitional year with the benefits starting to flow in FY '27 and more material thereafter. Now some of the benefits from the actions that we've taken this year, they're going to be partially offset for some of the ongoing transformation-related costs next year related to the new Queensland DC and the ongoing ERP costs. Hope that gives you a flavor of those costs.

Then as we think about -- there's quite a lot to do. And come to Strategy Day, I'll be able to kind of talk to you a little bit more detail on all the different elements. But we do today have over 60% of our sales are made up of technology. So I think we've got a right to play in technology. And we do have quite a few large technology brands that our teams sell to customers, including Apple, you've got Samsung, Sony, and there's quite a few as you kind of go through. The work that we're undertaking at the moment is how do we actually service the customers that come into store with our ability to sell product to those team members. And that's through both, I guess, team members, but also through the use of technology. And that's the work that we've currently got under play with our teams. And with the restructuring and moving to a low cost, it gives us a lot more opportunity to explore different ways to service those customers.

Does that involve sort of incentive selling into the commission-based selling that you need to do where they get part of it where your team members get part of the economics? And do you have the team at the moment to actually sell those products? Or do you need to train and/or bring in new sales team -- people on the floor?

Yes. Shaun, I will go into more detail at the strategy update on -- particularly around the incentive and the sell. There's different things that we are looking. But we have brought in 100 new team members, which we did talk about at the last Strategy Day, and they're in our stores currently. And we can see through the investment in training that they are delivering a higher sales than what would be with traditional sales assistance. So the investment is paying off.

Shaun, Rob here. In addition to John's comments about the opportunities that he's facing into at the moment, I think it's important just to step back and realize that Officeworks has driven quite remarkable growth in technology over the last decade. So I don't think there's any questions that customers are comfortable buying technology in Officeworks. What John is flagging is that we see many opportunities to do more, many opportunities to improve our range, improve the service proposition. But I don't think there's any question that Officeworks has arrived and has indeed been quite successful in selling technology products over the last decade. But obviously, a lot of work ahead.

There are no further questions at this time.

Okay. Thank you, everyone, for your time. And if you have any other follow-up questions, please call Dan and the team, and we'd be happy to help. Good afternoon.

That does conclude our conference for today. Thank you all for participating. You may now disconnect.

Good afternoon, ladies and gentlemen, and welcome to Wesfarmers' Annual General Meeting for 2025. My name is Ruth Callaghan, and I will be the moderator for today's meeting.

In relation to some housekeeping matters, in the unlikely event that you -- of an emergency, you'll be asked to leave the room in an orderly fashion through the exits which are marked around the room. Convention center staff will be available to assist you should you need them. If you have not already done so, may I remind you to please switch off your mobile phones.

Now before our Chairman, Michael Chaney commences proceedings, I'd like to begin today by welcoming and introducing Dr. Richard Walley OAM, to perform a welcome to country on behalf of the traditional owners of this part of Western Australia, the Whadjuk, Noongar People. Ladies and gentlemen, please welcome Dr. Walley.

[Foreign Language] That's a good spirit to keep everyone safe. This is called the Whadjuk section of the Noongar language group. Ask the good Spirit to give those who are presenting today the ability to articulate your message. Those who received the message you have the capacity to share it and pass it on to those who require it. At the end of this presentation, may the good spirit take each and everyone of us safely back to our families.

After I do my presentation in my song, I won't stay for the AGM much as I love speeches and hearing questions, I'd have to go. So [Foreign Language] may the good spirit be with us. I'd like to thank you for including and welcome, we do not take it for granted. It's a sign of respect to us. And regardless of who you are or where you're from, respect is our greatest asset.

[Presentation]

[Foreign Language] May the good spirit be with us. [Foreign Language].

Well, good afternoon, everyone, and welcome to this meeting. I'm Michael Chaney, the Chairman of Wesfarmers. I'm advised that we have a quorum present, and I now officially open the 44th Annual General Meeting of Wesfarmers Limited. Can I start by thanking Dr. Richard Walley for his welcome to country on behalf of the Noongar people, the traditional owners of this part of Australia from which I'm joining you all today, and I pay my respects to their elders past and present. And thank you to everyone who's joined today's meeting in person or online.

We're pleased to be hosting a hybrid Annual General Meeting from Wesfarmers from Perth with our Board and executive leadership team and hundreds of shareholders in this room, I think we had about 1,350 registrations and others, of course, who are participating online. As you can imagine, an event like this takes a huge amount of organizing. And I'd like to acknowledge a person who's organized AGMs here for as long as I can remember, this will be her last. That's Chris Dargie. Where are you, Chris? Somewhere here in the audience. Chris is up the back. But Chris has done a fabulous job over the years and everything has always run very smoothly, and we wish you very well in your retirement.

Now I'm joining you today, for those online from the Perth Convention and Exhibition Center. And on stage with me are our Managing Director, Rob Scott; and our Company Secretary, Sheldon Renkema. Also joining us are our Board of Directors and there are 3 directors standing for reelection or election today. Mike Roche, Sharon Warburton and Julie Coates, and you'll be hearing from them later in the meeting when they'll seek your support for election.

But first, I invite my director colleagues to stand while I introduce them. Firstly, Jennifer Westacott, who's been a Board member since 2013, and Jennifer is retiring as a Director at the conclusion of today's AGM. Next to Jennifer is Mike Roche, who joined the Board in 2019 and is Chairman of the Remuneration Committee. Alongside Mike, Sharon Warburton, the Chair of the Audit and Risk Committee and a member of the Board since 2019.

Next to Sharon is Alison Watkins, who joined the Board in 2021. Alongside Alison is Alan Cransberg, who also joined the Board in 2021. And then Kate Munnings, who joined the Board just last year in 2024. And then alongside Kate is Tom von Oertzen, who joined the Board last year as well. And then Julie Coates, who joined the Board this year and is seeking reelection today. So Bill English, who joined the Board in 2018 is unable to be here today due to some unanticipated -- anticipated personal commitments. Also, thank you, directors.

Also with us today at today's meeting, seated at the front are the group's senior executives, including the managing directors of our divisions, some of whom, of course, those who are in the room who we'll heard from a bit earlier today. And I welcome them on your behalf and thank them very much for their efforts and the efforts of their teams during the year.

You might have noticed I've got a slight lurgy voice. I caught something. The Board visited India a couple of weeks ago, and a few of us caught, what I would call heavy cold, but it's hung around. So I hope you'll excuse me if I turn away and cough occasionally.

As you would have seen, coming into the meeting, all of our businesses are well represented here today. And I know how pleased they all are to have been able to demonstrate their products and services to you outside before the meeting. So if you have any particular matters that you wish to raise that go into detail of their operations, please make contact with them after the formal meeting. And they'll all be outside and would be very please and available to talk to you.

We also have in attendance today, Wesfarmers' audit partner from EY, Mark Cunningham, who is able to answer any questions on the audit and related matters.

And lastly, I extend a special welcome to all of our current team members and also to all former directors and executives and team members who've joined us here today.

And so on to some procedural matters. Many of our shareholders have taken the opportunity to submit their voting instructions and questions through the online voting platform, and we thank them for doing so in advance. As outlined in our notice of meeting, shareholders and proxy holders may vote and submit questions during this meeting either in person or using the Lumi AGM online platform. All resolutions will be decided on a poll and to provide ample opportunity for shareholders and proxy holders including those participating in the meeting online to submit their votes.

I now open the poll on all resolutions. I'll provide a reminder to submit any outstanding votes later in the meeting before the poll is closed. Sebastian Erna from Computershare will act as the returning officer for the purposes of conducting and determining the results of the poll on each occasion. And the results will be announced through the ASX company announcements platform later today and will also be available on the Wesfarmers website.

We'll now play a short video outlining further procedural matters, which I have to say I appreciate because in some past years, I've had to read them all. And I think it's much better if we watch a professional.

For shareholders and proxy holders eligible to vote at the meeting who are joining the meeting in person. You will have a voting card, which has a voting paper printed on one side. If you are acting as a proxy and have been directed how to vote, please sign and lodge your blue voting card. If you don't, the vote will default to the Chairman as proxy and the Chairman will vote in accordance with the shareholders' instructions. If no instructions have been given regarding a resolution, the Chairman will vote in favor of that resolution.

When you have completed your vote, please place your voting cards in one of the boxes, which will be handed around by the Computershare representatives at the conclusion of the formal business.

For shareholders and proxy holders who are participating in this AGM online through the online platform and who are eligible to vote at this meeting, a voting icon will appear on your device or navigation bar. Selecting this icon will bring up a list of resolutions and present you with voting options. To cast your vote, simply select one of the options for each resolution for, against or abstain. There is no need to press submit or click the enter button as your vote will be automatically recorded. You may change your vote during the meeting until the Chairman declares the poll closed.

If you wish to ask a question, you must be a shareholder or their attorney, proxy or authorized company representatives. These attendees will have the option to ask questions both orally and by submitting them in writing through the online platform.

If your question has already been asked by another shareholder and answered or otherwise addressed during the meeting, please do not ask it again. Consistent with the approach taken at previous AGMs, the Chairman will respond to questions relating to a particular item of business during discussion on that item. The Chairman will also answer general questions at the end of the meeting, while voting results are being counted. In the interests of all participants, please ensure that your questions are relevant to the resolution being considered and are also relevant to all shareholders. When the Chairman calls for questions, if you're in the room, please proceed to the microphone nearest to you, show your green, blue or yellow card and give your name to the attendant who will introduce you.

If you are representing an organization, please say who you represent. You will see that we have microphone points around the room. In order to enable all shareholders a reasonable opportunity to be heard. If you have a number of questions on a particular item of business, please ask them together when you come forward.

If you are a shareholder or proxy holder participating in the meeting online, please submit any written questions on any item of business as early as possible during the meeting to minimize repetition and to maximize the number of questions that can be responded to during the meeting, written questions submitted through the online platform may be moderated. For example, by amalgamating into one question or choosing the broadest question, which covers questions on the same topic.

As time is limited, it may not be possible to respond to all questions during the meeting, and the Chairman may choose to limit the number of questions per person. If that is the case or if there are questions that might be better addressed on an individual basis, the company will respond to relevant questions after the meeting.

When the Chairman takes questions on the relevant item of business, written questions submitted online relating to that item will be read by an external moderator to the meeting.

If you are online and wish to ask a question in writing, press or click the messaging icon which can be found on the navigation bar on your screen. This will open a new screen. Select the category that relates to your question from the list, then type your question in the Ask a Question box before clicking the arrow to submit. A copy of your submitted questions, along with any written responses from the moderating team can be viewed by selecting my messages. If you are online and wish to ask a question orally, click on the request to speak button, which can be found in the broadcast panel.

This will pause the webcast. You can check your name is appearing correctly and then enter the topic of your question, submit your request and follow the instructions to allow microphone access, then connect to the queue. You will then listen to the meeting on this page in real time with no delay while waiting to ask your question. When it's time to ask your question, there will be a beep, and you'll be asked to proceed with your question.

If you are attending the AGM in person and need assistance with how to vote or ask questions during the meeting, please speak to one of the Computershare representatives around the room. If you are participating in the meeting online, a user guide is available on the online platform as well as on the Annual General Meeting section on the Wesfarmers website. This guide sets out instructions on how to submit your vote and ask questions during the meeting.

If you are having any issues of the online platform, please refer to the user guide or call Lumi on the numbers shown. Transcripts of the Chairman and Managing Director's addresses will be available on the Wesfarmers website and on the ASX company announcements platform. A recording of the meeting will be made available on the Wesfarmers' website after the meeting.

Well, I hope you found that video helpful. Please submit your votes anytime from now until I close the poll at the end of the formal items of business. Are there any questions about the poll procedure? We could always run through that video again.

Well, if there are no questions. As you would be aware from the Notice of Meeting, there are 5 items of business to be discussed when we move into the formal proceedings. But before that, I'll make some general observations about the last 12 months and the business environment. And then I'll hand over to Rob Scott, who will provide us with some reflections on current trading and the outlook for the group.

Before we do so, I'd like to take this opportunity to reflect on the past year and provide an overview of Wesfarmers' performance and its contributions to the Australian community and make some observations about the external environment generally. I'll also provide an update on the external audit tender, which was initiated by the Audit and Risk Committee earlier this year and outline recent changes to the Board before handing over to Rob.

Against a backdrop of ongoing volatility and uncertainty in global and domestic economies, I'm pleased to report that Wesfarmers delivered another strong year of performance. Your company delivered a record net profit after tax, excluding significant items, of $2.7 billion, up 3.8% on the prior year. The board declared increased fully franked dividends of $2.06 for the year per share, which was up 4%. This strong result once again demonstrate, I think, the real benefit of our diversified conglomerate model where weaknesses in one business may be offset by strong performances in other businesses.

For the financial year, year-on-year profit increases were recorded by Bunnings and the Kmart Group, by Officeworks and Wesfarmers Health. Returns from Chemicals, Energy & Fertilisers and from the Industrial and Safety division declined largely due to reduced international commodity prices and restructuring activities, respectively.

A core strength of Wesfarmers is our disciplined approach to capital allocation and capital management. Consistent with this focus and subject to your approval today, in December, we'll make an additional $1.50 per share distribution to shareholders. The $1.50 -- go right ahead. You'll see actually the vote surprisingly, as you'll see a bit later, it's 99.9% in favor, so it comprises a capital return of $1.10 and an additional fully franked dividend of $0.40 per share. The distribution has been enabled by recent portfolio actions being the disposal of the remaining 4.9% of Coles that we held a divestment of Coregas and of WesCEF's LPG and LNG distribution businesses.

After the distribution, the group will retain a very strong balance sheet, providing flexibility to navigate a range of economic scenarios and the capacity to invest in our businesses and in new opportunities as they arise.

As you know, the group's primary objective is to provide a satisfactory return to shareholders. And we've defined satisfactory as being in the top quartile of companies on the ASX over the long term. We adopted that purpose statement in 1984 when we listed. And it's really pleasing to us. And I know our faithful long-term shareholders, including many of you here today that we've achieved that purpose, that objective over the 41 years since with Wesfarmers returns to shareholders exceeding those of all other companies that were listed on the share market at the time. And those returns have amounted to about 20% per annum compound.

For those of you here today who have been with the company since listing, I'm sure it's remarkable that what began as a $28 million farmers cooperative could become a company worth today just short of $100 billion. The reason I think is that not only have we held fast to that stated corporate purpose, but equally importantly, that we've appreciated the importance of looking after our key stakeholders, our team members, our customers, our suppliers as well as the environment and the communities in which we operate.

And our stakeholders have in turn been loyal to us, to our mutual benefit. Of course, people buying shares today are interested in future returns, not those in the past. And I'd like to assure you all that notwithstanding our track record, we're always on guard against suffering hubris thinking that we can relax and the returns will keep coming.

The fact is we operate in a very competitive world, and it will only be through constant innovation and reinvention that your company will continue to prosper. Over the last 12 months, we've seen Wesfarmers share price rise significantly. And while some of that increase has been due to what I'd say heightened exuberance in the stock market. Wesfarmers’ reputation and historical performance has no doubt also been an important factor. The state of the share market at any time is something that's totally outside our control.

But there are things we can control, running our businesses as effectively as we can, seeking out and creating new ways for them to operate with new products or in new fields or geographies, managing our portfolio of businesses, acquiring new ones or disposing of existing ones, some of which we did in the last year, where we believe that will add to shareholder value.

And finally, keeping abreast of global trends and changes, which could represent threats to our businesses or opportunities and artificial intelligence being one current example of that. And we'll keep on doing those things. They are what keep us busy every day.

Providing good returns to our shareholders is our focus. But frankly, those returns are dwarfed by the huge contribution your company makes to Australian communities and the economy, something I think that's not generally well appreciated. And I think it's no better illustrated by considering what happened to the $46 billion of revenues that we received in the '24, '25 financial year. The answer is that $43 billion or 93% of it went out of the company to other parties, to our suppliers, to our team members, to governments and to the community. And the remaining 7% went to our shareholders or was retained to fund future growth.

This breakdown of our financial performance highlights, I think, the importance of large companies in our economy. And that's a fact really that is not well enough recognized. A good example of that latter problem is the recommendation of Australia's Productivity Commission for an additional 5% cash flow tax on large companies. Well, as it is, Wesfarmers pays corporate tax of 30% on its Australian profits, plus another 8% in payroll tax and other government taxes and charges, including an additional cash flow tax of 5%. Our total adjusted tax take would be 43%. Which would make Australia's tax regime one of the most onerous in the world and have no doubt it would drive investment offshore.

A lot has said about the need to improve Australia's productivity performance and I totally agree with that. Innovation and new investment lead to productivity increases, driving investment away would have the opposite effect. It's widely accepted by economists that Australia's corporate and personal income tax levels are too high. They need to be reduced. But given the state of fiscal policy that can only really be achieved through wholesale tax reform, standing back and considering all state and federal taxes and restructuring in a more efficient way. Piecemeal approaches will not do the trick. And it's very disappointing. I think that our political leaders seem unwilling to address this. I think it's time to think about the long-term needs of Australia and stop worrying about near-term political risks.

A similar issue is the cost of overbearing regulation on economic development. And it was very heartening to see general agreement on this at the recent Commonwealth economic roundtable event. But doing something material about it will require strong political will in the face of some stakeholders' protests.

In that respect, it was very encouraging. You might have read last week to hear the discussions between the Commonwealth and West Australian governments about streamlining major project approvals and removing current duplication, which increases costs and delays in investment. I just don't think people appreciate the effect of a delay on an investment. It means often investments don't occur because there's a real cost in total project returns, investment returns of delays.

Meanwhile, instability at international levels threatens economic growth around the world. And in response to China's recent actions on rare earths and their derivatives, President Trump's announcement of an additional 100% tariff on Chinese exports to apply from this Saturday if implemented, could cause huge disruption to trade and to the world economy. And every company would feel the effect of that in some way. Hopefully, the talks that are scheduled in South Korea today will help to avoid such an outcome.

Faced with such uncertainties, our strategy at Wesfarmers is firstly, to maintain a strong balance sheet and secondly, to focus on the things that we can control, as I described earlier. Uncertainties bring opportunities as well as threats. And we're confident that we're well equipped to take advantage of and to counter them, respectively.

Now as mentioned in this year's annual report, the Audit and Risk Committee of the Board initiated an external audit tender process given the long-standing tenure of our existing external auditor, Ernst & Young. As a result of a thorough process, I can announce today an intention to appoint KPMG as external audit from 1 July 2027, subject to shareholder approval at the 2027 AGM and subject to ASIC consenting to the resignation of EY. That will allow for an orderly handover of the external audit and permit KPMG to complete existing consulting engagements to ensure that the firm's independence on commencing is preserved when they commence as external auditor.

I'd like to acknowledge and thank EY for the contribution the firm has made to Wesfarmers. On retirement in 2027, EY will have been the firm's auditor for almost 49 years. They've done an outstanding job.

Turning now to the Board. I'd like to report changes that have taken place in the past year and those that will continue in the coming year. In 2024, we welcomed Kate Munnings and Tom von Oertzen to the Board. And Julie Coates joined us in July 2025. With their qualifications and experience, I'm sure they'll all make very valuable contributions to the board's deliberations. At today's meeting, we farewell Jennifer Westacott, after 12 years as a director of -- 12.5 years actually, the Board has benefited greatly from Jennifer's background and experience in business and in government and in the community. She's been a tremendous contributor to the Board, and we thank Jennifer for that great contribution to the success of Wesfarmers and we wish her well in her future endeavors.

In 2023, I announced that I will retire after next year's AGM, at the end of my current term. It's been a real privilege to serve this remarkable company. First, in an executive and then in a nonexecutive capacity, and I'm deeply grateful for the support of my fellow directors and our leadership team and our team members, and I look forward to my final year. I'm delighted to announce again that Ken MacKenzie will join the Board on 1 June and take over as Chairman following the end of the AGM at the time next year. Ken and his wife, Dorothy, are with us here today. And Ken, I wonder if you'd mind standing, please, face the audience.

Ken brings extensive experience as a Chairman and senior executive in large complex businesses operating across multiple industries and jurisdictions. Most recently, as you'd be aware, I'm sure he served as Chair of BHP Group and prior to that, as Managing Director and Chief Executive Officer of Amcor Limited, a very successful global packaging company. Based on my conversations with Ken, it's clear that he shares the same views about corporate governance and management and capital allocation and those philosophies that have underpinned Wesfarmers success for more than 4 decades, and we very much look forward to him becoming our 12th Chairman.

In closing, I'd like to acknowledge the outstanding contribution of our 118,000 team members led so ably by our Managing Director and CEO, Rob Scott, to whom I will now hand over for his remarks.

Well, thank you very much, Chairman, and thank you, Dr. Walley for your welcome. As the Chairman outlined, our results in the 2025 financial year highlights the quality and resilience of our portfolio and teams. A focus on operating excellence and our disciplined approach to capital allocation enabled us to keep our prices low, support our teams, partner responsibly with suppliers, invest in our local communities and pay tax to governments and strong execution of our strategic agenda positions the group well for the future and supports the continued delivery of satisfactory long-term returns to shareholders.

Today, I'd like to talk to you about 3 points. Firstly, how Wesfarmers is adapting for the future; secondly, how we're improving lives and livelihoods; and then how we are importantly driving productivity. I'm really pleased with the progress made to strengthen our portfolio. Investments and portfolio actions position the group for long-term growth and returns. Our businesses continued to drive product innovation and range expansion to meet changing customer needs and to grow their addressable markets.

Bunnings continued to invest in its store network enhancing its omnichannel customer experience. This includes the rollout of a new tool shop format to 175 stores, showcasing a wider range of leading brands and products and contributing to Bunnings higher sales and earnings. Kmart implemented its new store format in 5 stores with positive early trading results. Investments in Kmart Group's digital platforms grew customer engagement and omnichannel spending with monthly active app users doubling over the year to 1.3 million. Officeworks acquired Box of books to complement its education offer and upgraded 25 stores with a new technology layout to enhance offer presentation and experience to customers. At WesCEF, our Covalent joint venture achieved a major milestone, delivering first product at the Kwinana lithium refinery in July this year.

The 2026 financial year will be a transitional year for Covalent with production expected to ramp up over the next 18 months. The refinery will be a unique asset globally, expected to support satisfactory long-term returns with its attractive cost structure. In Health, Priceline Pharmacy achieved strong sales growth through network expansion and further investment in key value lines to lower prices for customers. Health continued to explore new formats to expand its addressable market, including through atomica and InstantScripts Pharmacy Health Hub. Our investment in the OnePass membership program continued to support incremental sales and earnings in our retail divisions. And this year, we launched a group retail media network, which is well positioned to deliver new revenue streams.

And I'm also pleased with the actions taken this year to renew our portfolio. In Industrial and Safety, we sold the Coregas business for $770 million, delivering significant value for shareholders and supporting in part the proposed $1.50 capital return that the Chairman mentioned earlier. The decision to wind down Catch and redeploy its assets and capabilities has eliminated operating losses and further strengthen Kmart Group through improved centralized online fulfillment capabilities.

Wesfarmers' success is built on customer trust, team member commitment and our connection to local communities. We are committed to improving lives and livelihoods in our communities, providing well-paid jobs to team members and supporting their development with rewarding careers. Our retailers are committed to delivering value and helping customers manage cost of living pressures without compromising on quality or service. And we support thousands of suppliers fostering ethical and sustainable sourcing.

The Chairman has spoken to our broader economic contribution, including taxes paid to government and investment in local communities. Around 13 million Australians have an interest in Wesfarmers through their superannuation. And we also recognize the critical importance of taking care of the environment, not only for businesses but for future generations. This year, we reduced group Scope 1 and Scope 2 emissions by 9.3%. And Bunnings, Officeworks, and now Kmart have achieved their 100% renewable energy targets. Together, these contributions evidence the critical role that Wesfarmers plays in supporting Australia's prosperity and resilience.

Now on productivity, there's been a lot of public debate around productivity, which, as the Chairman said, must remain a priority if we are to improve Australia's prosperity, and at Wesfarmers, we're committed to finding more efficient ways of working. And we know this requires sustained investment, disciplined execution and importantly, a mindset of managing our businesses for the long term and not optimizing just for short-term profits. Across the group, we're driving productivity and improving service by simplifying how we work digitizing our operations and leveraging AI and data where it makes sense.

In Bunnings, improved team member productivity and inventory efficiency has been enabled through investment in in-store technology and a new demand and replenishment system. Kmart Group has benefited from the integration of Kmart and Target systems and processes. And Kmart Group has also continued to digitize operations, for example, expanding its RFID capabilities to improve product availability and service to customers.

In Industrial and Safety, the operating model reset was enabled by recent systems investments, materially improving customer service and costs, which are expected to support long-term earnings growth. Our businesses are increasingly using AI, including in areas such as demand forecasting to enhance our team member and customer experience and in areas such as marketing and to improve product availability. Bunnings and Officeworks have launched voice-activated AI tools that help our team members access product information to better serve customers. We've made great progress, and there are further opportunities ahead.

I'd now like to comment on our 118,000 team members across the group. Now we recognize that the value of a workforce that reflects the communities where we operate is critical. With our diverse workforce, we accessed the best talent available to help connect with our customers and to harness the creativity and problem-solving skills that our team possess. Our leadership team and our Board remain in gender balance, and we maintain indigenous employment parity.

In the last year, some of our talented leaders stepped into key leadership roles within our group leadership team, including Aleks Spaseska as Managing Director of Kmart, who you heard earlier, together with Aaron Hood, as Managing Director of WesCEF. And then more recently, John Gualtieri at Officeworks and Leah Balter, at OneDigital. And we're really proud to be able to focus on internal promotions here. And I'd also like to recognize and thank Ian Bailey, who retired as the Managing Director of Kmart Group. And Ian has played a pivotal role in Kmart's growth and he remains with the group as Chairman of our Anko Global business. And our thanks also go to Sarah Hunter and Nicole Sheffield, who transitioned out of their roles as Managing Director of Officeworks and OneDigital respectively.

Now as always, safety comes first at Wesfarmers. We take our responsibility to create safe, inclusive and respectful workforces very seriously. Now while group total recordable injury frequency rate has improved this year to 9.5%. During the year, we experienced a significant worsening of retail crime and customer threatening situations. Over the last 12 months, we recorded 13,500 customer threatening incidents across our retail stores. And this included more than 1,000 instances of physical assault and several hundred threats of serious harm with a weapon.

Now these are not issues just focused on Wesfarmers. These are broader societal community issues. Now customer threatening situations at Kmart Group increased 29% for the year. And at Bunnings, incidents involving serious threats of harm increased by 66%.

So in response, we've strengthened security in higher-risk locations, we've increased training for team members, including to help them with de-escalation strategies, and we've deployed body-worn cameras where appropriate in some areas. Now we share intelligence with our retail peers, with governments and with the police because they all have an important role to play in addressing this growing hazard.

Now we support sensible reform, including tougher nationally consistent penalties for violent retail crime and a national conversation to enable controlled responsible use of technology to exclude known violent offenders from retail environments, which is in the community interest. Our position at Wesfarmers is clear. Our team members must be safe and respected at work, and we will keep investing partnering and advocating until we see sustained improvement.

Now I'd like to provide an update on the group's recent trading performance. The Australian economy remains resilient, supported by a growing population, low unemployment and improving household disposable income. At our full year results in August, we noted a modest improvement in consumer demand to the start of the 2026 financial year. Since then, consumer demand has remained positive, the cost of living pressures remain a challenge for some households and some consumers maintain a cautious outlook.

Cost pressure, especially in relation to domestic costs present challenges for many businesses and this is weighing on business demand and investment in Australia. These pressures are reflected across Wesfarmers divisions through higher domestic supply chain, labor, energy and regulatory costs, and some subdued business-to-business sales growth.

For these reasons, the group businesses continue to invest in productivity initiatives to help offset these higher costs and maintain competitive prices for our customers. In this economic environment, the group's retail businesses are very well positioned with their strong value credentials and product ranges that have broad customer appeal. They remain focused on disciplined execution with performance for the first half of the 2026 financial year, subject, of course, to the important trading period that we're leading into with Black Friday and Christmas ahead of us.

Bunnings year-to-date sales growth is ahead of growth recorded in the second half of the 2025 financial year, supported by solid trading in the consumer segment. The commercial segment has also delivered positive sales growth despite the soft sales to builder customers, which reflects the ongoing supply side challenges resulting in weak residential construction activity.

Kmart Group is benefiting from the strong value credentials and quality of its Anko products with year-to-date sales growth broadly in line with the second half of last financial year. The business continues to invest in various projects that are expected to deliver long-term cost and operational benefits such as improving supply chain capabilities including its next-generation fulfillment center, upgrading digital platforms, including the launch of a marketplace together with other areas of digitizing operations.

Officeworks sales momentum has continued for the full year result -- from the full year results in August. Earnings for the first half, however, will be impacted by lower operating margins and costs associated with resetting the operating model and some restructuring activities, together with an ERP replacement project, which is underway. And as a result of these additional costs and margin impacts, earnings for the first half are estimated to be between 15% to 25% -- $25 million rather lower than in the prior corresponding period.

Now while the reset of the operating model and these restructuring changes, will impact earnings this financial year. The benefit of the changes are expected to result in lower cost of doing business and improved financial performance in the years ahead.

In the Health division, Priceline Pharmacy continues to deliver strong network sales growth, supported by better retail execution, network expansion and price reductions on key value lines, together with the introduction of new and exclusive brands that are resonating really well with customers. Performance in the wholesale segment continues to improve, but trading remains competitive in that space. Strong online sales growth in the retail and health divisions has been supported by our investments in omnichannel capabilities in recent years, and the insights provided by the group shared data asset and the continued growth of the OnePass membership program are contributing to incremental sales and earnings in retail and the health divisions.

In WesCEF, the ramp-up activity associated with the Covalent lithium refinery continues to progress well. As previously indicated, earnings in Chemicals, Energy & Fertilisers this year are expected to be impacted by higher contracted natural gas costs in WA as well as lower expected LPG content in processed gas. And of course, earnings in these businesses are always subject to global commodity prices.

In the Industrial and Safety division, trading conditions remained challenging with earnings impacted by subdued demand across the mining and resources sector.

Following the reset of the operating model, key operating metrics in Blackwoods, including customer Net Promoter Scores and new customer win rates are ahead of expectations.

Now in closing, Wesfarmers is well positioned for the future. Our balance sheet is strong and it ensures we have the capacity to invest in our businesses, adapt to dynamic markets and take advantage of opportunities as they arise. Compared to this time last year, our businesses are more productive, more efficient and have more growth opportunities.

I want to thank our Board for their continued advice and support and for our leadership team as well, together with team members across the group for their broader commitment towards our corporate objective.

I'd now like to hand back to the Chairman. So thank you.

Well, thank you, Rob. And so now on to the formal business of the meeting. I refer to the minutes of the 43rd Annual General Meeting of the company held on 31 October last year. I reviewed the minutes and I've signed them as a true and correct record of that meeting. The minutes are actually available for inspection at the shareholder registration desk and the company's registered office.

Voting on all resolutions today will be carried out by a poll, as I mentioned earlier. All resolutions are ordinary resolutions requiring approval by a majority of the shareholders who vote on that resolution or a majority of the shares. Where as Chairman of the meeting, I've been nominated as shareholders' proxy, I intend to vote all undirected and available proxies in favor of each of the resolutions. There are also voting restrictions for some resolutions, as outlined in the notice of meeting, which apply to those who have an interest in the resolutions and certain of their related parties.

A reminder that if you're having any issues casting your vote or submitting a question, please speak to a Computershare representative if you're attending here in person today. Or if you are participating online, please refer to the user's guide on the Wesfarmers website or call Lumi on the number shown on the slide.

The proxy votes and direct votes that have been submitted in advance of the meeting will be set out on the slide shown for each resolution and I'll provide details of the percentage of for and against for the benefit of all of those listening to the meeting online.

As mentioned earlier, the final results of each poll will be available on the company -- on the ASX company announcements platform and on the Wesfarmers website later today.

So I'll now proceed to the formal business of the meeting. The notice of Annual General Meeting was distributed to shareholders on or before Friday, 26 September 2025, and I'll take the notice as read. And we'll now proceed with the items of business listed in the notice of meeting. For each item of business, we'll display the wording of the relevant resolution on the slides in front of you here and online. And for those listening to the meeting online, please refer to the notice of meeting for the relevant wording.

Now the first item is to receive and consider the financial statements and the reports of the directors and the auditor for the year ended 30 June 2025. And which have been included in the company's annual report. Fiona Campbell and Mark Cunningham from EY were the signing audit partners for the company for the 2025 financial year. And Mark Cunningham is here and available to answer questions on the audit and related matters. So I'll shortly invite shareholders to ask in person or submit online any questions that they have regarding this resolution on the accounts. And for those shareholders and proxy holders participating online, just a brief -- just a reminder, there's a brief delay in the broadcast. So please follow the instructions outlined earlier to ask your questions online.

Now are there any questions on item 1?

No, Chairman. Apologies, Chairman. There are no questions for Item 1.

Sorry, what was that?

There are no questions for Item 1.

No questions online. And if you have a question, just go to 1 of the attendants with a number in front of them. And it looks like there are no questions here on this item.

So if there aren't any further questions, I'll now move on to the next item of business.

So the next item is for the reelection and the election directors. Mike Roche, Sharon Warburton and Jennifer Westacott are retiring by rotation at this meeting today. And Mike and Sharon are offering themselves for reelection. While as I mentioned earlier, Jennifer will conclude her directorship at the end of this meeting. Again, I want to thank Jennifer for her contribution, it's been fantastic.

Julie Coates was appointed as a Director in May this year and offers herself for election today. So displayed on the screen, is the position in relation to votes and proxies received on the reelection and election of directors prior to any revocations that may have been occurred -- been made during the meeting. And for those who are listening online, there are 98.07% of the votes in favor of Mike's reelection, 92.7% of the votes in favor of Sharon's reelection and 99.27% of the votes in favor of Julie's election. And the first director to speak today is Mike Roche, who was appointed to the Board in February 2019.

So Mike, would you mind coming up to the stage, please?

Good afternoon, ladies and gentlemen. Good afternoon, shareholders. Thank you for considering my reelection as a nonexecutive director. I feel privileged to stand before you and outline what contribution I believe I can continue to make to the Board. My background is I have over 40 years' experience in financial services, 30 years of that has been in investment banking, most of which was for a global investment bank, where I advise a lot of the major corporates, private equity and government across multiple industries and multiple jurisdictions.

I was head of mergers and acquisitions for the final 10 years. And I served 2 terms on the Australian federal government takeover panel. Prior to that, I was a senior actuary advising on long-term funding and investment. I'm currently a Non-Executive Director of Macquarie and 2 private companies, 1 owned by a global private equity firm Apollo. Also my wife and I, Geraldine, founded and remain Directors of Sally Foundation, which is our own private charity.

What have I found since I've been on the Wesfarmers Board. It's been really interesting to see the company from inside. You see it from outside, I guess, as a director, I've seen it from inside. And what I see is a very high-quality company with exceptional people and depth of talent, well-positioned businesses and a strong ethos of community engagement. Most importantly, the company maximizes and maintains its hard-earned reputation for genuinely thinking long term and seeking to maximize return to shareholders. But as you've heard, only doing that by looking after customers, staff, environment, shareholders, et cetera.

Since 2019, I've been Chair of Remuneration and attended every Audit and Risk Committee and being proactively engaged in discussions around portfolio optimization. And that's where I've sought to bring my experience to support strategic decisions and try and position us for the challenges and opportunities ahead.

My style is to try and bring questioning outside-in perspective to our deliberations. I think this external lens is critical. So my focus remains on helping the organization make sound decisions whilst preserving its well-earned reputation. I grew up on a farm in regional Australia, and that taught me resilience and the importance of long-term thinking, qualities that I think, they've always been important, but they're particularly important at the moment, given current market uncertainties. As an actuary long-term thinking is what that's all about. And having started my career in the 19 -- mid-1970s recession, I've weathered multiple economic cycles, which I think is helpful for whatever lies ahead.

Because the global landscape, like it's evolving rapidly, whether it's regulatory changes, technology, geopolitical this creates a need to think strategically and adaptively. So I think my background is suitable for that. It adds experience to the oversight of Wesfarmers diverse operations. And I've learned over the years that independent thinking is critical. Being part of an effective team, however, is what creates real value. So I'm proud to be part of what I observed to be exactly that kind of team at both the management level and the board level in Wesfarmers.

So I can assure you that I'll always act in the best interest of Wesfarmers and most importantly, your best interest as shareholders. My skill set, I think, complements that of other Board members and enhances our collective ability to provide overall effective guidance and oversight. So I look forward to your continuing support. Thank you.

Thank you very much, Mike. I invite shareholders to ask any questions on this resolution. Ruth, are there any questions online?

No, Chairman.

Okay. And I don't think there are any questions in the room. So I'll now introduce Sharon Warburton. Sharon was appointed to the Board in August 2019. And Sharon, would you mind coming up on to the stage, please.

Thank you, Chairman. Good afternoon, ladies and gentlemen. Thank you for this opportunity. First, I want to tell you a little bit about me. I'm a proud West Australian. I spent my childhood in the Northwest, growing up in a town called Exmouth. These days, when I'm not in a boardroom or on an aircraft, I reside in the great Southern region.

During my career, I have lived and worked in the U.K.; Abu Dhabi in the Middle East, as well as in Sydney. And I would summarize my executive career as globally focused with large corporations, enrols specializing in finance, strategy, risk management and mergers and acquisitions.

Turning now to my financial qualifications. I am a fellow of the Institute of Chartered Accountants Australia and New Zealand, and I am a fellow of the Australian Institute of Company Directors. Finance and risk management has changed a lot since I went to university, and it continues to change. These days, I find myself committing significant personal time when I'm not in the boardroom to continuing my education in areas that are important to Wesfarmers and the other companies in my portfolio. And I find myself spending more and more time in the areas of risk management like cybersecurity, like data protection and privacy and sustainability reporting and assurance.

I described myself as a full-time company director, and I've been a full-time company director for over a decade now. My director roles to date have largely been in businesses in the global mining sector across, across the full mining value chain and across a range of commodities. However, I've also had roles in a range of other industries, including energy distribution and transmission, data centers, engineering services and commercial property.

Today, as well as my role here at Wesfarmers, I am a Non-Executive Director for 2 other large ASX-listed resource companies, South32 Limited and Northern Star Resources Limited. And I have also just assumed the role of Chairman of the Audit and Risk Committee at South32 Limited. I find playing this role as Chairman of the Audit and Risk Committee across a range of organizations enables me to see and encourage the cross-fertilization of industry best practice. It enables me to see the depth of both in Australian and the global auditing communities, and it enables me to learn from different perspectives, particularly on risk and governance matters.

Since I spoke to you 3 years ago, I have retired from my part-time role as a member of the federal government's Takeovers Panel. And I also retired from an ASX Board listed role at Worley Limited. However, I continue to serve as an independent non-executive director of one of Australia's largest indigenous corporations, the Karlka Nyiyaparli people based out of Port Hedland in the Pilbara region.

For me, working with the traditional owners, Elders has been an incredible learning experience. In closing, I have now served as a Non-Executive Director and Chairman of the Audit and Risk Committee here at Wesfarmers for over 6 years. It is an absolute privilege to work alongside my colleagues and the outstanding Board of Directors. I believe I bring complementary skills to the Board, including in the areas of strategy, governance, accounting, finance and risk management. And I would be grateful for your vote of support today. Thank you very much.

Well, thank you, Sharon, and I invite shareholders to ask any questions in relation to this resolution. Firstly, Ruth. Do you have any questions online?

No questions, Chairman.

Okay. And no questions in the room. So in that case, we will move on to allow me to introduce Julie Coates. Julie was appointed to the Board on the first of May this year, and we -- and she was previously Managing Director of CSR and had a lot of retail involvements as well, but I'll let Julie tell you about that.

Thank you, Chair, and good afternoon, everyone. I was very pleased to join the Board earlier this year. And today, I seek your support for my election to the Board of your company.

Wesfarmers is an iconic Australian company, and I am pleased to have the opportunity to serve you on your Board. There's a couple of things about me that I'd like to highlight to support my election. I, too, grew up on a dairy farm in country Victoria. So like Wesfarmers, my beginnings were on the land, and this has shaped my work ethic and my values. Much of my career has been working in retail, which is of relevance to the Wesfarmers group.

I worked at Target and then was involved in the start-up of the Officeworks business. I'm very proud to say I was employee number two right back in 1993. I was also at the Woolworths Group for 12 years. First, as the Human Resources Director, then the Chief and distribution of fast-moving consumer goods, running Goodman Fielder in both Australia and New Zealand. I was also on the Board of Coca-Cola Amatil at that time. As Michael said, my last executive role was as the Managing Director and CEO of CSR, a proud Australian business for over 169 years. I felt very fortunate to be able to lead that business for 5 years before it was acquired for a significant premium for the benefit of all stakeholders, particularly its shareholders.

Finally, I commit to bring all that I have learned to my role on the Wesfarmers Board to support our objective of delivering satisfactory returns to shareholders. Thank you.

Well, thank you, Julie. Are there any questions on this resolution? Ruth, no questions?

No questions, Chairman.

And I think none in the room. Or is that one coming?

Mr. Chairman, Microphone 5, may introduce [ Patrick Berg ], who is a shareholder.

Just a quick one. Why are you changing auditors from EY to KPMG. If EY was so long -- well, you were with them for so long.

Yes. Well, thank you for the question. As I mentioned, EY has been the company's auditors for a very, very long time, far longer than any firm normally audits a listed company. But they've done a great job, as I mentioned during my address. As you know, under the law, the lead audit partner is required to change ever, I think, it's 6 years. And I've always described the -- when people in the past said to me, how can you keep the same auditors? I've commented, it's a bit like O'Reilly's ex, he's had it for 50 years, and he's changed the head twice and the handle 4x because you do get this rotation of partners. And so we've been very satisfied with the very professional job that EY has done.

There is an increasing trend to go out to tender for your external audit after a period in the U.K. companies are required to do so, I think, after 10 years. And it's becoming a lot more common in Australia, as you would have seen. And we felt that it was an appropriate time to go out to tender and to see what the other firms had to offer. And we got very good submissions from the firms.

And in the end, decided to appoint KPMG as external auditor. And of course, it's no reflection on EY. Similar things happening in other companies where EY gets appointed. But I think it's always good to have a new firm, a new set of faces looking at the accounts and new approach and so on. And it's part of modern corporate life, but I think you'll see external auditors change more frequently than they traditionally have in Wesfarmers.

Was there a question on microphone 3? No.

So if there are no further questions, we'll move on. And I ask that you vote on resolutions 2A to 2C, each of them is independent and should be voted on separately. So shareholders voting in person should place a mark in the for, against or abstain box for each resolution to see on your green voting cards. Similarly, proxy holders voting in person who've been given open votes should place a mark in the appropriate box on your blue voting card to indicate whether you're voting the open votes for, against or abstaining. Shareholders who've already voted will have received a yellow card and don't need to do anything further.

Now if you need assistance in completing your voting card, please raise your hand and a Computershare staff member will come over and help you. Shareholders and proxy holders voting online should follow the instructions already provided and the user guide is available on the voting platform as well as on the Wesfarmers website.

If you need any assistance, as I said earlier, just called Lumi on the number that's shown on the slide.

Now item 3 relates to the company's remuneration report for the year ended 30 June 2025 and displayed on the screen is the position in relation to direct and -- direct votes and proxies received on this resolution prior to any revocations that may have been made during this meeting. For the benefit of those listening online, there are 97.95% of votes in favor of this resolution.

The remuneration report, which is in the annual report provides information regarding the remuneration of our senior executives and directors who are considered to be key management personnel of the group. And they can be found on Pages 96 to 125 of the annual report. We appreciate the engagement from shareholders in relation to our remuneration practices and I can assure you that the Board remains absolutely committed to an executive remuneration framework underpinned by our guiding principles on remuneration. That is really focused on driving leadership performance and behaviors to deliver satisfactory returns to shareholders over the long term.

The total remuneration for senior executives is set at levels that reflect the executive's contribution and competencies and capabilities and at a level that enables Wesfarmers to attract and retain the best people. The remuneration report, including the covering letter from the Chair of the committee, Mike Roche, provides a detailed explanation of the outcomes for 2025 year, so I won't repeat them here. The remuneration report continues to address the desire for transparency regarding our remuneration framework and outcomes specifically in regard to variable remuneration.

So I now invite shareholders to ask any questions on the remuneration report. Ruth, questions online?

Chairman, I have a number of questions submitted to the meeting by Mr. Stephen Mayne. In relation to this item, he asks the following. I voted in favor of this resolution, but suspect there will be more than 2,000 retail shareholders who voted against, particularly after seeing the 7% share price drop today. However, under your current disclosure practices, you won't reveal the shareholder turnout. The annual report says we have 479,215 shareholders but less than 2% of them will have bothered to vote today.

Will you voluntarily follow the lead of Qantas, Suncorp, Tabcorp, Meyer, Stockland, ASX, Computershare and many other companies, and disclose the voting results as at the scheme meeting, where you also reveal how many shareholders voted for and against each item? This will make public Wesfarmers retail shareholder sentiment on issues like remuneration rather than having the voting results dominated by U.S.-based index funds, such disclosure will also stimulate future retail shareholder participation. You have the data. So please let the sun shine in on Australia's chronically low retail voting rates.

Well, thank you, Stephen. I think you've asked this question before. The requirement of the listing rules and the act that we announced the results of voting in accordance with the number of votes cast in favor or against or abstain and that's exactly what we do. We haven't discussed the matter of whether it would be worthwhile doing what you suggest. Certainly, when we have -- in the more distant past, we've decided that we conform to the requirements of the law, and that's what we continue to do.

And Ruth, was there another question?

No further questions, Chairman.

Okay. Are there any questions from the floor? Yes, number 3.

Mr. Chairman, Microphone 3. May I introduce [ Roman Kniznikov ] who is a shareholder.

Thank you, Mr. Chairman. My name is [ Roman Kniznikov ], and I'm a long-term shareholder. I come all the way from Sydney to thank you, Mr. Chairman, to thank your Board and your great management team and to ask a couple of questions. My first question is why all AGMs are here in Perth only? I have many shareholders in many national companies, and many of them are doing their AGMs all over Australia. This way, the Board and the management will hear all shareholders and make right decision.

My second question is why different departments of this company making different policies. Let me explain, well-known brand like Bunnings. Everyone knows their policies. They will beat any price and anyone know the best price and best quality is Bunnings. Totally different policy applied to the Priceline Pharmacy. I will start that even price difference between different price pharmacies can be 400%. This is prescription medicine that should be equal value, I'm talking in Sydney CBD in space of 2 minutes’ walk between each other. It doesn't make any sense. More to it, when I raise this issue at the Priceline Pharmacy, I was told to buy from competitor like a Warehouse pharmacy, where price were even lower. I understand the pharmacy is a very competitive business. but to send our customers to competitor is too much.

Before I finish, I would like to look at the earnings between Bunnings Group, $2.336 billion and Wesfarmers Health Group only $64 million. Actually, you can see the Wesfarmers Health Group is the lowest earning between all the groups. Thank you.

Well, thank you very much for those questions. Certainly, on the second question, the policy of the company has always been to allow its businesses, its different divisions to run autonomously. And we think that's been a real strength of the business that if you give the manager of the business, the authority to make decisions such as pricing decisions, they can -- they have a very close understanding of the competitive environment and how they should be positioning themselves.

So if you look at Priceline, for example, there may be products where the price is higher than in another pharmacy, but it can be made up for and I think it is made up for much higher levels of service and advice. And so that's a decision that the management has made and which as I think you see from all the results, has proved to be a very successful process. And so I think we'll continue to do that. Each business if you look at Officeworks, they have the same sort of price guarantee that Bunnings has, in the case of Kmart, their everyday low-price organization like Bunnings, and it is, as I said, has been a very successful strategy.

Rob, would you like to comment on the first point?

And then just maybe a couple of points to add there. There's unique regulation that impacts pharmacies where it's the responsibility of a pharmacist to dispense prescription drugs, and they have the right to set the price as they believe is appropriate. And that applies across all pharmacies. One area where I know that the team at Priceline have made amazing progress is a lot of what we call the front of store products, so the non-prescription products where the team have lowered the prices of over 150 everyday lines to be very competitive.

So the price positioning of the Priceline franchise stores now has improved materially, and that is what is leading to improved sales. But if you look across many independent different pharmacists around the country, the current regulation means that each independent pharmacist is responsible, ultimately has responsibility for dispensing prescription drugs and setting the prices. But hopefully, all of our shareholders will avail themselves of the fantastic and improved prices that you'll find across the Priceline network.

Yes, Rob, maybe I'll talk about the first one. As far as the annual general meeting goes, we have always held it here in Perth, and I think it's likely we'll do so for the foreseeable future. We've got the advantage now of being able to have hybrid meeting so that shareholders in other cities can go online and participate and ask questions and so on. The Wesfarmers' annual meeting is a pretty unique one in Australia. For one thing, we've got all the events outside, which many of you came early to participate in. And we have our divisional people there, and it's a very big setup. And I think replicating that in another city would be a more expensive thing to do and be inconvenient for people traveling when you think of -- it's not just the board, but a lot of team members involved.

But I think also, we are very much a West Australian-based company, and we started here, and we're the biggest company in Western Australia on the stock exchange. And we have a huge number of original retail shareholder, i.e. farmer shareholders, who -- many of whom got their co-op stock through trading bonuses and come along faithfully every year. And I think that makes us a little different to other national companies that maybe have a spread of -- a bigger spread of retail shareholders around the country. So that's how we feel about it.

The third question was really about the difference in profits between Bunnings and Health. Interestingly, when we acquired Bunnings, the hardware business was making about 1/5 of the profits that Health is currently making. It's grown from -- it must be around $10 million to $2.5 billion a year in profit. And when we acquired Australian Pharmaceutical Industries, it was because we identified the health industry as one with potential for growth and that this would give us a foothold in an industry that would grow because of aging population and so on, and we continue to look -- we've made a few smaller acquisitions since then, things like telehealth and so on.

But we continue to look at large acquisitions in the health industry as we do across the in other industries. But we haven't currently to date, found anything that we thought was worth acquiring and would add shareholder value. But you may well find in due course that the health business and the division is as big as the Bunnings division or you may find that it's a lot smaller because we haven't outlaid funds on acquisitions we thought were too expensive.

Are there any other questions, please? No? And none for you -- from you, Ruth. So we'll move on and ask you to vote on Resolution 3.

So the next item on the agenda is Item 4, that relates to the grant of deferred shares and performance shares to the Group Managing Director. And displayed on the screen coming up is the position in relation to direct votes and proxies received on this resolution prior to any revocation. And for the benefit of those listening online, there are 98.2% votes in favor of this resolution. The Board, as I inferred earlier believes that it's in shareholders' interest to provide the group with equity-based incentives to ensure that there's sufficient alignment between the returns that shareholders get in due course and the returns that the executives get. So approval is sought for the grant of deferred shares and performance shares to Mr. Scott under the, what we call, the key executive equity performance plan on the terms set out in the explanatory notes in your notice of meetings. And I ask shareholders to ask any questions on this resolution.

None from you, Ruth?

No, Chairman.

And any questions on the floor? Okay. And I'd ask you then to vote on Resolution 4.

Now as we're moving into the final item of business for the meeting, I'll take this opportunity to remind that those who are eligible to vote at this meeting who have not yet cast their votes that I'll close the poll shortly after the final item of business. So please ensure that you cast your votes before that time.

So the next item relates to the return of capital to the shareholders. And displayed on the screen is the position in relation to votes and proxies received before any revocations. And for the benefit of those listening online, there are, as I mentioned earlier in the meeting, 99.48% of votes in favor of this solution.

Now the Board proposes to undertake a capital return to shareholders of $1.10 per share or approximately $1.249 billion, subject to the approval sought under this resolution on or about the 4th of December. If the capital return is approved, the Board's decided that a fully franked special dividend of $0.40 per share or approximately $454 million will be paid to the shareholders on the same date. The initiative is being undertaken to return a portion of Wesfarmers group surplus capital equitably to shareholders, and I think does demonstrate our commitment to efficient capital management.

So are there any questions on this resolution? None online?

No questions online, Chairman.

And none on the floor. Okay. I'd ask you now to vote on resolution -- sorry, microphone 1.

Mr. Chairman, Microphone 1. May I introduce [ Shane Denton ], who is a shareholder.

Good afternoon, Chairman. My question relates to the future planning regarding the issuance of a special dividend versus the potential for future growth and acquisition opportunities, ig.com, Australia's leading CFD and share trading platform referred specifically to the sale of Coregas at the time of sale at least as Wesfarmers recycling assets to unlock value and potentially fund future acquisitions.

In the CEO's address, Mr. Scott said under the adapting for the future section, he refers to actions taken in renewing Wesfarmers' portfolio, stating it delivers significant value for shareholders and that at least in part, it supports the $1.50 capital management distribution, whereas the wind down in redistribution of assets such as Catch has had readily noticeable data reflecting its positive outcome on Kmart, hence, growth in Wesfarmers overall.

As the Chairman, Mr. Chaney said earlier, the more than 99% affirmative vote for the dividend to be given the uncertainty of the cost of living and markets going forward. A little is more certain than cash in hand. I'll not pretend to have a better understanding for this reason, and I reiterate that the outcome is happily welcomed by the majority. But would this enormity of money not have been better directed at facilitating growth in the company itself to uphold its share price, which is already presumed as inflated rather than supporting the issue of dividend.

Yes. Thanks very much, Mr. Denton. Wesfarmers has actually had a record over 41 years of its listing of returning capital by the way of capital return or special dividends to shareholders in addition to having the payout ratio of our profits of between 80% and 90%. And we do the latter, by the way, because franking credits sort of no value to the company that are real value to shareholders. And we say, why would we hold them in here and never be able to get rid of franking credits when they're of real value outside.

Capital returns can be done when the tax office approves that you've, for example, dispose of an asset like Coregas or 4.9% of Coles and that's a capital asset, and you're able to return it to your shareholders. Now when you come to make a decision about whether you should do that, the main driver really is how efficient is your balance sheet. The fact is that equity has a higher cost than debt. And so it's important to have a balance of equity and debt, obviously, not too much debt because you might go broke if things go badly, but a reasonable amount of debt because it has a lower after-tax cost compared to equity.

And what you take account of is the rating agencies' view of your current balance sheet. So if you look at it before this proposal, we were under geared, that is, we had a huge amount of headroom between where we were on a ratio, for example, of earnings to debt compared to what the rating agencies allowances for our credit rating. And so we look at that and we model it and we say, if we return $1.10 of capital and a special dividend of $0.40, what will our ratio be, what will our debt-to-equity be and so on. And it's still way below the limits that the rating agencies believe are important. At all times, I think we've been conservatively geared, i.e., we haven't had a huge amount of debt in the balance sheet or more than we think is prudent. And the same applies and will apply after this capital return.

Now finally, the question you raised really is instead of returning capital, why don't you go out and invest in assets. All I can say to that is we'd love to if we can find investments where the numbers add up. In some companies, they have a view that capital is limited. Well, actually, capital is not limited. It's unlimited except on a few days after the GFC because banks and shareholders will always provide you with capital if you have a good investment.

And so we've always had a practice of, well, we're under geared. We've got too much cash, we'll give it back to shareholders because they can do something with it. And if we need it to make a big acquisition, they'll give it back to us in return. The challenge is not limit of capital, it's limit of investment opportunities where the numbers add up. And I mentioned in my earlier speech, that the imposition for example, of a 5% cash flow tax makes -- would make every investment less viable. And you'd find less opportunities in Australia than you currently find. So that's an explanation of why we do this, but it is always with a strong shareholder return focus.

Any more questions on the capital return and dividend? Okay. Thank you very much. Well, that now concludes the formal business of the meeting, and I intend to close the poll. So if you're eligible to vote at this meeting and you haven't yet cast your vote, please do so now and ensure that you then insert your papers into the boxes being carried around the room.

And we'll just give a couple of minutes to allow people to do that.

[Voting]

So are there final voting cards that people haven't put in? I invite you to put up your hand if there are, and somebody will come to you. So thank you all for taking the time to vote on the resolutions. And I think it's safe now unless there are hands up to declare the poll closed. And shortly, we'll move to general questions and -- but prior to inviting you to ask any general questions, so a couple of other matters for me to highlight.

We've got a great turnout here today. And for those shareholders and proxy holders who are in the meeting room, representatives from each of our division, as I said, are available outside. So you can always ask them any customer questions. But in the meantime, we also have an invitation -- sorry, an information desk at the counter where you registered for invitation, information about Wesfarmers and staff members and so on. So quite a few shareholders are still receiving communications and dividend advice in paper form which is pretty costly for the company.

And we'd really like to encourage all shareholders to opt into electronic shareholder communications. And that will reduce our mailing costs substantially and it's actually a more secure, convenient and sustainable way of receiving communication. So shareholders who registered today at the shareholder information booth to receive all shareholder communications electronically will be entitled to a $10 Bunnings gift card, which, as you know, buys you more than $10 worth of things. But please -- and so please take note of that. And if you would like to, please fill in the forms. So note that light refreshments will be served at the conclusion of the meeting. But if as some already done, you want to leave before that, thank you very much for your attendance. I don't think general business questions will go for very long, but I invite any shareholders now to ask any question about any matter of general business. Ruth?

Thank you, Chairman. We have a number online. The first is from [ Mr. Michael Mumolo and Mrs. Luis Mumolo ], who asked, how do the workforce plans across the Wesfarmers divisions deal with AI impact on workforce numbers?

Yes, I wonder, Rob, if you might like to comment on that?

Sure. Thanks very much. Well, there's a lot going on in the AI space and our focus -- and we're very aware that it will have implications to ways of working and jobs and so forth. The way that we're approaching it at Wesfarmers is in a number of areas. First of all, we're trying to learn as much as we possibly can around the responsible applications of AI in ways in which it can help our teams, help our customers, help our businesses be more successful. Secondly, we've also put in place responsible AI policies to govern the way in which we will implement any AI use cases and functionality to make sure we do so in a very robust and responsible way.

In terms of the key areas of opportunity for our teams and for jobs within Wesfarmers, like frankly, a lot of our jobs, there's only so much that AI can do when you're running a chemicals plant or store environment, we continue to need a lot of people and people are one of our key assets and differentiators. But we're using AI in areas such as helping our teams in Bunnings and Officeworks, access a lot of technical information to service customers. We're also reflecting on ways in which customers can use AI to better search for product information and to transact with our products.

The areas where I think Gen AI will have the greatest implications are likely to be areas back-office functions such as contact centers, call centers, coding, a lot of software development and coding roles. We're already seeing those implications. But I'd say in the short term, at least, I think that our team will see AI as an enabler to help them do their job more effectively. And we've run a number of training programs to help our team members and our leaders across the group understand the opportunities and the possibilities afforded through Gen AI.

Thanks, Rob. Ruth?

Chairman, I have a question from [ Mr. Henrik Kay ], who says in relation to the CEO's speech earlier that the company is of improving the diversity of its workforce. I ask how many people with disabilities have been hired within Wesfarmers?

Well, thanks very much for that question. We -- in terms of team members that identify as having a disability and my sense is that the real number is a lot higher than this, but we have over 1,700 team members across the group that identify as having a disability. For example, over 2% of Kmart's team. So about 1,000 team members identify as having a disability in Kmart. It's about 600 in Bunnings. About 100 team members have declared a physical disability at Officeworks.

And as I said, I have no doubt that the real number is higher. What we have done across our businesses is try to make efforts to adapt workplaces to create more opportunities for team members with disabilities. And I'd say, Kmart -- both Kmart and Bunnings have made some great progress in this regard. And for example, in Kmart, we've seen the jobs available for team members with disabilities triple over the last number of -- last few years. That has also been supported by a partnership that the Kmart Group entered into with the Commonwealth government to help look at ways in which we can create these opportunities.

So I think there's still a lot more to do. When you think about the broader disability space, there's a very large proportion of Australians that have an enormous amount to offer in the workplace and to offer our businesses, and I think there are further opportunities for us to create those opportunities.

Thanks, Rob. Ruth?

Thank you, Chairman Mr. [indiscernible] has 2 questions regarding Wesfarmers Health. The first is that the current return of capital is 3.8%, up from 3.2% last year. What is the estimated time frame for the business to achieve a return on capital greater than Wesfarmers cost of capital? And furthermore, can we shareholders take it that Wesfarmers Health has an effective strategy to counter Chemist Warehouse's dominant market position?

Well, thanks for that question. Yes, the return on capital is low at the moment. And in fact, at today's Board meeting, we did our routine 3-year review, which we do after an acquisition. So we looked at how did the outcomes compared to the forecast that we made when we made the acquisition that case of API. And the answer is that it's very much in line. The -- in terms of EBT, earnings before tax, it's in line. And in terms of return on capital, it's slightly below the projection a couple of years ago because of increase in inventories.

If you look then at the corporate plan of the Health division, which every year, we do a 5-year corporate plan and revise it every year. It shows the return on capital going into much more satisfactory levels over the next 5 years. And that requires, obviously, very good management by the team in health and also a favorable environment, I guess, for an environment that's no worse than it is today. But we have confident that Emily and her team can give us a better return on capital and certainly approaching that cost of capital for the group, in fact, above the cost of capital of the group.

And Ruth, there was the second part to that question?

Sorry, Chairman. It was just in relation to an effective strategy to counteract Chemist Warehouse.

Well, Chemist Warehouse is now a listed company. And no doubt, they have their challenges as every company does. We've certainly under Emily, got a very clear strategy about how we should go forward. And we think we'll be able to compete very well with them. Certainly, on the service side, it's something that Priceline is noted for. And so we're confident that we'll be a pretty solid competitor.

Any more questions online?

Thank you, Chairman. I have 2 related questions from Mr. Stephen Mayne. The first is, Wesfarmers leaders seem to have a strange approach to chair succession, going for the long-dated handover after many years of service. Why did we announce on the 28th of August that former Amcor CEO and BHP Chair, Ken MacKenzie would succeed Michael Chaney as Chair, way into the future on the 29th of October in 2026. Furthermore, why is Ken only joining the Board on the first of June 2026, giving himself less than 4 months to learn the ropes taking the top job? Good governance normally sees chair succession handled more quickly and from within. Why hasn't Mr. Chaney done this at Wesfarmers similar to what has happened with his friend, Richard Goyder at Qantas in the AFL, 2 organizations that have also had to go outside for a new chair due to poor internal succession management.

Mr. Mayne's second question is directed at Ms. Warburton and asking her as the longest-serving director up for election today and a member of the Board Nomination Committee, could she please comment on why the company has failed to manage chair succession internally, which is best practice, instead recruiting Ken MacKenzie as the next chair who won't join the Board until June next year. We've historically managed the CEO succession internally, which is great, but it appears that no one on the Board was trained up to succeed Michael Chaney, and we've instead had to look outside to find a successor.

He concludes, there is a little discussed conflict of interest with CEOs and Chairs of public companies, which is to not bring on potential successes in order to extend one's tenure in the top job due to a lack of internal challenges. And he asks, does Ms. Warburton agree that this is what might have happened at Wesfarmers and that the Nomination Committee has fallen short on those Chair succession questions.

Well, I can answer both of those, because they're very much for the whole Board and with the resounding no to most of them. And I know Stephen, if you're listening, you like everyone else who's commented and who've certainly has spoken to me will think the appointment of Ken to take over this time next year is a fantastic outcome.

Where to start on your questions. I suppose the first thing to say is Wesfarmers has always, I think, proudly had a record of long-term succession planning. We do that with regard to our management where we know we go through succession plans every year. We know who's likely to retire in a couple of years and who can come up behind them. And it's no different at the Board. We know who will retire from the Board in a year, 2 years, 3 years, and we very early set about on a process to see who might replace them. Sometimes we report -- we appoint search consultants or headhunters, sometimes we just use our own knowledge of who's around.

In the case of my retirement, I can assure you there was no -- I had no interest in extending my tenure. I did announce, I decided a couple of years ago to say, this will be my last term, because I reckon 76 is old enough, and I might forget where the boardroom is. And so we then set about really a couple of years ago talking about who might succeed me. As we went through it, there were certainly some of the directors who may well have been able to take on the job. But the Board was unanimous when we looked at potential candidates outside, which, of course, you've got a responsibility to do that Mr. MacKenzie was top of the list. And if he were willing to come on board, none of the -- we had a unanimous view that it would be the best outcome.

As far as timing goes, Ken retired from BHP at the end of March, and he was -- in my discussions with him, made the point that he really wanted to take a year off corporate life before he did anything else. So the timing worked out perfectly where he could come on mid next year and then take over subject to your approval as shareholders at next year's AGM.

In terms of hitting the ground running, Ken has actually signed a nondisclosure agreement with the company and has access to board papers in the meantime, so he attended our Board meeting yesterday and today he'll attend meeting we're having in March in Melbourne, and we'll be very much, I think, up to speed on the real issues facing the company by the time he comes on in June. I can tell you from personal experience that if you're going to become Chairman, you really don't want to join the Board a year before you become Chairman because you're sort of champing at the bit and waiting to do it. So I think it's a perfect bit of timing actually.

And Ruth, anymore?

One final question online Chairman, and this is from [ Ms. Carly Ashen Brenna ], who asks, Chairman, can you please expand upon your comment in the Chairman's message in the annual report related to suggestions of a 5% cash flow rate for large corporations and explain how that would erode the competitiveness of Wesfarmers?

Yes. Well, Carly, very nice to hear from you. I don't know if you had a chance to hear my address, where I did go into that in some detail. The answer is that our corporate tax rate at the moment is 30%, and we pay a full corporate tax rate. If you look at payroll tax and other taxes levied by governments, it's 38% in total. And then if you add the cash flow tax is 43%, that compares to a corporate tax rate, half that in other countries, in other western countries. And it simply makes investing in Australia -- it would make investing in Australia, far more challenging.

Investing is a very simple process. You look at the cost of the investment and the cash flows that you're going to get for it for whatever term. And if the cash flows are diminished by a much higher corporate tax rate, then the bottom line doesn't justify the initial investment. And it's as simple as that. And so that's why people argue for a reduction in the corporate tax rate, which, in the end, probably would cause governments not to have to outlay any more money because they -- while they get reduced taxes, they get increased economic activity, which itself is taxed.

And so we thought the cash flow -- proposed cash flow tax was not a good idea at all. The plan of the Productivity Commission or the idea really was that you get a rebate from that tax for investment -- capital investment you made. The danger of that -- 2 dangers, I think, 1 is tax avoidance might rear its head again in finding ways of calling something capital that was not.

And secondly, it might cause companies to make investments that were suboptional, that is that didn't meet the investor hurdle rate. That goes to productivity. What we need in Australia is investments that are productive, not investments that you're making in order to avoid some sort of tax. So for those reasons, we've had a very strong view that it would be a bad idea.

Any more questions? Ruth, none from you?

No further online.

Number 6.

Mr. Chairman, Microphone 6. May I introduce [indiscernible], who is a proxy holder.

Thank you, Mr. Chairman. My question relates to Wesfarmers 2025 climate disclosures. A recent report by market forces identified Wesfarmers as one of Australia's largest users of manufacturing gas. The report found that approximately 56% of Wesfarmers Scope 1 emissions come from its use of gas in the production of ammonia. Wesfarmers CSBP ammonia production facility was the ninth largest manufacturing gas user in the country.

Another major ammonia production facility, Dyno Noble's Phosphate Hill is at risk of permanent closure with its CEO citing high gas prices as one of the major financial contributing factors. In financial year to 2024, WA gas prices were 2.5x higher than they were 10 years ago. This, despite gas production and therefore, gas supply more than doubling in Western Australia over the same period. Given the significant financial risks associated with continued reliance on gas as a primary fuel source, including rising gas prices, rising network costs and rising costs of ACCU purchases under the safeguard mechanism, is Wesfarmers looking into setting quantitative targets to reduce gas use at facilities like CSBP?

Yes. Well, thanks very much for that question, Mr. [indiscernible]. The answer is to your question at the end there is yes. We -- while we might be the ninth largest user of gas for chemicals manufacturer or the figure you quoted, we're actually a very small user in the scheme of things. And if you look here in Western Australia, more than 50% of electricity is generated using gas. We, as you say, are a producer of ammonia, we're also an importer of ammonia. But what we've done in the last couple of years has invested very heavily in adding agents to our nitric acid plants to greatly reduce their emissions.

They're called catalysts and we started with the nitric acid plant #3, at a cost, I think, of about $13 million or $14 million. We're going to be adding catalyst to plants 1 and 2 at a cost -- total cost of about $65 million, half of which is going to be contributed by the government. And that will reduce emissions of CO2 from those plants by -- is it 95%, Rob? A huge amount. Now their costs in that case, about $80 million, for which there's no evident financial benefit. But it's part of our commitment to reduce our emissions.

Wesfarmers as a group is actually a very low emitter of Scope 1 and 2 CO2 equivalent emissions. But the WesCEF operations down at Kwinana have the majority of the emissions. And this is one way they're going to meet their 30% reduction by 2030 target. Beyond that, we've been looking at things like carbon capture and storage, sending gas up to a depleted gas field in the Perth Basin. The economics of that are very challenging and you need a pipeline or reusing a whole pipeline, but it's still -- it's work that we're still progressing.

You'll hear people like us say, we're committed to a zero 2050 target, but it requires technological developments and carbon capture and storage is potentially one of the host. So it's something we take very seriously. And when you say are we going to set some quantitative targets for reducing gas consumption in our plants, it effectively -- the answer is yes because of the reasons I've given you. If not gas consumption, then the effects of gas consumption.

Wesfarmers has partnered with ARENA to participate in the Parmelia green hydrogen project to feed its operations in Kwinana. The study concluded that the ammonia plant has the potential to displace feed gas and fuel gas with delivered green hydrogen. Has Wesfarmers or its project partners develop time lines around this project, including time bond targets for quantities of green hydrogen used at the ammonia production plant?

I don't believe so. And the whole question of green hydrogen and the economics of green ammonia are really up in the air. It's very challenging as we've seen with hydrogen itself to make economic sense of producing hydrogen and green ammonia is in the same category. We spend money looking at the possibilities. There may be technological breakthroughs, but it's not something we could give you any time line on. And I think we're destined here in Western Australia to be producing ammonia, utilizing gas and importing ammonia from elsewhere for quite some years yet.

And number 4?

Mr. Chairman, microphone 4, may I introduce [ Crawford Taylor ], who is a shareholder.

Thank you, Mr. Chairman, Crawford Taylor. I would like to ask a follow-up question around AI, but more from an economic sense. Rob has spoken about the potential benefits for the Wesfarmers businesses and the efficiencies that AI might create. Mine is more from a broad economic sense about the impacts that AI could have on the number of people in employment within the Australian economy and therefore, driving and having an impact on consumer demand and Wesfarmers is a consumer business. Has the Board strategized about this and come up with any plans or are considering options, how they might negate this?

Yes. Thank you, Mr. Taylor. The answer is it's impossible to do because no one knows where AI is headed and what it will lead to. So we're very active in our consideration of AI. Today, at the Board, we had I think, a 40-minute session from our lawyers about directors' duties in relation to data and artificial intelligence. But no one, including the huge companies that are building data centers and promoting AI knows where it will lead. And so you can't sit there and say, well, this is our strategy because it might -- it will lead to the elimination of x jobs.

It may actually lead to the -- an increase in jobs. And if you ask me what employment will look like a year from now in Wesfarmers, it's likely to be higher rather than lower because we have growing businesses. But it's something we have to monitor. We've got a duty really to make sure that our company is protected from developments, including AI. And so we'll continue to do that very actively. We've got a number of use cases, so-called around the group. And if you go into Bunnings, they'll have a device that uses AI to give a much richer product information experience and there are things like that, that we will utilize that I think won't have an effect on employment.

If I could just finish with a comment about AI, Anil Sabharwal was on our board for a few years, and he was a senior executive at Google. And when ChatGPT first came out, he said, I'll tell you what worries the tech industry. It's the unknowns ahead of us rather than the things you can forecast. So you can sit there and say, AI can eliminate white collar jobs or AI can make things more efficient. But when the iPhone was released, everyone sort of looked at it and said, this is a lovely device, we'll be able to send text and put it in our pocket and make phone calls and so on.

No one at that time, imagine the near destruction of the camera industry or the taxi industry or the problems associated with social media or apps, things called apps of which there are hundreds of thousands. They're the unpredictable things. And so his point was, there'll be things that AI leads to that we can't imagine. And some of them may be really bad or some of them may be good like increasing productivity, maybe even increasing employment in different ways. But it's a big unknown. And I can assure you that management is very focused on it, and we'll monitor it as it evolves and the Board will do the same.

Go ahead.

Thank you, Mr. Chairman. Maybe just as a follow-up to that and maybe some telltale signs of what we're seeing in the broader economy is not only here but overseas, but we have seen companies starting to announce significant layoffs as a result of AI. Could this question the diversity of the Wesfarmers model there when we are so weighted towards the consumer element as a result? Question, thank you.

Yes, it's -- as I say, it's hard to know. And there's one very substantial Australian company that announced layoffs. And a few weeks later, announced there were no layoffs. I think that illustrates the uncertainties that face us all.

Yes, number 6.

Chairman, may introduce [ Sebastian Zammit ], who is a shareholder.

Good afternoon. Mr. Chairman, I've got 4 questions here for you. Do you want to answer one as I ask you?

No, just let me have all 4.

Is it true that Wesfarmers are contemplating to shift management operations to the Eastern states?

And the second one?

My wife and I are shareholders in this, I call it a wonderful company. I'm very pleased with what you guys have given us in return. But my wife and I, are shareholders, but we only get 1 vote because we bought the shareholding in one Mr. and Mrs. you understand what I'm saying?

Yes.

Now the other one is would you consider having a Wesfarmers shareholders discount card. I think it would be of great benefit, I would say, to the share price as we used to have some years ago with Coles.

And the last one comes from my son. He had an experience when he went into a Bunnings store, he had a problem there with a dog. Now, I'm not a dog owner. And if there is dog owners, I don't think they'd agree with what I got to say. I don't believe that dogs should be allowed into Bunnings stores. And we've never had any real -- not that I've heard of, real instances where dogs have been a major problem, but they can be. I mean, they even turn on their owners. So I'd like you to with the Board, to consider -- reconsider your board -- your dog policy, please.

Well, thanks, Mr. Zammit. With regard to your first question, most of our operations are headquartered outside Western Australia already. So if you look at Bunnings, Kmart Group, Officeworks, the headquarters are in the Eastern states, and so is most of their business. So that will continue. The head office is in Perth, and the WesCEF business here is headquartered in Perth -- or in the suburbs. And I think the head office is likely to stay here, but it makes sense to have head offices of those operating companies closer to where the majority of the stores are.

With regard to your shareholdings, if, for example -- what counts, as I said earlier in response to Mr. Mayne's question is the number of shares that are cast in favor or against. And so if you and your wife have a joint shareholding, you could actually -- if you had a different view, one of you could vote half of them against and one for, you might think that was a waste of time because the net result is 0. But that's your choice.

Thirdly, on a discount card. All I can say is when I ask Joe Boros, who is running Bunnings, Joe, can you give us employees because I was still an executive, can you give us a discount card, he replied. If we gave people like you discount cards, we wouldn't have everyday low prices. And so there's no intention to do that for shareholders, but shareholders have the benefit of using their dividends and going and buying things at low prices at Kmart or Bunnings.

As far as the dog question goes, I am a dog lover. And so I've always thought it's a great policy. And I think the people in Bunnings would take a lot of convincing that banning dogs would be a bad thing, commerce wise. And I know a lot of people enjoy the fact they can bring their dog into the store. And amongst other things, creates, I think, a good culture in the store of a sort of relaxed atmosphere. So I'm afraid I can't give you any assurance unless Ian Bailey sitting there says, no, Chairman, you're wrong. He's shaking his head. So I think the dog policy is here to stay.

Mr. Chairman, if I go into Bunnings again, the only thing I'd like to be attacked by is a bunch of women, not a bunch of dogs.

I think it's politically very incorrect to say that. Okay. Any other questions? We're probably done. Number 3.

Mr. Chairman, microphone 3. May I introduce [ Sean Chang ], who is a shareholder.

Good afternoon, Mr. Chairman. I've got 2 questions. One, relating to succession and the second one relating to retail theft. But before I start, I'd like to play a complement to our Managing Director, Rob Scott, for solving a coffee malfunction earlier. So if he didn't solve it, I won't be standing here for 10 minutes, nonstop. So not only did he show great leadership by getting someone. He came back 5 minutes later to make sure it was done. So that's leadership. So my first question, Mr. Chairman, about succession. You're not too old. President Trump is 3 years older than you and has much greater responsibility.

I think if I might. I think that proves the point.

Okay. In your role as previous Chairman of other companies, you had one golden rule. And that golden rule was if the culture is great, succession always comes internally. Is this succession of the Chairman's role abnormally because that's what you preached. And so that's my first question.

My second question is about retail theft. And I have seen it, I've been in the middle of it where people take things and run. Some of them get the teller to run up the items and then they run and that's actually a bit more of a headache because the teller has to decide what do I do, and marrying that up against what the Managing Director said about, can I find out what is the theft rate? Can you make some comments on that? And why is it that the privacy commissioner is stymieing everything you're trying to do, whether it's cameras, whether -- in fact, the suggestion about dogs, maybe we need guard dogs, at your Bunnings. Thank you, Chairman.

Okay. Thanks. Well, I'm not sure what I can add to my earlier comments about succession. But at the end of the day, you want the best person in the job. And while I said, while we had people internally who could have done it. Everyone agreed unanimously that if Ken were available, he'd be the right sort of guy. One of the challenges actually of chairing Wesfarmers is that it is a very different company, it's a conglomerate. And people used to say, conglomerates don't work, you should spin it all the bits off and have separate companies.

Well, Wesfarmers has proven that it's not right in every case, and we've been very successful. I think if you got the wrong person in there who -- you might get a person from outside who wanted to spin off parts of the business and be a retailer or try and run the company themselves, that wouldn't happen, I guess, with internal candidates. And so appointing anyone from outside, I think, is always an issue that, do we know this person well enough and so on.

We know Ken very well through various involvements over the years, what we've read about him, and Ken gives lectures in capital management and runs courses for chief executives, and is a very, very highly regarded person in Australia for focus on shareholder returns. And that's why the Board felt that if he were able to come on board and willing to come on board, it'd be a terrific appointment. He will, of course, join us in June. He will have access to board papers over the next year.

And in that sense, he's an internal appointment. We've had a lot of people taking on senior positions, who we brought in a year before, proved their worth and made them Chairman. So I don't have any doubt there'll be a smooth handover and the company will be in the right hands.

The second was on, Rob, more a question for you, I think.

Regarding retail theft and the implications and the...

And yes, about regularity commission and so on.

Yes. So you're absolutely correct that one of the flaw and implications of the customer threatening situations is that they're often aligned with retail theft and across the country, we've seen estimates that retail theft accounts for in excess of $8 billion. So unfortunately, all of us are paying the price of retail theft because it is a significant cost of doing business across Wesfarmers businesses, the difference between what we would say is an excessive level of theft versus -- there's no such thing probably at a normal level, but a more average level.

It's hundreds of millions of dollars. So it is quite significant. Now we're obviously doing a lot of things to try and improve that through leveraging technology, improving business processes, security and some of the other points I mentioned. As you called out, we are in a dispute with the privacy commissioner at the moment around the use of certain technologies to try and combat violent assaults and retail theft. And we're currently in a legal dispute on that one because we think it is worth fighting for the safety of our team, for the safety of our customers and for the betterment of the community.

So this is something that we are fighting. I can't comment more specifically on the action other than to say that I think this is one of those areas where taking a highly technical legalistic approach to regulation is probably not going to drive the right outcome. And given the severity of this issue in the community, it would be timely to step back and think about, are there responsible ways in which we could utilize technology to make our retail environment safer for customers and team members.

Thanks, Rob. Are there any other questions? Ruth?

Chairman, I have 2 final questions online. The first from [indiscernible] which is a follow-up question on the AGM location, they ask, could Wesfarmers perhaps organize annual shareholder briefing events around the country?

I'll take that on board, and we can talk about it as a board. It's actually not about idea, we used to do it when we had a major restructuring of the cooperative, we do it around country towns. And we always got a pretty good crowd along the Albanys and Esperances and Bunburys and so on. And it is something we could do. So I'll undertake to discuss that with the Board and see what we come up with.

And I've got a final question from Mr. Stephen Mayne, who asks, if Chairman elect Ken MacKenzie is being paid to attend Board meetings or at least having his travel costs covered by shareholders. If so, will the full amount of what we pay him be disclosed in the 2025, '26 annual report, even though he'll only join the Board on the 1st of June next year. Is there a formal agreement around his pre-appointment activities? Is it a gentleman's handshake agreement between Chairs? And what is his title at the moment? Is it consultant?

Ken, you've got a title. The answer is no, we're not paying Ken at all, and he won't be paid any director fees until he comes on the board, on the 1st of June. We have paid his fares and the fares for his wife to come over this week because we've got a big board farewell dinner for Jennifer. And Ken was going to attend the Board meeting today but without fee. So we're getting tremendous value at the moment.

Okay, I think that might be all the question. There are no more from the floor, are there, Rob, can you see anything?

Okay. Well, look, thank you very much for joining us. I trust there are some sausage rolls left for those of you who've stayed and some wine. And thank you for your interest in the company. So I declare that all resolutions have been passed. And as I said earlier, an announcement with those results will be released through the ASX platform and on the company website. So thank you again, and please join us outside for refreshments. And by the way, we're delighted to have entertainment this afternoon from one of our Wesfarmers Arts partners, the West Australian Opera, in the area outside this room. So singing today are Wesfarmers young artists. Thank you very much.

Ladies and gentlemen, thank you for holding, and welcome to the Wesfarmers 2025 Full Year Results Briefing.

[Operator Instructions]

This call is also being webcast live on the Wesfarmers website and can be accessed from the homepage of wesfarmers.com.au.

I would now like to hand the call over to the Managing Director of Wesfarmers Limited, Mr. Rob Scott.

Well, hello, everyone, and welcome to our 2025 full year results briefing. And today, I'm joined in Perth with our divisional Managing Directors and our CFO, Anthony Gianotti. I'll start with providing a summary of the group's performance for the year, together with some comments on our strategic progress. Anthony will then talk through the financial results in more detail. Then I'll provide some broader comments on the portfolio and the outlook for the group. And then our divisional Managing Directors, Anthony and I would be happy to take any questions.

So starting on Slide 4, a slide that will be familiar to most of you. Wesfarmers' primary objective is to deliver a satisfactory return to shareholders, and we define satisfactory as a top quartile total shareholder return over the long term. And we recognize that we can only achieve this if we continue to anticipate the needs of our customers look after our team members, engage with suppliers in a fair and ethical manner, contribute positively to the communities in which we operate, take care of the environment and act with integrity and honesty.

Now turning to Slide 5. This year, Wesfarmers' net profit after tax increased 14.4% and excluding significant items, profit increased 3.8%. Trading conditions were challenging in the 2025 financial year, especially in the first half as many customers and businesses continue to face cost of living and cost of doing business pressures. Our solid result in this environment highlights the quality of our businesses and teams, and it was pleasing to see our largest divisions, Bunnings and Kmart Group, continue to perform well.

Our results reflect continued strong execution of growth and productivity initiatives. This has helped our businesses deliver greater value, service and convenience to customers at a time when many face cost pressures. And we finished the year with an expanded addressable market and more opportunities for growth and value creation. We also undertook a number of portfolio actions to improve returns to shareholders, and I'll talk about them in a minute. As a result of these portfolio actions, the Board is proposing a capital management distribution of $1.50 per share, subject to shareholder approval.

Now while the form of the distribution is subject to an ATO ruling, this is expected to include a capital return of $1.10 per share and a fully franked special dividend of $0.40. And together with our total dividend for the year of $2.06, this takes our distribution to shareholders for the year to $3.56 per share.

Now turning to Slide 6. This provides some of the divisional highlights for the year. I won't talk to these because Anthony will cover divisional performance in a minute.

So turning to Slide 7. This slide sets out some of the recent portfolio actions and demonstrates the group's financial discipline and focus on shareholder returns. We want our capital allocated to businesses that have attractive prospects for shareholder returns. And I feel that we've made good progress on this front through the year. As noted earlier, the proposed capital management initiative has been made possible by select portfolio actions undertaken in recent years, including the sale of Coregas for $770 million.

As many of you know, this year, we also announced the wind down of Catch, which ceased trading in April. And this included the transfer of Catch's fulfillment centers to Kmart Group and select digital capabilities to our retail divisions. Now this will improve earnings in 2026 as we eliminate -- we have eliminated the Catch operating losses and the move to next-day delivery for much of Kmart and Target's East Coast operations will improve the customer experience of our online operations. And our broader understanding of marketplaces is also helping Kmart with the launch of a new curated marketplace in the first half of this financial year.

During the last year, we also completed the divestment of WesCEF's LPG and LNG distribution businesses, completed small bolt-on acquisitions in Officeworks and Health. We announced the windup of the BPI property structure and announced the intention to internalize BWP Trust management rights and the extension and variation of Bunnings leases within BWP. And this transaction completed on the 1st of August and will deliver extended tenure and more flexible lease terms at key Bunnings sites.

Turning to Slide 8. This year, our focus on long-term value creation again enabled us to deliver better outcomes for our teams, customers, suppliers, communities and the environment. The group's total reportable injury frequency rate continued to improve from 11 to 9.5 at the end of the year, with Bunnings delivering a significant improvement in performance. During the year, we delivered a 9.3% reduction in the group's Scope 1 and Scope 2 market-based emissions.

Bunnings and Officeworks have now achieved their 100% renewable energy targets, while Kmart Group is on track to achieve this by December 2025. And in a major step towards achieving WesCEF's decarbonization goals, CSBP installed tertiary abatement catalysts in 1 of its 3 nitric acid plants, reducing nitrous oxide emissions by 98% and planning is underway to install abatement technology in the remaining 3 plants.

I'll now hand over to Anthony, who will provide more detail on the financial performance, the group's balance sheet and cash flows.

Thanks, Rob, and hello, everyone. Slide 11 in our presentation provides details on the sales performance across each of our divisions for the year. I'll speak to sales and earnings performance on the next slide. But at an overall level, we were pleased with the sales growth achieved in our retail businesses with notable improvements in the momentum of sales growth in the second half across both Bunnings and Kmart Group. Our strong value credentials continue to resonate with consumers, which supported transaction and unit growth across all of our retail businesses.

On Slide 12, at a total level, divisional earnings increased 4.6% for the year, with the pleasing results in our retail divisions more than offsetting the impact of lower earnings in WesCEF, which was impacted by lower global commodity prices. Our retail businesses continue to execute well during the year. And on a combined basis, Bunnings, Kmart Group and Officeworks increased earnings by 5.2% with positive momentum into the second half with earnings growth increasing to 6.4%.

I'll now step through the divisional results in a bit more detail. In Bunnings, sales growth of 3.3% was supported by its lowest price positioning, which underpinned growth in sales, transactions and units sold across both consumer and commercial segments. Consumer sales growth was supported by robust demand for home repair and necessity products, while range innovation and expansion attracted higher store visitation and drove strong sales growth in the tools, outdoor living, smart home and paint categories. Growth in commercial sales reflected resilient demand from trades, organizations and business customers, but partially offset by lower demand from builders, where we saw continued softness in residential building activity.

This year, Bunnings continued to invest in its network to support its omnichannel customer offering, which included rolling out its new tool shop to 175 stores with the new format performing well. Bunnings ongoing cost discipline and the execution of productivity initiatives continue to support investments in price, range and experience. Bunnings earnings before property contributions of $2.34 billion represented an increase of 4% for the year.

Kmart Group delivered earnings of just over $1 billion for the year, an increase of 9.2%. Kmart Group's value credentials and world-class product development continue to resonate with customers. It was pleasing to see strong growth in Kmart's app utilization with active monthly app users doubling on the prior year to more than 1.3 million. The strong earnings growth reflected the solid sales performance as well as further productivity gains from the integration of Kmart and Target systems and processes and ongoing digitization across stores, sourcing and supply chain. These productivity benefits mitigated the impact of ongoing cost of doing business inflation, which supported higher earnings growth in the second half of 12.6%.

WesCEF's earnings declined 9.3% to just under $400 million for the year, impacted by increased losses in Covalent and lower global commodity prices. In Chemicals, earnings were broadly in line with the prior year as lower ammonium earnings were offset by favorable ammonium nitrate recontracting outcomes. In Kleenheat, earnings were impacted by higher natural gas costs and lower LPG production volumes, which were partially offset by the impact of higher Saudi Contract Price.

Fertilizers earnings increased on the prior year, supported by higher sales volumes, including from a strong end to the 2024 growing season. During the year, Covalent completed construction of the Kwinana lithium hydroxide refinery and a key milestone was reached in July when first product at the refinery was achieved. Due to subdued market pricing and higher unit costs during production ramp-up, WesCEF's lithium business contributed a loss of $59 million. Despite this loss, the business generated positive operating cash flow for the year.

In Officeworks, sales increased 3.8% and earnings increased 1.9% to $212 million for the year. The result was supported by growth in key categories, including technology and Print & Create, partially offset by lower furniture sales and more subdued activity across business customers, which reflected the challenging economic conditions affecting SMEs. Earnings growth was also impacted by one-off costs associated with the closure of Circonomy as well as increased investment in price in response to elevated competitor activity.

In Industrial and Safety, revenue declined 1.2%, reflecting the challenging economic conditions facing business customers across Australia and New Zealand. Earnings decreased 4.6% to $104 million, with the earnings result including $9 billion in restructuring costs across Blackwoods and Workwear Group that were largely recognized in the first half. The restructuring costs reflect actions to reset the operating model and cost base enabled by recent system investments to better position the businesses in a more challenging trading environment. The benefits of these actions started to materialize in the second half. And excluding restructuring costs, earnings were $113 million or 3.7% above the prior year.

Wesfarmers Health continued to focus on its transformation program to accelerate growth and improve earnings. Earnings of $64 million included $18 million of amortization expenses relating to business acquisitions. Excluding these costs, earnings increased 17.1% to $82 million. Priceline Pharmacy's headline network sales increased 11.9%, which includes both retail and dispensary sales. Priceline Pharmacy's retail sales were supported by network expansion, price reductions on key value lines, the launch of new and exclusive brands and the ongoing contribution of Sister Club.

MediAesthetics delivered profitable growth following the consolidation of its clinic network to create a more sustainable operating model and digital health continued to perform well, underpinned by growth in services through InstantScripts.

The stronger performance of Consumer was partially offset by the wholesale segment, which was affected by higher fulfillment costs and increased competitive intensity despite higher sales from customer acquisitions and strong demand for high-value drug categories. The Wholesale segment continues to focus on executing productivity initiatives to mitigate higher supply chain costs and increased competition and is expected to benefit from investments to improve its customer proposition.

Turning now to Slide 13. Across our other businesses and corporate overheads, we reported a loss of $168 million, which was in line with the prior year. The group's share of profit from associates and joint ventures increased by $45 million to $64 million, primarily driven by favorable property revaluations in both BWP Trust and BPI. Group overheads were broadly in line with the prior year, while other corporate earnings decreased by $52 million. This decrease was primarily reflected in lower group insurance result and lower interest received.

Other EBIT includes the continued development of the OnePass membership program, the Group's customer and data insights capabilities through OneData and investment associated with the recent launch of the Group's new retail media network. Together, the investment associated with these initiatives was $63 million. The benefits from these investments continue to be realized through incremental sales and earnings in the divisional results.

Before I move to the next slide, and as a reminder, I just wanted to note that separate from the result in the other segment, the Group's statutory result includes the impact of significant items, which are detailed on Slide 57 of the presentation. As previously disclosed and as Rob talked to, these items included the gain on the sale of Coregas, the profit on the windup of the BPI property structure and the one-off costs associated with the windup and the transition of Catch. These items totaled $279 million on a pretax basis, with each being in line with the guidance we had previously provided to the market.

I'll now turn to working capital and cash flow on Slide 14. Divisional operating cash flows increased 2.3% for the year with divisional cash realization at 100%. Divisional cash flow result reflected disciplined net working capital management at Kmart Group and Wesfarmers Health, partially offset by net working capital investment in Bunnings to support higher customer demand and the rollout of the new tool shop format across the network. Overall, inventory remains in a healthy position with good stock availability across the retail divisions.

At a group level, operating cash flows decreased 0.6% to $4.6 billion, with divisional cash flow growth offset by higher tax paid due to the timing of tax payments in the prior year. Free cash flows for the year increased 6.9% to $3.4 billion, supported by the divisional operating cash flow result and the cycling of the Group's acquisitions of SILK and InstantScripts in the prior year.

Moving to capital expenditure on Slide 15. The group invested gross CapEx of $1.15 billion, which was 6.6% up on the prior year. This was primarily driven by higher spending on new stores and expansion projects in Bunnings. Proceeds from the sale of PP&E were higher for the period, reflecting increased property disposals within Bunnings, which resulted in net capital expenditure for the year increasing 5.3% to $1.1 billion. For the 2026 financial year, we have given net capital expense guidance in the range of $1 billion to $1.3 billion, which remains obviously subject to net property investments and the timing of project expenditures.

It's worth noting this guidance does exclude any proceeds from the sale and leaseback of Bunnings properties following the previously announced wind up of the BPI property structure in September 2025. The group has agreed to a sale and leaseback transaction for 6 of the 15 properties that are currently in the BPI property structure at a valuation of around $290 million. As noted, this amount is not included in the net CapEx guidance we provided. We will continue to look at sale and leaseback opportunities for the remaining BPI properties through the year.

Turning to balance sheet and debt management on Slide 16. The strength of our balance sheet continues to provide the group with significant flexibility and the capacity to support our investment and to take advantage of value-accretive opportunities as they arise. We continue to actively monitor the group's debt mix and manage exposure to variable interest rates. The average cost of funds for the year decreased from 3.9% to 3.8% and the weighted average debt term to maturity increased to 5 years following the successful $1.1 billion 7-year Eurobond issued in June this year. Other finance costs decreased 5.4% to $157 million. On a combined basis, other finance costs, including the component of interest that was capitalized, decreased 2.6% to $187 million.

Wesfarmers retained significant headroom against key credit metrics, and this year reduced its debt-to-EBITDA ratio, excluding significant items, to 1.7x. After adjusting for the proceeds from the sale of Coregas, which completed on the 1st of July 2025, the ratio improves further to 1.6x. The group retains considerable funding headroom. And at the end of the financial year, the group had available unused bank financing facilities of around $1.7 billion, and this excludes the $770 million in cash that was received from the sale of Coregas on the 1st of July.

And finally, to shareholder distributions on Slide 17. As Rob has already mentioned, the Board has determined to pay a fully franked final dividend of $1.11 per share, bringing total dividends for the year to $2.06 per share. In addition to the final ordinary dividend, the directors have also recommended a capital management initiative under which shareholders will receive a distribution of $1.50 per share. The distribution is consistent with our focus on providing a satisfactory return to shareholders and will enable a more efficient capital structure while still maintaining balance sheet capacity to take advantage of value-accretive opportunities as they arise.

The proposal remains subject to a final ruling from the ATO, but is expected to comprise a capital component of $1.10 and a fully-franked special dividend of $0.40 per share. The return also remains subject to shareholder approval at the group's AGM on the 30th of October with payment expected on the 4th of December. In line with recent practice, we do intend to continue to purchase shares on market to satisfy any shares issued as part of our dividend investment plan.

And with that, I'll now hand back to Rob to cover outlook.

Thanks, Anthony. And I'll turn to Slide 19. Now while today is all about our results at a time when the Australian government is reflecting on how to address lagging productivity, I feel it's important to emphasize the broader contribution made by Wesfarmers. And as most of you on the call would understand, businesses like ours and other big businesses play a critical role in the prosperity of Australia. And when businesses like Wesfarmers are successful, Australians benefit. We also operate in competitive markets against some very large multinational companies that benefit from structuring their operations and capabilities in other jurisdictions.

We also operate in trade-exposed areas where national competitiveness really matters. The recent economic reform roundtable highlighted opportunities to reduce the regulatory burden on businesses, encourage investment, fast-track approval processes and better control government spending. And while a range of options were canvassed, any changes that increase the already high tax burden on Australian companies or apply new regulations or constraints that make it harder to compete will put many Australian jobs at risk and materially reduce living standards in the future.

Now at Wesfarmers, our investments are directed towards initiatives that drive productivity, accelerate growth and advance sustainability. And these investments support national prosperity and resilience more generally. And some examples of this. Probably one of the most significant investments that Wesfarmers businesses make is in lower prices for millions of Australians. And this is well understood through the everyday low price policies of Bunnings, Kmart and Officeworks.

We provide wages and career development for 109,000 Australian team members. We pay $1.5 billion in taxes to federal and state governments in Australia. And when we consider the payroll taxes and other taxes and charges, we actually pay closer to an effective tax rate of 38%. This year, we also proposed to distribute $4 billion to our shareholders. Now these distributions support over 480,000 direct shareholders, the vast majority of which are Australian retail investors and approximately 13 million Australians through their super accounts.

So turning to Slide 20. Before I discuss the outlook, I just wanted to make 3 points on the positioning of the group's portfolio. First, our high-quality businesses provide us with a platform for long-term value creation through their unique mix of resilience and growth. Our retail divisions benefit from strong value credentials, broad customer appeal, omnichannel capabilities and leading market positions. This provides resilience when customer demand is softer across the economy, while at the same time, we remain leveraged to any improvement in demand from households and commercial customers. WesCEF is a critical supplier to key industries that support the Australian economy, such as iron ore, gold and agriculture, where Australia has a competitive advantage.

Second, our businesses have a pipeline of long-term growth and efficiency opportunities, including initiatives to expand our addressable market, better leverage data, digital and AI capabilities. We're confident that our new and developing businesses, which currently make a minimal contribution to earnings, will realize significant potential over the next 3 to 5 years. This includes our Health division and our lithium joint venture, which are exposed to strong demand fundamentals and also, obviously, our new retail media business. And other new businesses such as retail media and Anko Global provide new growth opportunities that don't -- that haven't currently existed.

Now finally, the strength of the group's balance sheet supports continued investment across the portfolio and provides capacity to manage potential risks and opportunities that may arise.

So turning to the outlook on Slide 21. At a macro level, cost of doing business pressures are persisting in Australia, and they are weighing on business demand and investment, while geopolitical risks continue to add some uncertainty. Now despite these challenges, the Australian economy remains resilient, supported by strong labor markets and moderating inflation, and this is contributing to a modest improvement in consumer demand. The recent easing of interest rates is expected to provide further relief for households and businesses, supporting consumer sentiment and business confidence.

Going forward, our retail divisions are well positioned to grow their accessible markets and profitably grow their share of customer wallet, supported by strong value credentials. Bunnings, Kmart Group and Officeworks remain focused on leveraging investments in their omnichannel assets and capabilities to drive sales and earnings. For the first 8 weeks of the 2026 financial year, Bunnings sales growth was stronger compared to the second half of the 2025 financial year, supported by its market-leading customer value proposition. Kmart Group sales growth was broadly in line with the stronger sales growth experienced in the second half. And Officeworks maintained solid sales momentum with its sales growth broadly in line with the second half.

Along with our joint venture partner, SQM, Wesfarmers remains focused on the Covalent lithium product. And as I mentioned earlier, we were pleased to report that the Covalent team achieved first product at the refinery in July 2025. For Covalent, the 2026 financial year will be a transitional year with lithium hydroxide production expected to ramp up over the next 18 months.

Overall, I'm really pleased with the progress made to strengthen our portfolio over the past year. Our businesses are now more productive, more efficient and with more growth opportunities. Looking ahead, Wesfarmers remains committed to strengthening our existing businesses, investing in emerging growth platforms that will shape the future of the portfolio and create long-term shareholder value.

So with that, we're all now happy to take your questions.

[Operator Instructions]

Your first question comes from Adrian Lemme with Citi.

I had a question for Mike actually on Bunnings, quite a strong trading update considering we've had such sharp wet weather here on the East Coast in the last month. With the Bunnings tool shop expansion, I think you were planning for 190 to be completed by June versus the 175 being reported. But we've heard in the trade that you've been going back and making some further refinements to the initial stores that we've done and that the ones that have been rolled out, you're seeing very strong growth of maybe double digits in tool sales.

So can you talk to the initial success of the format? Is that the kind of key delta in terms of the sales improvement we're seeing in Bunnings overall? And how is the format being refined, please?

Thank you, Adrian, for the question. We're really pleased with the performance of the tool shop. I think one of the things that's been particularly successful has been the growth in the commercial side. So if you sort of think about our commercial strategy, we focus on builders, organizations and trades, the work that we've done on the tool shop has really lent into that trade section of our commercial portfolio. And commercial brands like Makita and DeWalt have performed very, very well for us in the new ranges that they've put into those stores.

The changes that we've made that we've sort of gone back on have been very minor. They're actually mostly being driven by increasing range and driving space intensity in the tool shop. And that's been a really important driver for tool shop growth is the increased range and also the opportunity to take some of the automotive range out of the tool shop and create its own department elsewhere in the store, which has been performing very well also. We were just delayed really through some resourcing constraints internally to get to the full 190, but we're really pleased with the performance. And I think by the end of October, all tool shops will be completed.

We're also experimenting with some retail media opportunities in there as well with some screens going into a number of stores in the tool shop to understand if we can optimize the retail media opportunity. But performance has been strong. It's certainly one of the contributing factors to our stronger trading performance. And I agree with you the heavy downpours in Sydney and along the Eastern Seaboard have certainly been the challenge. But if I take a glass half full view to that, it does set us up for a strong spring. So we're really excited for the opportunity and geared to make the most of that in the weeks ahead as well.

Your next question comes from Tom Kierath with Barrenjoey.

Just got one on the Health division. It's good to see the disclosure there on Priceline network sales, 11.9%. I think you added a bunch of stores or added them to the network rather. I'd just be interested in if you could comment on kind of like-for-like or comp store growth in the consumer business there just so that we can see what's, I guess, organic versus the store wins that you've had, please?

Sure. Thanks, Tom. Look, we're really pleased with the headline sales growth that we've had in Priceline Pharmacy. I think we've added more stores this year than we ever had before in terms of 31, but we've also closed quite a few as we've tightened up the network. In terms of the network growth strategy, most of them -- the bulk of them sort of came on in Q4. So we're pleased with the growth. We think that we're holding our own, and it's an important component sort of going forward. But as we put down new stores, we're trying to really make sure they're aligned with our core brand value proposition. So yes, pleased with the progress we've made.

And sorry, just to clarify, like is it fair to assume that most of that 11.9% is comparable like stores that were there in the network 12 months ago?

I think that's probably a fair assumption.

Your next question comes from Shaun Cousins with UBS.

Just a question for Aleks on Kmart. Just curious around the source of growth. Is it sort of new customers joining Kmart as they trade down? And is that offsetting, I guess, some maybe trading out by lower income customers? Or is the growth that you're getting skewed to existing customers shopping in more categories? And with that, could you maybe sort of talk a little bit about, I think, how well your best customers are shopping? I think you've highlighted in the past maybe 40% to 50% of categories are being shopped by your best customers. So there's still a lot of opportunity to get your already existing customers to shop more. So just curious on that, please.

Thanks, Shaun. In terms of the drivers during the year, we've served more customers than we ever have before. We're also seeing the transaction frequency of those customers continue to grow, and they are shopping more departments across the store, which is a really positive trend that we're seeing. We're seeing greater levels of digital engagement. So more of our customers are shopping across all of our channels.

And we've also seen really strong engagement driven by the app and our app users, in particular, we're really pleased to see them shopping 3x the average customer in-store in addition to online as well. So really seeing positive growth across all of those metrics. I would say, as we look forward, we see the opportunity to continue to grow share of wallet amongst existing customers through increased frequency items per basket and the percentage of departments shopped across the store.

In terms of any other trends within that, we really did see growth across all affluence levels and across all demographics. The one I'd probably call out would be our under 30 customer cohort. The younger customers are growing with us to a greater rate than the overall, and that really points to the future strategic opportunity in terms of continuing to grow our customer lifetime value with the younger customer demographic.

And with that, maybe just looking forward, there's a degree to which customers have traded down and discovered sort of Kmart. How do you think about being positioned for possibly a more -- a consumer that's in a better place? Just curious about the resilience of this sales that you've won and then how you can continue to sort of benefit from that and grow if the consumer is feeling a bit better about themselves in the future, please?

Yes, we feel really well positioned. We've definitely acquired a significant number of new customers in the last couple of years. But what we are seeing is our ability to convert them into higher frequency and more departments is effective over time. So that engagement is growing. And if I step back from all of that, I think what we have seen over the long term is value is really important to customers across every single economic cycle. So we think we're really well positioned to continue to grow our share of wallet in Australia and New Zealand through any economic cycle as we move forward.

Within our offer, we do have our opening price points, our 1 up and our 2 up, and we see that they provide extreme value to customers across that whole price spectrum. What we have been able to do through the uniqueness of the Anko brand and our product development capabilities is continue to innovate the range, particularly at the 2-up level. And we're now bringing products to market that are offering really extreme value to customers. And even during a period where consumer demand was more challenging, we've seen when we can offer really extreme value for good quality and good aesthetic. Customers have been willing to trade up into those 1 up and 2-up price points really effectively. So we feel like we've got all of the ingredients in place through our Anko product development and direct sourcing model to continue to grow our share of wallet with customers as we move forward.

Your next question comes from Michael Simotas with Jefferies.

Just wanted to pick up on a couple of the comments around investment and cost in the outlook statements for Kmart and Officeworks. So in Kmart, you've got investment in new tech capabilities, Plan C stores, online fulfillment center and then in Officeworks, investment in the ERP replacement and the omnichannel supply chain. How should we think about that cost as it comes through the P&L? Do you think you'll be able to mitigate that with other productivity benefits and operating leverage from sales growth? Or should we think about that as a sort of meaningful one-off investment in the coming years?

Thanks, Michael. There's really 2 components of the investment in the year ahead. There's the CapEx component and the OpEx component. So we are now in the building phase for our Next Gen omnichannel facility for New South Wales. I indicated at the Strategy Briefing Day, the total CapEx for that would be around $200 million and just under half of that will be incurred in this financial year, but that is CapEx to be really clear. In terms of our OpEx investment, we've continued to invest in digitizing our operating model end-to-end for a number of years now. We are able to extract both short, medium and long-term benefits from that investment.

So as we move forward, I would very much expect that our productivity plans that are in place continue to mitigate not just the OpEx investment that's in the plan, but also the persistent cost of doing business inflation that's within our plan. I guess beyond that, really focused in terms of the market and making sure that we continue to maintain our lowest price positioning. So that is absolutely a priority as we move forward. But I think what we have demonstrated in the past is that where trading performance is strong, our ability to fractionalize the cost base is high as well. So there will be a level that's determined by the level of trade over the next year as well.

On the Plan C plus stores, we've got 5 currently trading. We're really pleased with the performance of those. We'd look to have 20 opened by the end of this financial year, and that will be reflected in the CapEx as well.

Thank you, Michael, John from Officeworks. I think we've got 2 that you've mentioned, the ERP replacement and the Queensland distribution center. Both the costs to the business this year that we didn't have last year, but there are productivity improvements every year that we're looking at to, I think, reduce those costs as we move forward. I'd look at both those 2 initiatives as drivers of leverage as we move forward in future years.

Your next question comes from David Errington with Bank of America.

Rob, this question is probably directed to -- well, it is directed to Mike Schneider. I want to address the issue of leverage following on from Mike's questions there. But Mike, I know you reinvest a lot back into your business. But -- and I know you get asked this question about leverage, but it's really front of my mind now going forward in the next 2 to 3 years about the operating leverage of Bunnings or at the moment, the relatively distinct lack of it.

Can you call out some of the things, please? Because what I'm looking for is there's not a bigger fan in the world of this business, Bunnings than me. But I'd like to see either, one, higher sales growth or stronger leverage. I mean when I look at Kmart, they're doing 3.5% kudos to Aleks, 3.5% sales and 9% EBIT growth. Bunnings has only about 3.5% sales, 4% EBIT growth. So you're obviously reinvesting a lot or it's just -- because we want higher sales or higher leverage because at the moment, 3% and 4% is just not getting the job done for us.

So can you go into, please, some of the things that you're clearly reinvesting in? Obviously, I think you've called out price and there was a few things you called out experience range. Can you call that out, please? So then that might give us a bit of confidence that your sales growth will be a lot stronger in the next couple of years than what it currently is. Now I don't know if I've asked that question very well. Hopefully, you understand where I'm going with it. But at the moment, that lack of leverage is playing on not only my minds, but quite a few investors' minds. And for such a quality business, I'd either like to see higher sales or I'd like to see higher leverage. So can you go into some of that investment, please? That would be really appreciated.

Yes, absolutely, David. I think it's a really important question, and it's certainly something that occupies a lot of time in our thinking. At Bunnings, we're focused on absolute returns over the long term, and that's something that has been a really strong sort of tenet in all of my time in this role. And I think we've got an incredibly strong track record on that and a really deep commitment to continuing to do that for all stakeholders, shareholders, customers, suppliers and team members. And I think we work hard to sort of strike that balance. And we've got a very strong and ambitious growth agenda, and we've seen very strong results in what's not only a challenging consumer market, but a particularly challenging commercial market.

And I definitely think that in terms of driving sales growth, recovery in the building sector will be something that I think Bunnings plays a really important role in, and we're really geared to optimize that. And we've been really pleased by the relative performance of the builders part of our commercial business in what has been a challenging market, certainly compared to some of the sort of competitor set that we come up against. But we've got very strong growth ambitions across energy, across automotive with sort of the second part of that automotive category expansion just about to commence the third iteration of our pet categories, another one.

And obviously, space productivity is something that we spoke to quite a bit at around the 2 strategy days. But on the sort of productivity side, that is definitely something that we continue to stay really focused on. We've got opportunities across our transport, delivery and fulfillment capabilities and supply chain with really distinct projects to deliver great outcomes across each of those. We're in the early stages now of the optimization piece for our store rostering model, which will allow us to not only enhance the customer experience but drive further productivity across our store network.

And in our support function, we've now got the opportunity because we're on the other side of some of the more significant investments we've made in the technology space to start to optimize some of those, not only to improve the customer experience through online fulfillment as one example, but also through inventory management with our demand and replenishment capabilities we've invested in. And on price, it is something that we are incredibly committed to. In the financial year just finished, we invested over $200 million into price, which I think does demonstrate some of the productivity benefits that we're getting. But we are investing to make sure that our offer is compelling and it's a winning offer so that we continue to earn the right to be chosen by customers.

So it really is, David, a full-court press across the growth ambition of the business, the productivity ambition, but also making sure that along the way, the customer is front of mind for us.

Yes. I think it's an important point you make that it is a very tough market and 3.5% in a really weak consumer and weak building is probably a pretty good outcome. But -- two follow-up ones. When do you think we could start seeing some improvement in the building industry? And secondly, what would be the ideal outlook or the ideal thing for you in terms of sales to EBIT growth? Is it sales equaling EBIT growth, but off a higher sales growth? Or is it a little bit more leverage there? If you could -- there's a little bit of a follow-up there, but if you could give us a bit of sugar on those 2, that would be helpful.

Yes. Look, I think you and I'd be in violent agreement that if we could see stronger sales growth, it would be amazing, and we're working really hard to make sure that we optimize the opportunity we have, both for our consumer customer and our commercial customer. And to the point around recovery in the building sector, we're really hopeful that we're seeing that later in this financial year. We see strong resilience in trade, as I talked to when I answered Adrian's question earlier around the tool shop, but also on the organization part of the business.

But the challenging environment on the commercial side has meant that we've been able to really drive efficiency in our commercial sales team, our manufacturing team so that as that market swings around, we are really well placed to not only drive growth but drive very profitable growth out of that sector.

And on the leverage piece, my view is there needs to be stronger leverage out of the Bunnings business. That's something that we've talked about as a team. It's something we talk about with Rob and Anthony. And we believe that we've got the sort of tools in the toolkit, but also the strategies to be able to deliver on that, not only in this financial year, but in financial years to come as well.

Your next question comes from Ben Gilbert with Jarden.

Sorry, Mike, another question for you. Just following a little bit from [indiscernible]. I'm just -- it feels that the Bunnings business is changing a little bit now in the sense that it is leaning a bit more into consumer focus. Now I appreciate it's always been from front to back of the house. But you look at a lot of the FMCG products you're putting in, which are obviously natural extensions. I'm just wondering how does that then impact your view around needing to invest from a capital standpoint with respect to supply chain capabilities around sort of next day, same-day fulfillment, similar to what some of your peers offshore in Lowe's and Home Depot have done.

So I understand you're doing a bit of work around it at the moment. And obviously, CapEx last year was much lower. It stepped up this year. Just wondering how you're thinking about that moving forward because it feels like a massive opportunity for you, and you're obviously killing it in pet and cleaning and auto. Do you lean into that more? And if you do, do you need to put more CapEx in terms of systems, capabilities, supply chain, et cetera, into the business?

Yes, it's a great question. Thank you, Ben. I think our commitment to seeing the business strike a really good balance between consumer and commercial is still our aspiration. Commercial is now a higher penetration into overall earnings. I think we're up to about 37% of our sales coming from commercial. And as the market improves, we look to -- as I said to David, want to continue to optimize that opportunity. I think what we've been able to demonstrate with automotive and tools, these are sort of core categories, not only for the consumer customer, but the commercial customer and demonstrating those credentials. And we've got strong ambitions in energy, which I think plays heavily into sort of the electrical market, home automation, home electrification. They're all very trade focused.

We've got some really great opportunities in plumbing as well, where we see some really strong positioning as we transition into lead-free categories for tapware and those sorts of things. So we definitely don't have a skew one way or another. I think one of the things that Bunnings can sometimes be a bit guilty of is probably not calling out some of the things that we do and deliver that just exist because we've got around of fixing them. So same-day and next-day delivery is now a core part of our offer. I think it's really helping to support the growth we've seen in our OnePass engagement, but also the double-digit growth we continue to see in digital.

And we've just opened our second fulfillment center in Queensland. So in Wacol, we've got our second fulfillment center up and running, and we've got ambitions for other markets as well. So I think we're well equipped to sort of deliver on those things, but we definitely understand the sort of ranging lens of front gate to back fence that we've long had and the ability to participate both for the consumer and commercial customer in that remains really strong.

So for us, we want to win as many customers as we can, both across the consumer segment but the commercial segment, but it's absolutely focused on things that build, maintain and repair homes and office buildings.

Just a follow-up on that, just the consumer aspect. How big is marketplace for you guys now? Is it approaching sort of $0.5 billion business? And do you make the decision to work with Aleks where there are opportunities to cross-pollinate and Aleks is launching one in a couple of months?

Well, I think where things make sense across the group, I think we're open to collaboration. We've seen that with OnePass. We're having similar conversations around retail media. So where things make sense, then we do. And where we need to compete with one another, we do as well. And I think that's what really makes Wesfarmers such a strong business at a group level.

Marketplace is performing exceptionally well for us. We've been delighted with the tens of thousands of products that customers can access through the website. I think we're uniquely positioned to optimize the incredible volume of traffic that goes through the Bunnings website to drive that offer to customers. We launched our services marketplace recently, which is connecting trade customers with consumers to help them, and we think that, that's going to be a great opportunity going forward.

So still not at a materiality point. But certainly, when we look at the market and then look at our performance, we're pretty satisfied with the growth and the contribution that marketplace is making.

Is hundreds of millions dollars now?

I'm not going to give that away because it's just in the scheme of the Bunnings business, it's not as substantial, but the growth on it is spectacular.

Your next question comes from Bryan Raymond with JPMorgan.

Just mind changing tack slightly to Mt Holland. You've kind of come through construction and commissioning. You've got first product. You've also got still out there the potential to expand production, doubling capacity, the mining concentrator. How do you -- how does that decision get impacted by current losses and current prices and a reasonably subdued backdrop there? And I know your JV partners got a transaction underway, could increase their focus on Covalent a bit. And yes, just interested if you are looking at that, how capital intensive that could be and what that could mean for CapEx, please?

Yes, sure. Thank you. Good questions. Just I think just step through the order of priorities for us within the lithium venture, and that will help answer the question. So the mine and concentrator really got up and running December 2023. And so over that period of time, we've been focused on just trying to achieve nameplate capacity at the mine and concentrator. You can see last year, we did 145,000 tonnes for our share. Our outlook is now somewhere between 160,000 and 180,000. We have seen in the last couple of months, we've actually been able to achieve nameplate capacity. And so really, for us, it's around getting the consistency of being able to do that month in, month out and get the plant stable. That will be the best objective there.

Then over to the refinery, we've just achieved first product. And as Rob outlined, it's a circa 18-month journey now for us to ramp up the refinery. Really, those 2 objectives at the mine and then the refinery will be our main and primary focus at the moment, which will help us drive down unit costs and kind of compete in this current lithium pricing environment. We haven't slowed down the work behind the scenes on the expansion opportunity. So one of the biggest issues in the overall timetable for that is getting environmental approvals and doing the upfront engineering work on what style of concentrator and what new technology, et cetera, we want to put into that decision if we were to go ahead. So that work is continuing.

And really, they will be the key outcomes on determining when we can make a decision alongside looking at the price and outlook for lithium. So we're not really there yet, but the decision is still available for us to make. And I think that will be an important and probably the best return for us rather than looking at other opportunities in the lithium industry.

Right. So just to confirm, is it very dependent on near-term pricing? Or is it more dependent on the cost of actually achieving the expansion itself in terms of CapEx? Like what are the key swing factors for you once you get through this 18-month period? It sounds like it's not near term, but how would you think about that?

I think for us, we want to have confidence, first and foremost, that the lithium refinery ramp-up journey is going well, and you can see the unit costs coming down on that integrated operation, you then have confidence to consider what are the longer-term opportunities for Mt Holland and the refinery. So that's important. And having that confidence, you'll also see the unit costs of the integrated operation coming down. So we're probably less focused on making predictions around future prices and more concerned around where Mt Holland as an integrated producer will sit on the cost curve.

Your next question comes from Craig Woolford with MST Marquee.

I'm going to attempt an accounting type question related to Bunnings and the whole BPI. I did notice that D&A actually dropped in Bunnings in '25 on '24. It's only a small drop, a bit of a surprise. Will that continue? Is there any other implications we should be mindful about around the BPI transaction and what it might mean to the actual Bunnings D&A profile given lease accounting?

Yes. Thanks, Craig. I'll try that question. So firstly, there's probably a couple of things. As you know, there's the BWP transaction as well where we reset effectively 63 properties in the Bunnings portfolio. And of course, that, as you know, with the accounting standard, that will bring forward some depreciation expense related to the right-of-use assets. So you'll probably see a little bit of a hit next year because that extends the minimum lease terms on most of those leases, which is a positive from an operating point of view, but it has a bit of a financial impact in the short term. So you'll see a bit from that.

On BPI, less of an issue because, obviously, we're doing the sale and -- we will enter into a sale and leaseback around the end of September towards October on 5 of those 6 properties. One of the properties will settle a little bit later because there's some development work that has to go on in one of the properties. So that will settle a little bit later. The rest of the properties in BPI, the other 9 will actually come on to the balance sheet once the structure is wound up at the end of September, and they'll sit on Bunnings' balance sheet until such time as we enter into sale and leaseback transaction on those.

So obviously, that will have less depreciation impact because I'll sit on there from a capital point of view, but the depreciation from right-of-use asset will increase once we enter into a sale and leaseback on those properties. We don't have timing around that. But as I said earlier, we will kind of monitor the market and look at opportunities to enter into sale and leaseback opportunities for those remaining 9 properties through the year.

So just on the actual reduction in FY '25 on D&A, was that the leasing side? Or is it the PP&E side that...

It's probably a combination of both, but I don't think it's overly material. It probably is more to do with depreciation of shorter-term assets like technology. A lot of the technology spend, as you probably know, is now moving to OpEx. So it's moving away from CapEx and depreciation into OpEx spend. And so that's probably what you're seeing.

Okay. And does rents -- does the actual -- let's put AASB 16 to one side, when you're doing the sales and leaseback and the BWP transaction, is rent higher, the actual rent to sales ratio that you're incurring going to be higher...

No. So you won't -- obviously, they're all subject to their own negotiations, but you're not going to see any significant shift in rent expense.

Your next question comes from Richard Barwick with CLSA.

I've actually had a question for Aleks on Kmart, please. I'm going to take the reverse tack to Aero on Bunnings. With earnings growth was obviously well ahead, Aleks, of sales growth. Can you just -- but I mean the sales growth wasn't that significant. So can you just talk through the drivers there? I was wondering if there's -- you're actually seeing some mix effect or if there's any particular cost out that you can talk to? And then just looking further ahead, assuming sales growth did remain around the 3% levels, what's the runway for this like a repeat performance where earnings can outpace revenue growth?

Thanks, Richard. I think the 3 big factors in terms of the result for the year, which we've covered, there's one that is in the base. So -- and that is the benefit of the Kmart and the Target integration. So we got a full year benefit of that in FY '25. That is now in the base. It will not be repeated as we go forward. Outside of that, we have had good productivity plans across our entire business. That's through the digitization of our stores and our supply chain, but just generally good cost control and just continued focus on continuous improvement as far as our productivity goes across the board.

And the last one would be the fractionalization of the cost base. So we saw that strengthen in the second half as the trading performance of the business strengthened. I think as we move forward, we've clearly had now 2 years in a row of very strong margin expansion. I would not expect that to repeat in the short term as we move forward. And that is because some of those big initiatives like the Kmart and Target integration are now in the base. We do have persistent cost of doing business inflation, and we have continued investment in our strategic programs, but I feel that we also have really good productivity plans in place to mitigate those impacts as we move forward.

And then again, just reiterating the importance of lowest prices for our business, we will always focus on that as an absolute priority and ensure that we have a very agile pricing response to make sure that we retain our lowest price position in the market.

So I think to summarize all of that, a benefit that's in the base that won't be repeated going forward, but ongoing productivity that should ensure that we get good earnings growth in line with sales growth as we move forward.

So just to pick up on that last point. So earnings growth in line with sales growth. So are you saying that in terms of an effective bottom line margin than FY '25 is the top?

No. What I'm saying is I wouldn't expect the rate of expansion to be what it has been in the last 2 years because it's been very significant in the last 2 years. I think difficult to say where it would land. I think to the extent we get stronger top line growth, our ability to fractionalize fixed cost base, we've demonstrated that's good. And so that would result in further margin expansion as we move forward. Equally, it's a very competitive dynamic market. We need to remain agile in our pricing. And if we need to respond to maintain our lowest price positioning, we'll continue to do so.

Okay. And just to sort of touch on to that one. I know it's been very clear in the text saying that Anko Global is still immaterial for Kmart, but you're also talking about that as an opportunity in FY '26. How far away are you from being able to call that and saying actually, it is making a difference? And again, how do you think about that in terms of that -- I guess, the margin relative to the -- sorry, the earnings growth relative to the sales growth profile?

Yes. Anko Global, we still feel really encouraged about the long-term potential of that. We're focused on it as a strategy. It's a business that's very much in start-up phase still and an important strategic priority for us. We don't expect it to have a material impact on either sales or earnings in F '26, but we will continue to pursue the 2 parts of the business model. So continued expansion of the store networks in the Philippines is a priority. The 3 stores we now have are performing well from a sales per square meter perspective, and we see a really good opportunity to expand there over time.

And equally, we've shipped first orders to our key B2B partners. The sell-through on those products has been positive, but very early days still and not a material contributor to FY '26. However, important strategically that we continue to focus on developing both of those capabilities for the long-term growth potential of the business outside of Australia and New Zealand.

The next question comes from Ajay Mariswamy with Macquarie.

Just a question around health. So you talked to new and exclusive launches coming through in the business. Are there any learnings that you've been able to take from the Bunnings business and Kmart business given how well you've done there in exclusive brands and any implications to margins there as well?

Yes. Thanks, Ajay. Through our retail businesses, a couple of things. So bringing new and exclusive brands has always been core to the Priceline proposition. So it really resonates well with customers. So whether it's through Priceline or through atomica, we've really been bringing new skin care and beauty brands to the market. In a similar way to both Bunnings and Kmart, private label is also a key part of our strategy. So expanding private label obviously comes with sort of better margins and gives us a lot more flexibility around the consumer offer. So that's definitely been growing, but will be a significant part of the business going forward. And we continue to sort of think about the sort of, I suppose, the category expansion opportunities within our business as well.

Your next question comes from Phil Kimber with E&P Capital.

Sorry, I had some tech issues. So if someone has already asked this, I can ask another one. But on the WesCEF business ex lithium, it's always a bit tricky because ammonia prices globally, there's sort of lag effects, and I think there's rising gas contract rollovers. How should we think about ex lithium, the earnings for that business in FY '26? I mean, can they keep growing? Or are we potentially going to step backwards a little bit?

Yes. Thanks, Phil. It's Aaron here. I think it's obviously hard for us to sit here and predict the commodity prices going forward for the year ahead. But it's clear that the start of FY '26, ammonia is, for example, remains pretty subdued. We are dealing with higher gas input costs. A lot of those are on sort of rolling 3- to 5-year agreements. So we don't get a kind of a sudden impact to the business, but it is a high input cost environment. And the key commodities for us being ammonia prices, Saudi CP Price has sort of remained pretty subdued at the moment.

We have had a benefit in the past of some of the ammonium nitrate recontracting, so us and the other key suppliers in the industry, that market has tightened, and we've benefited from that. I wouldn't say in FY '26, we're likely to get another benefit from that AN recontracting cycle. That's probably more an opportunity in FY '27. So does that help sort of provide a bit of shape there?

Yes, yes. Just I guess it's always a hard business to try and forecast. So I just wanted to understand because I mean, if you go back over time, I think it sat around that $400 million to $450 million and it's sort of back in that range now ex lithium. I'm just trying to understand maybe it sort of stays in that sort of range depending on what ammonium nitrate pricing does rather than we have had periods where you've had some quite material step-ups in that business.

Yes. The upside in the business really comes from -- other than the commodity prices is when we can expand the key manufacturing plants. So we've flagged there that the sodium cyanide plant will be shut down for the early part of calendar '26 to go through the first stage of an expansion. When we come out of the end of that expansion phase, we're looking at an extra 30% production volume in cyanide, obviously selling into a really strong gold market globally at the moment. So look forward to that.

We've got the ability to expand 3 of our nitric acid plants. We've kicked off the first one. That will be an incremental circa 40,000 tonnes of AN coming out of that first plant expansion, and then we can do that for the remaining 2 plants after that. So that will really provide us the longer-term growth in the business.

Your next question comes from Craig Woolford with MST Marquee.

Just wanted to get a perspective on the New Zealand market. We've been hearing from a lot of different companies, some green shoots, not consistent. But I noticed in your accounts, the sales for Wesfarmers New Zealand went backwards. I know that's largely Kmart and Bunnings, but you would like a perspective on that market?

Yes, I might start, Craig, and then hand over to Aleks. But it's certainly a challenging market in New Zealand. But we've been really pleased with what we've been able to deliver from a market share point of view over there. We've had to compete pretty strongly with not only a couple of our sort of peers, but also in the broader sort of mass merchant area, particularly with the Warehouse Group. So it's just a challenging one, but they've really accelerated some of the monetary policy changes in the last sort of 6 months and some of the settings with the way the government are thinking about business and housing are positive. So I think that our outlook for the year ahead is for a noticeably stronger performance in our New Zealand business.

From a Kmart perspective, we definitely saw improvement over FY '25 in New Zealand, and the second half was considerably stronger than the first half, and we've seen some encouraging results going into the start of this financial year. So a challenging year overall, but on an improving trajectory is how I'd summarize Kmart.

Your next question comes from Bryan Raymond with JPMorgan.

Just again on Kmart margins. The CFCs have been repurposed and just interested in the degree to which that's played a role in the margin expansion in FY '25 or if this is predominantly an FY '26 issue depending on the phasing, et cetera. If you could give us some color around how meaningful that transition was to your numbers this year and or if that's coming next year?

Thanks, Bryan. So we're still in the ramp-up phase of the CFCs. Pleasingly, they're now fulfilling over 70% of the volumes in New South Wales and Victoria. The biggest benefit has been to customers in terms of improving our speed of delivery and being able to get to next day as a standard proposition. We've also seen much improved inventory integrity as a result of the consolidation of the stock, which is opening up sales and availability to customers. So that's been a real positive. It has not been a material contributor to productivity nor will it be a material contributor to productivity in this financial year.

As I said, we're learning a lot in the ramp-up phase and the level of complexity around the inbounding of inventory and managing a centralized pot of inventory. All of that is a new capability to us. It's something I'd see as being a contributor to productivity over time. But in the next 12 months, we're really focused around utilization of the sites and extracting the customer benefits that are available while continuing to get more productive outcomes from the 2 facilities.

Great. And just to confirm there, Aleks, when you say productivity, are you referring to like EBT margins? Or are you referring more to inventory and other things?

I'm referring to the unit cost of fulfilling our online orders.

Your next question comes from Ben Gilbert with Jarden.

Rob, I thought I might ask you bit of a big picture one. We've had Coles and Woolies [indiscernible] sort of said the market is still tough. [ Leigh ] is talking to green shoots. I suppose you're sort of the 3 biggest employers. I was looking for you sort of the decider in terms of how do you view the consumer at the moment? Do you think we're starting to see green shoots? And I suppose you're feeling much more optimistic as we head into Christmas?

Ben, as we said in the outlook comment, we have seen a bit of a pickup, a modest pickup. So we are more positive about the consumer outlook than we were 6 months ago. There's definitely some improvement there, but it's still early days. The caveat to that is we shouldn't forget that cost of doing business is still a challenge, and you probably picked up a bit of a theme that we have over 1.5 million B2B customers across the group, whether it's Officeworks, Bunnings, Blackwoods and even Kmart has a number of B2B customers. And B2B demand is still pretty soft, and that's reflected by the cost of doing business pressures that many Australian businesses and New Zealand businesses are facing.

But on the consumer side, at least, we are seeing some positive trends. And hopefully, with a bit more relief on the interest rate side, if we can see inflation remain under control, then I think there's more upside to come.

And how does that factor in, Rob, to your view around M&A? I appreciate you've obviously done the capital obviously got Coregas and you've got some process in the Bunnings stores. Should we signal that given you're doing a larger capital return in Coregas, there's potentially nothing sort of imminent from an M&A standpoint? And at this point in the cycle, if things are going to start improving, we're moving further into an easing cycle, does that put a bit more urgency in your view to look at M&A or not?

Well, first thing I'd say that the decision around capital return, special dividend is totally independent of how we think about acquisitions. So we've got a really strong balance sheet. We've got access to debt equity capital. So the decisions on whether or not we would invest fundamentally different decision-making process to should we give tax-effective returns back to our shareholders.

And on the -- look, on the M&A side, we continue to be cautious but opportunistic. We look at a lot of opportunities. We tend not to get too overexcited with short-term movements in consumer demand because at the end of the day, if we're investing, we're investing for the long term. So it's -- whether it's on the industrial side, on the retail side, it really comes down to taking a longer-term perspective on demand. So look, I wouldn't say the changes in the consumer or market environment have increased or decreased our appetite for M&A. We'll continue to be very disciplined and prudent around any M&A that relates to an acquisition.

There are no further questions at this time.

Okay. Thanks, everyone, for your questions and dialing in. And if you have any further questions, please contact Dan and the team. All the very best.

That concludes our conference for today. Thank you for participating. You may all now disconnect.