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Operator: Thank you for standing by, and welcome to the Coles Group FY '25 Results Briefing. [Operator Instructions] I would now like to hand the conference over to Leah Weckert, Chief Executive Officer. Please go ahead.
Leah Weckert: Good morning, and thank you for joining our full year results call this morning. Before I begin, I would like to acknowledge the Traditional Custodians of this land on which we meet today, the Wurundjeri Peoples of the Kulin Nation. We acknowledge their strength and resilience, and pay our respects to their Elders, past and present. Several members of our executive leadership team are with me in the room today. Charlie Elias, our CFO; Matt Swindells, our Chief Operations and Supply Chain Officer; Anna Croft, our Chief Commercial and Sustainability Officer; and Michael Courtney in his new role of Chief Customer and Digital Officer. We also have Claire Lauber in the room with us today. Claire commenced in her role as Chief Executive Liquor at the end of June. Moving now to Slide 2. We are now 2 years into our refreshed strategy, and I am really pleased with the positive momentum that we're seeing in the business. This has been achieved through a consistent focus on executing against our strategic priorities. As we entered FY '25, we were clear that value, quality, availability and the overall customer experience were going to be key areas of focus for us, and we have made good progress on each of them during the year. Importantly, not only has this been reflected in our financial performance, but we have seen it through the increase in our customer satisfaction scores, particularly in terms of store look and feel, range and online. We are also seeing the benefits from both our ADCs and CFCs now being fully operational with ADCs delivering improvements in availability and cost efficiency and our CFCs supporting strong growth in e-commerce sales. And we've delivered record cost savings of $327 million through our Simplify and Save to Invest program. Strategically, it has been a significant year for our Liquor business with the commencement of our Liquorland banner simplification program. At year-end, we had converted 52 stores, and I'm pleased to say the results have been encouraging so far. Finally, we could not have achieved any of these highlights without the support of our more than 115,000 team members. Through our mysay team member engagement survey, we asked our team members to share specific feedback on their experiences and challenges, and we've been working hard to respond to these. This has delivered our highest-ever team member engagement score, placing us in the top quartile of Australian companies. Moving now to Slide 3 and the financial results. As you will no doubt recall, FY '24 was a 53-week year. So when we talk about growth rates through this presentation, we will be focusing on normalized growth, which removes the impact of the 53rd week from last year. The dark gray bars on this chart are the normalized figures. On a normalized basis and excluding significant items, group EBITDA and EBIT from continuing operations increased by 11% and 7.5%, respectively. And underlying EBITDA and EBIT increased by 10.7% and 6.8%. Underlying NPAT from continuing operations and excluding significant items, increased by 3.1% to $1.2 billion. And reported NPAT inclusive of significant items increased by 2.4%. Charlie will talk more to the financials in his presentation. But for now let's move on to Slide 4. As I said at the start, we maintained a consistent focus on executing against our strategic priorities throughout the year. I won't spend too much time on this slide, but as you can see, once again, this year, across all 3 pillars, we have made meaningful progress whether that's in the value we provided to our customers through our Great Value, Hands Down campaigns in supermarkets, the investments we made in our e-commerce and digital offering or the new stores and renewals across our store network. And what makes these achievements even more pleasing is that we were able to achieve all of this while successfully navigating a period of increased public focus. So let's get into a bit more detail, starting on Slide 5 with our first pillar, the destination for food and drink. From our customer surveys and insights and with interest rates easing, we saw a modest uptick in customer sentiment towards the end of the year. However, there is no doubt that value has remained front of mind for our customers, and we have continued to work hard on providing a compelling offer with quality products across all price points. During the year, in Supermarkets, we expanded the number of products on everyday low prices to more than 4,700, up from around 4,000 products last year, and we reduced the number of promotional tickets we have on shelf that made the remaining promotions deeper and more relevant for customers. At the same time, we have maintained our Great Value, Hands Down seasonal campaigns that customers love where we reduce hundreds of prices on products that we know matter most across different price points in the year whether this is our best-selling single smoked beechwood half leg ham at $8 a kilo over Christmas or our Coles Beef Sizzle Steak, which was part of our spring value campaign just in time for families and friends entertaining for Footy Finals. In Liquor, we have also strengthened our value proposition with consistent and competitive pricing under 1 brand and 1 website, all underpinned by our new Price Match Promise. We have also continued to grow our exclusive brand portfolio during the year, and we know this is a real point of differentiation for us. In Supermarkets, we added new products across multiple categories, including in our Ultra Life, Coles Finest and Wellness Road ranges. While in Liquor, you can see on the slide 3 international lagers, which we have introduced: Sabroso, Mexican; Alla Nostra, Italian; and Nomikai, Japanese lager, which was actually our top new product launched in the beer category in terms of sales in FY '25. And we have received more than 600 awards across our exclusive brands, including 12 products of the year awards for products such as our CUB biodegradable water wipes. And finally, when I think about being a destination for food and drink, I think about key events through the year, such as Christmas and Easter when so many people entertain at home. And we've continued to focus on innovation and execution so that we are front of mind during those times. Since we launched our Smith Street Flowers brand last year, we have also sold thousands of floral arrangements, particularly around Mother's Day and Valentine's Day. Smith Street is a great example of how we are innovative through our exclusive brands. We have a head florist who curates a fabulous range of flowers for our stores, and we have seen significant growth in this area over the last 12 months. Moving now to Slide 6. We are also well progressing on our journey of resetting our range and space in stores. Space in our stores is a scarce resource. And as we mentioned at our Investor Day in November, we are using advanced analytics to ensure we have the right range and the right space for the demographic of every store, which is a good outcome for our customers and a good outcome for Coles. During the year, stores specific ranging was rolled out to more than 40 categories, including in the nonfood space as well as other categories such as flowers, canned vegetables and milk. And we have focused on innovation and expanded space in certain areas, such as our authentic Indian range. On the slide, you can see our new range that we introduced in partnership with Sanjeev Kapoor, India's most celebrated celebrity chef. This range was crafted with Chef Kapoor's signature spice blends and deep culinary expertise. We have also continued to optimize our range to reduce unnecessary duplication, allow space for new products and improve availability and efficiency. An example is in the soaps and body wash category where through range optimization activity, we removed the duplication, simplified our Own Brand offering and updated the layout, which made it easier for customers to shop. Pleasingly, we are seeing the positive impacts of this work showing through in both our sales and also in our range NPS metrics. We've still got work to do and this isn't a set-and-forget strategy, but we have made good progress this year. Moving now to Slide 7 and the next pillar of accelerated by digital. The performance of our e-commerce business was a highlight for FY '25, and we reported another strong year of growth with 24.4% revenue growth in Supermarkets and 7.2% growth in Liquor. We invested in our own website to improve the customer experience, delivered greater personalization and increased loyalty. Through our Coles Plus and Coles Plus Saver subscriptions, membership more than doubled and we saw a 6% increase in Flybuys swipe rate and a 13% increase in customers redeeming Flybuys points through a Coles supermarket. In terms of network expansion, we introduced a windowless rapid offer in home delivery and Click & Collect and extended our home delivery catchment areas in Melbourne and Sydney. Overall, online NPS saw a meaningful uplift driven by improved availability, fulfillment and the overall digital customer experience with our CFC customers in Melbourne and Sydney recording the most significant gains, which brings me to our CFCs on Slide 8. We delivered a major milestone during the year with the opening and successful transition of our next-day home delivery volumes in our Melbourne and Sydney CFC catchment. Our CFCs are already delivering a strong set of outcomes, as you can see on the slide. We are really pleased with how these facilities are performing and how they are transforming the experience for our customers. During the year, CFC fulfilled sales growth exceeded the already strong growth in our overall e-commerce channel. Perfect order rates were more than double the national home delivery rate. The range in our CFCs is already 33% larger than our average in-store range and includes new SKU in nonfood, Global Cuisines and Big Pack Value categories. We also have over 2,500 SKUs where we offer a minimum life so that customers can be confident to afford purchase for the week. And all of this has led to a significant uplift in customer satisfaction. In addition, relative to Ocado's international partner benchmarks, our facilities have seen the fastest growth in volumes in the first 6 months of operations, and we are operating in the upper quartile across a number of key efficiency and last-mile metrics. Finally, we are seeing broader network benefits. By opening up capacity in store, we have seen strong growth in same-day immediacy and Click & Collect orders. We have seen improvements in store level NPS in CFC catchment areas as a result of less congestion in store. And as we said at the half year, the CFCs allowed us to ramp volumes quickly to respond to peaks in demand, such as during the competitor supply chain disruption in November and December. So overall, we're pleased with the progress to date. Moving now to Slide 9 and our delivered consistently for the future pillar. As I said earlier, we delivered record cost savings of $327 million through our Simplify and Save to Invest program this year, which helped to offset inflation and allowed us to reinvest in the business. Consistent with previous years, there were many initiatives across different parts of the business that contributed to the $327 million. But I would say that a common theme, which supported a lot of them was the use of AI and other technology automation to improve the effectiveness and efficiency of processes. Our focus on continuous improvement and cost control has been a muscle that we have built now over many years, and I would say it is certainly embedded in the way in which we operate. Moving on to Slide 10. We successfully completed the ramp-up of our New South Wales ADC in January in line with schedule. Both our ADCs are now fully operational and delivering strong results with cost per carton benefits in line with business case and improvements in, in-store availability. During the year, our supply chain was tested on a number of occasions with severe weather events in Queensland and New South Wales and the market disruption in Victoria in November and December. And we were able to see how valuable these facilities are in a way they allowed us to respond at pace to these peaks in demand in a way that would not have been possible with our manual DCs. You will also recall that in October, we announced the development of a third ADC in Victoria, and we are now well underway with [ construction based ] on with photos on the slide. Moving now to Slide 11. Before handing over to Charlie, I would like to cover off some of our achievements from a team member, supplier and community perspective; the progress we've made on sustainability; as well as some comments around the regulatory environment. I'll start with our team members. Our team member engagement score was a real highlight for me this year. And with our team members being a reflection of the communities in which we operate, it was also great to see how we have progressed in our diversity and inclusion strategy, including women in leadership and the representation of our indigenous workforce. We have also been working closely with our suppliers this year on a range of initiatives. But once again, one of the highlights was $3.5 million that we are awarded to 11 small- and medium-sized businesses to drive innovation and sustainability as part of the latest round of the Coles Nurture Fund, bringing total financial support to more than $40 million since 2015. Alongside the support we gave to local communities as part of disaster recovery efforts in Queensland and New South Wales this year, we were once again the #1 corporate giver in Australia as a percentage of profit for the fifth consecutive year. And we donated the equivalent of 39.1 million meals to SecondBite and Foodbank. We've also continued to progress our sustainability initiatives. In FY '25, we reduced combined Scope 1 and 2 emissions by 71.4% from FY '24, sourced 100% renewable energy and set an SBTi validated FLAG target to deliver a 30.3% reduction in Scope 3 FLAG sector emissions by the end of FY '30. You can read more about these highlights and achievements in our sustainability report, which was also released today. Finally, on the regulatory environment. The ACCC released their supermarkets inquiry final reported February 2025 finding no evidence of price gouging or land banking. We are continuing to work constructively with government and industry stakeholders in relation to the recommendations in the report. There's also been a lot of commentary in the market recently on tobacco. The new packaging law came into effect on the 1st of July. And this, along with the growth in the illicit market, is continuing to result in a decline in tobacco sales for us. With that, I'll now hand over to Charlie, who will take you through the financial results in more detail. Thanks, Charlie.
Sharbel Raymond Elias: Great. Thanks, Leah, and good morning, everyone. I'm now on Slide 13, which details the group results. As Leah mentioned, FY '24 was a 53rd-week year so the normalized growth rates that I'll refer to in my presentation are adjusted for that 53rd week. I'll also talk to these results on a continuing operations basis, which excludes the significant items. So let's get to the results. During the year, we saw group sales revenue increased by 3.6% to $44.4 billion, and group underlying EBITDA and EBIT increased by 10.7% and 6.8%, respectively. Earnings on an underlying basis adjust for major project implementation costs, dual running and transition costs in relation to our ADCs and CFCs as well as nonrecurring expenses such as those in the Liquor division of $8 million. This year, we incurred $103 million in project implementation costs and dual running and transition costs. These will fall away in FY '26. Underlying NPAT increased by 3.1%. And off the back of these results, the Board has declared a fully franked final dividend of $0.32 per share, bringing total dividends declared for FY '25 to $0.69 per share fully franked, an increase of 1.5% compared to the prior year. Moving on to our segment overview on Slide 14. Starting with Supermarkets, sales revenue increased by 4.3% supported by solid volume growth with growth across both transactions and basket size, all underpinned by our focus on value, quality, availability and the overall customer experience, as Leah talked to earlier. Excluding tobacco, sales revenue increased by 5.7%. Underlying EBIT margin increased by 21 basis points with gross margin efficiency initiatives and operating leverage more than offsetting cost inflation and the investments that we made in value. In Liquor, sales revenue increased by 1.1%. While the liquor market remains subdued, sales growth was supported by new stores, including our Tasmanian acquisition, as well as strong trading across key events such as Christmas and Easter. Our Simply Liquorland banner simplification also commenced with positive early metrics around sales, transaction growth and customer NPS. Pleasingly, operating leverage improved in the second half with underlying EBIT increasing by 6.8% as a result of stronger sales revenue growth supported by new stores, coupled with the simplification in the above store operating model. In Other, EBIT result was impacted by an increase in insurance-related costs and an increase in property-related expenses. Now turning to cash flow on Slide 15. Operating cash flow, excluding interest and tax, was $4 billion, with a cash realization ratio pleasingly at 102%. The working capital movement was driven by higher payables largely due to the timing of year-end payments, partially offset by an increase in inventories to support availability. These movements also impacted inventory and trade payable days, which you can see on the slide here as well. The movement in provisions and other was largely driven by the utilization of provisions relating to the New South Wales manual DC closures following the opening of Kemps Creek ADC. Now I'll take you through CapEx on Slide 16. Gross operating capital expenditure on an accrued basis was $1.3 billion, a decrease of $134 million compared to the prior year. This was largely as a result of the reduction in capital investment related to the Kemps Creek ADC, loss technology and service transformation, partially offset by the milestone payments relating to the construction of the Victorian ADC. Capital expenditure falls really into 4 key areas: store renewals, growth initiatives, efficiency initiatives and maintenance. Within store renewals, we completed 178 store renewals across our network consisting of 60 supermarkets and 118 liquor stores, which included the 52 Simply Liquorland conversions. Pleasingly, our optimized renewal program, which we discussed at the Investor Day last year enabled us to renew more stores compared to last year at a lower capital cost. Within growth, we opened 8 new supermarkets and 16 new liquor stores. We also continued to invest in e-commerce, including our digital platforms and completion of the CFC program and invested in the integration and growth of MilkCo and our Tasmanian liquor store acquisitions. Efficiency initiatives included our capital payment in relation to Kemps Creek ADC, milestone payments for Victorian ADC as well as additional stock loss technology and front-end service transformation. Our maintenance capital, which is the fourth bucket, includes our ongoing refrigeration, electrical replacement programs and life cycle replacement of store and IT assets, including our master data management system and group cyber control investments. We continued to optimize our property portfolio with net property capital expenditure increasing by $36 million primarily due to the lower proceeds from property divestments compared to the prior year. In FY '26, we expect capital expenditure of $1.2 billion as we continue to invest in store renewals, digital technology and growth initiatives and enter the second year of our Victorian ADC development. Now finally, turning to funding and dividends on Slide 17. Our funding position remained strong. We have extended our debt maturity profile and continued to maintain access to diversified funding sources. Note that the $150 million repayment that is occurring in August was prefunded as part of the most recent $300 million issuance in April '25. At year-end, our weighted average drawn debt maturity was 5 years with undrawn facilities of $2.6 billion. As I said earlier, the Coles Board declared a fully franked dividend of $0.32 per share in terms of a final dividend and a payment date of the 22nd of September 2025. This takes total dividends for FY '25 to $0.69 per share fully franked and is within our annual dividend payout ratio target of 80% to 90%. Finally, we have retained hedge room with our ratings agency credit metrics and a strong balance sheet to support growth initiatives with our current published credit ratings of BBB+ with S&P Global and Baa1 with Moody's. I'll now hand it back to Leah to take us through the outlook and concluding comments.
Leah Weckert: Thank you, Charlie, and I'm now going to turn to the outlook on Slide 25. In the first 8 weeks of FY '26, Supermarket sales revenue increased by 4.9% or 7% excluding tobacco. This was supported by continued strength in volume as we continued to invest in customer value and experience. Our e-commerce sales have also continued to benefit from the investments we are making in our digital offer. Strong growth in sales has been partially offset by a further decline in tobacco as a result of the impact of the new tobacco legislation and growth in the illicit market. In FY '26, our ADC program will deliver its first full year of annualized benefits. And we will also continue our disciplined approach to cost control as part of our Simplify and Save to Invest program. With our CFC volumes continuing to increase, we are also on track to deliver improved earnings from these facilities across the course of the year. In addition, in FY '26, no implementation, dual running or transition costs in relation to our ADC and CFC program will be incurred. In Liquor, in the first 8 weeks, sales revenue growth was flat. Whilst the market remains subdued, the convenience of our offer and the investments we are making in Simply Liquorland and in streamlining our operations will enable us to benefit from improved operating leverage as cost of living pressures ease. Simply Liquorland is expected to be completed by the third quarter of FY '26 and incur one- off costs of approximately $20 million. You can also see on the slide further details on our store openings, closures and renewals as well as capital expenditure. So overall, we're pleased with the results we've delivered in FY '25 and have had a good start to FY '26. And with that, I'll now hand back to the operator for Q&A.
Operator: [Operator Instructions] The first question today comes from Tom Kierath from Barrenjoey.
Thomas Kierath: Just a question on the trading performance in the fourth quarter and then into the first quarter. It looks like it's improved quite a lot. Is that trade up or consumers just putting more in their basket? Or is it more to do with traffic that you're seeing in the stores?
Leah Weckert: Thanks for the question, Tom. Yes, so very pleasing growth in the fourth quarter and that has continued into the first 8 weeks. I think there's probably a couple of things at play. So I think, first of all, we are continuing to see strong execution. So we've had a real focus on availability. Our availability metrics are probably now at the best we've seen them since pre-COVID, which is very pleasing. And the ADCs are definitely driving improvements in New South Wales and Queensland, particularly on our promotional stock, which is fantastic. We're continuing to invest in value, and that's really resonating with the customer. And we have got the strong online growth, which is really supported by the CFCs. So I think on the things we can control, we're executing well. I think the other side of the story, though, is that from our customer surveys and some of the data we're seeing now, we're definitely seeing some green shoots in terms of customer sentiment. So that really has come from the interest rate cut and people starting to feel a bit more optimistic about household budgets going forward. If you look at the ABS data for June, total food spend was up at 6.3%. And I think that's indicative of a customer that is just slightly starting to feel like they can spend a bit more, particularly on things like entertaining. But they're still very cautious in a lot of the behaviors that we've seen and revert to over the last couple of years. So entertaining at home, eating at home instead of eating out, shopping mobile retailers, that's all still quite prevalent. And actually, you put those 2 things together and that's a combination that's working quite well for us as a supermarket. I guess the question is going to be longer term is as that confidence grows, will we start to see some of those behaviors reverse and will we see a bit more eating out? So we've definitely got that sort of front of mind as we head into the remainder of the year and into Christmas and definitely very focused on the fact that we need to focus on what we can control, and that's how our customer offers.
Operator: The next question comes from Shaun Cousins from UBS.
Shaun Robert Cousins: Great. Another question on Supermarkets, Leah. Just maybe can you talk a little bit about the impact of the lower shelf price campaign from Woolworths dropping their, I think, now 700 SKUs. Just curious if Coles has had to match all these prices? Or is this a degree some of those price reductions are playing out -- pardon me, seeing Woolworths come down to you. I guess our concern has been around Woolworths potentially deflating the category. But given the trading update you delivered, that doesn't appear to be the case, it might be an issue for them. But just how has that changed in the competitive approach from Woolworths impacted your business, please?
Leah Weckert: So well, first thing I'd say, Shaun, is we've been saying for some time that we are going to make sure that we're competitive. And we actually look at a fairly broad range of retailers now when we think about that competitiveness, including discounters and nonfood specialists, food specialists. So we're taking into account a significant amount of different information on price, and we will always take note when a competitor launches a new value campaign. Having said that, I think my observation would be we've seen a cycle over the last couple of years of a number of retailers making investments on a seasonal basis into relevant SKUs. And so we would look at over the last sort of 6 months and say that really isn't that different from what we have seen over the last couple of years. We also don't expect that to change going forward. And you would have seen this morning that we've actually launched price drops on another 240 lines, which are relevant for spring, which is actually cycling the campaign on this that we had last year.
Operator: The next question comes from David Errington from Bank of America.
David Errington: Really encouraging set of numbers, very pleasing to see. If I could delve into your gross margin in Supers, which was another very strong second half performance after a pretty strong first half. Now you call out the buckets there. I note that your wastage or your losses dropped 10 basis point improvement in the second half, but you're also -- you're gaining some good benefits in Coles 360, you've also got you Simplify, Save and Invest in there and you've got the strategic sourcing. Where I'm going with this, I want to try to work out how much more you've got there in '26 and '27 in terms of opportunities to keep improving that gross margin because that's the thing that's really pleasing me the most, offsetting your cost of doing business growth. You're getting really good supportive gross margin improvement on a good sales growth basis, which is even more pleasing. So can you go into those buckets, please, of gross margin and give us an idea as to the ability to continue to grow that gross margin in those particular buckets. If you know where I'm going with that question, if you could give us that, that would be great.
Leah Weckert: Yes, no problem. Thanks, David. So let's start with FY '25, so the big building blocks to gross margin in there. So we had the 28 basis points of improvement in the decline in tobacco sales. There was 25 basis points across the course of the year for total loss. Although I will note that, that was flat 39 basis points in H1 and 10 basis points in H2. And then we also had benefits flowing through from Simplify and Save to Invest. Now historically, we've had about 1/3 of Simply and Save to Invest that has gone into the gross margin line. In FY '24 -- FY '25, I should say, that was slightly more weighted to CODB than the 1/3. You then had the benefits coming through from the ADCs. And from a phasing perspective on the ADCs, we've had some benefits come through from Redbank in FY '24, we had benefits in FY '25 from Redbank and the start of Kemps Creek starting to transition. And then into FY '26, you're going to see the cycling of that, that you'll see benefits coming through from Kemps Creek. And then I think the other 2 big ones, which you mentioned are the Coles 360 and the strategic sourcing. You put all that together in the gross margin bucket, the thing that is offsetting that is the investments that we're making in value. So that was kind of the shape of FY '25. If I then go to your question on the FY '26 margins outlook, probably start by saying we are very focused on competitiveness and ensuring the offer is sharp. And we are going to continue to invest to keep that top line momentum going that we've got. But you have seen us doing that now for some time. So that's not really a change, but you can expect us to keep that up. In terms of what the margin will benefit from, I think, firstly, you've got both ADCs fully operational. And as I mentioned on the phasing, I'd almost think about it as a -- in terms of the benefits flowing through 1/3, 1/3, 1/3, FY '24, FY '25, FY '26. The second big one is tobacco. So tobacco, we expect will continue to decline, which will benefit the margin rate. However, it is going to be diluted from a dollar's impact on gross margin and on EBIT -- sorry, on gross margin dollars and EBIT dollars. We have an aspiration to keep growing loss. But as you've seen from that impact that we got in H2 of 10 basis points, I think it would be safe to expect that, that's a less material component of this equation going forward. And so we'll see improvements that they're likely to be much smaller. I think the couple of exciting things we've still got coming ahead are Coles 360. So we are looking to bring on more assets and improve some of our measurement and reporting capabilities this year, which we think is going to continue to support really good growth in that space. We'll also have the third year of the SSI program, of which we will get probably around 1/3 that will flow into the gross margin line. And then we continue to do the work with our suppliers on strategic sourcing. So a lot of positive drivers that will help to benefit that gross margin line and give us then that flexibility to continue to invest in the offer and keep that momentum going in the top line.
David Errington: Yes. It seems like there's still a lot there, a lot of tailwinds still. So we can expect to see that growth continue to rise without wanting to nail you because you can't give forward-looking statements, I understand. But yes, there's a lot of optimism there that, that margin will continue to rise at a fairly high clip. That's the way I'm reading it so.
Leah Weckert: We're very focused on making sure we've got the right building blocks to give us that flexibility going forward.
Operator: The next question comes from Ben Gilbert from Jarden.
Ben Gilbert: Just on the trading update and just how we think about that looking forward. Just on maybe some of the consumer behaviors you're seeing, I know you've talked to sort of cooking at home a bit more. But in terms of the essentials category, things like cleaning, pet, et cetera, where there's been sort of well-documented leakage, are you seeing starting to get that back? I've also seen some data suggesting that people are now doing 1 and 2 shops and they're not shopping across 3 and 4 stores. And I suppose as we look forward, and hopefully, we move into a period of normality, whatever that is, do you think we see shopping behaviors move more back to where they were at pre-COVID because we're seeing some of those trends in the U.K. and in theory it's pretty supportive of a business like yours and your friends up north in Sydney as well.
Leah Weckert: Yes. Thanks for the question, Ben. I think we might take this in 2 parts. I'll cover off the customer behavior piece and then I might get Anna to talk about the nonfood aspect of your question. So look, as I said, on the question about the trading outlook, we are definitely seeing the early signs, but I'm going to call them early on green shoots around customer sentiment. And as you said, we do look to other markets that are maybe 6 to 12 months ahead of us in terms of the interest rate cuts. The U.K. would be one of those, where they have definitely seen benefits of customers reverting back to behaviors of consolidating shops because that's just a more convenient way for them to operate. Time will tell as to how quickly that starts to play out. What we're really focused on is making sure that as they start to do that, our value proposition really resonates. Anna, do you want to cover nonfood and where we're at with that?
Anna Croft: Yes, happy to. As you know, nonfood has definitely been an area of focus for us and we are continuing to look at how do we best structure our offer. We did actually think we are the very most -- the most convenient place for customers to buy nonfood. So for us, it's going to be critical that we give customers no reason to go anywhere else. It really, though, isn't a one-size-fits-all in each of these categories. We're taking a category by category on an approach to work through what's the right range, what's the right customer proposition and doing that really collaboratively with our suppliers. I would say we've landed some fairly big change on range and pricing in certain categories, whether that's bigger pack, better value, more EDLP, more innovation where it matters most to customers. And obviously, I won't go into too much detail because of the competitive nature of it, but it's fair to say we are seeing some of the metrics moving in the right direction. But there is a lot more to do and we remain incredibly focused on that and making sure that customers do a one-stop shop with us.
Ben Gilbert: Would your pet and cleaning -- I appreciate you're not going to break down category, but would they be materially off or weaker than your total number now they'd be closing because obviously I think you've reported a period ago they're in decline and then moved back closer to flat.
Anna Croft: I'm not going to get into specific category details, Ben. What I'd say is we are the green shoots I'd started to talk about in terms of some of the activity is playing out in some of what we call the real core areas that we must win from customers, of which both of those categories you talked about. So there's a lot of work going on in each of those spaces, and we are seeing some of the metrics moving. It's very early days and we've got an awful lot more to do.
Operator: The next question comes from Adrian Lemme from Citi.
Adrian Lemme: I just wanted to focus on the balance sheet and how the Board is thinking about it. You've noticed some improving signs from the customer. Leverage ratio came down to 2.6x. This result, I think the 5-year average is about 2.8. And in '26, we should see further decline in that number given the earnings picking up from the nonrecurrence of one-off cost, CapEx is coming down. Is this something we should expect to think about in '26 as the earnings growth comes through, please?
Sharbel Raymond Elias: Yes. Look, Adrian, in terms of the balance sheet, you're right. One of the things that we've really been focused on is ensuring that we continue to maintain a really solid balance sheet. That's important and well within our credit metrics. And we are -- so yes, we are BBB+, as I mentioned, with S&P Global and Baa1 with Moody's. So look, from our perspective, it's our strategy to continue to maintain that, continue to actually ensure that, that is solid. We're also very disciplined in terms of how we allocate capital as part of that program. And not only that, also our promise to shareholders, if you like, with a target payout ratio of 80% to 90%. That's as much as I'd sort of go into the balance sheet at this point. And one of the things that, again, we're all focused on as well is to get that cash realization ratio to 100%. And pleasingly, in FY '25, we delivered another 102% in terms of realization ratio. So that's sort of the broad parameters of how we look at the balance sheet, Adrian, and what our return to shareholders are.
Operator: The next question comes from Michael Simotas from Jefferies.
Michael Simotas: And well done on the result. My question is just around the cost bridge and how we think about the various parts into FY '26. So firstly, on the implementation costs, they came in a little bit lower than what you'd guided to for FY '25. Just want to confirm that they do completely fall away? And then related to that, you've made the comment that you expect improving profitability on CFCs. I presume that's separate to the $40 million implementation OpEx that you took in the FY '25 year.
Sharbel Raymond Elias: Yes. Thanks for the question, Michael. So look, can I go first to the implementation cost? Absolutely, they fall away in FY '26. That's very clear. I think both Leah and I mentioned those several times in our presentation. So they will fall away. And look, they were $103 million for the year. I think, pleasingly, just to give you a bit of a split, just so you're aware of where that's coming from. 60% of the implementation costs were in relation to the CFCs. They're all about the transition costs, so nothing to do with ongoing operations. They were purely the transitioning of our e-commerce [indiscernible] into those CFCs and you're running and the like and 40% related to ADCs. The actual implementation cost, we did a little bit better with them because, look, the team did an amazing job, they really did, treating every dollar as their own, looking at how they can actually reduce those costs. And we use the learnings from our Redbank transition there. So really pleased, but they go away, which is great for FY '26. In relation to CFCs, the CFCs, if you like, financial performance that we'd outlined for '25 pleasingly, I mean, Leah talked through all the sort of benefits that we're receiving from a customer, from an operational perspective. So we're really pleased with how they're performing. And more importantly, they perform from a financial perspective in line with our expectations in FY '25. What we can expect in FY '26 is as these CFCs increase in volume, and we are seeing strong volume growth from the CFCs. So I think we noted that the e-commerce growth rate in the CFCs is actually ahead of what our e-commerce growth rate of '24 was for last year. So we see that continuing. So we would expect a better financial performance in the first half of '26 compared to second half '25, but also, again, a further improvement in the first -- in the second half of '26 as well. So we would expect, if you like, that $40 million drag that we called out from an EBITDA perspective to progressively improve throughout FY '26.
Leah Weckert: And Michael, can I just build on that. When you asked the question, you described the negative $40 million as implementation OpEx. We don't think about it that way. There was the implementation OpEx, which was in the $103 million, of which the CFCs were about 60%. That was what it took to transfer all of the volume in and to run fuel operations in the store and the CFC alongside each other while we were making the transition. Once the transition occurred, though, we had -- we guided to an EBITDA drag into the P&L of negative $40 million for the remainder of the year. And what we're saying is that as we go into FY '26, we're expecting that earnings of the actual running of the CFC. So not the implementation costs, but the running of them to improve over the course of the year as we continue to grow volume. Does that make sense?
Michael Simotas: Yes, that does make sense. And then just the last bit I've got on that is most of the D&A on both the assets and the leases was in the P&L in '25, right? So there might be a tiny bit of step up, but the big step change has already happened?
Sharbel Raymond Elias: Yes. So let me take you through the D&A. That's probably -- yes, obviously, there. Look, so in '25, we actually saw a step-up in D&A of around $230 million. So $100 million of that, Michael, related to the ADCs and the CFCs, right? And then the balance related to our broader CapEx program. And as you know, with our CapEx program, as I mentioned, we have mentioned previously, we're spending about $1.1 billion, excluding sort of our investments in the sort of automated facilities. And then finally, you get depreciation from things like right-of-use assets as we renew stores, as we bring new to stores on board and the like. So the good news is for FY '26, we won't see the same step-up that we saw in FY '25, and in fact, yes, I sort of guide you to where FY '26 might land. You'd expect a step-up around half the step-up that we saw in FY '25. So just to repeat that, about 50% of the step-up that we saw in FY '25.
Operator: The next question comes from Richard Barwick from CLSA.
Richard Barwick: You just sort of touched on it a second ago, Charlie, just wanted to talk about the impact that the CFCs are having in terms of driving the online growth. So obviously, there's very, very strong online growth overall. But to what extent is that growth being skewed to New South Wales and Victoria? And then there's a bit of a flow-through for that. To what extent are CFCs really underpinning the overall top line? So I'd be curious to get a sense of how that was looking for the fourth quarter. And if you'd be -- if you're willing to talk to the impact for these first 8 weeks because obviously the sales growth are looking very good. So to what extent are the CFCs actually driving that.
Sharbel Raymond Elias: Right. Well, look, I'll touch at a sort of a high level and then sort of pass it on to Matt Swindells to give us a bit more color. So look, as I said, we're really pleased with the volume growth at CFC. So we have actually seen strong growth. As you saw across all our e-comm channels, growth in FY '25 was about 24.4%. And we are pulling out that obviously the CFCs grew at a bigger rate than that. And part of it is we're seeing that through the improved customer experience across things like availability, the perfect order rates, the freshness and the extended range, which is all sort of resonating with our customers, and we're seeing that through our customer NPS scores through the CFCs, which are actually higher than our online CFC scores there as well. And also from a performance perspective and operational performance perspective, I think Leah mentioned as part of the presentation that the operating performance and the transition compares favorably with some of the overseas CFC implementations, which we're really pleased about. And we are seeing not only that, the growth, though, what the CFCs have done and we called this out, I think, not only our Strategy Day, but since. What we have seen is less congestion in our stores as we transition to home delivery. That's resonating in a better store look and feel and customer experience, which has been positive, but we've also been able to open up more slots in stores for things like immediacy and same-day type home delivery, which we have actually seen some very good growth. But Matt, with that, would you like -- anything you'd like to add to that?
Matthew Swindells: Look, I think, Charlie, you've covered the key points, which is the performance of the CFCs has been really pleasing for us. And yes, they have significant capacity. So in New South Wales and in Victoria, they are delivering growth that's ahead of the other states and that is because we are seeing them play a role more of a network play in those catchments. It enables the stores to have capacity for better Click & Collect, for better immediacy offers and also better in-store execution for customers that still shop the store. So our availability has improved and the congestion is removed. And then the capacity in the CFC themselves to do that home delivery with the customer proposition, the specialty market, is also then driving a lot of that growth. So I think we're very pleased with the CFC performance and the growth, but we're also really encouraged by the impact it's having on the wider network in those catchments and is supporting capacity and given us the ability to grow even further.
Richard Barwick: And just sort of to clarify, a follow-on, a sense of the momentum there. So are you seeing like that idea that the New South Wales and Victoria is growing ahead, is that accelerating as the CFCs ramp up? Or have you sort of reached a level where it's a bit more normalized?
Matthew Swindells: I'm not sure we've reached a normalized level yet. You've got to bear in mind we're still in the early days post the ramp-up of driving growth and there's a lot more work to do on the extended range, on really thinking about how we get better efficiency and better service deliveries. There's more to come. We have also got further automation in the next year. So for those of you that were at the investor tour of the Victorian CFC with the robo arms, there are 20 robo arms currently in that big CFC ready for implementation through the year. And so we expect to see some further performance improvement in the operation. Where it will end overall, I think we're just pleased we've got capacity and we've got the right operating metrics and the right customer outcomes, and we can meet the customer where the customer wants to shop across all those modalities, in-store, Click & Collect, immediacy and home delivery with the best offer in the market. So the growth opportunity is there. Where it will then cap out, I guess, over time, we will see.
Operator: The next question comes from Craig Woolford from MST Marquee.
Craig John Woolford: Just wanted to follow up with another question on the cost outlook. It was a great result in FY '25 on that Simplify and Save to Invest of $327 million. What do you see as the implications for FY '26? You sort of have less than a quarter type run rate left over the next 2 years, but just interested in that. And also just dealing with the still fairly high retail award wage increase that's in FY 26?
Sharbel Raymond Elias: Great. Thanks for the question, Craig. Look, the SSI program, just a bit of a reminder, we announced that back in August '23. It was a full year program where we were targeting $1 billion over the 4 years. We generally target about $250 million a year. Look, some years we do a little bit better and FY '25 was a great case in point where we delivered $327 million, but other years a little lower. And one of the things that we will see in the 2 years, we have delivered about $560 million of benefits. We'll obviously look to do more where we can. We see $1 billion as a bit of a floor, not a cap. But I would also just caution that $327 million was a fantastic result. And yes, it would be ambitious to think, I think, we can deliver that again in '26. That doesn't mean we aren't going to try, but I would be generally working towards a target of more than $250 million or thereabouts. In terms of costs that we see in CODB, I think, look, pleasingly, our CODB just generally went up by about 59 basis points. Pretty much most of that was the D&A step-up, right? So from a cash CODB perspective, we're actually seeing that to be relatively in line with sales, which is pleasing. That being said, we do see pressure on costs in 2 key areas. Wages, as you've cold out there where, yes, the Fair Work wage increase that was announced. But also energy costs, energy costs continue to be something that we navigate but we see that as part of our SSI program as well. And I think Leah mentioned it earlier, historically, with SSI, 1/3 of the SSI tends to work its way into gross margin and about 2/3 into our cost of doing business. Although in FY '25, it was a little higher in the cost of doing business in terms of what we realized.
Operator: The next question comes from Bryan Raymond from JPMorgan.
Bryan Raymond: My question is just back on the CFC. So I just wanted to get -- maybe just step back a bit. We talk a lot about the underutilization and the $40 million cost base there in '25. Interested just to understand the sort of the economics of those transactions going through those 2 sheds. Are they -- is the $40 million loss reflective of them being those transactions being actually loss making at the moment until you reach a certain scale? Or is that relative to theoretical earnings you should be making on those transactions? I just want to understand if you're better off at the moment, putting those -- from an earnings perspective, putting those online sales through CFCs versus through store based on EBIT margin, EBITDA margin now if you like to look at it?
Sharbel Raymond Elias: Yes. So Bryan, look, thanks for the question. Look, you need to look at the CFCs as when we implemented the CFCs, clearly, it was implemented for growth. We actually put those CFCs, it provided capacity for us to grow not only our next-day home delivery service in Sydney and in Melbourne, but also, as I said earlier, it allowed us to [ drive it ] in stores. So put really simply, the $40 million, yes, when you invest in facilities like these, there are a certain amount of fixed costs that relate to those facilities. And what we said was operationally, post transition, to repeat Leah's words earlier, post the transition element last year in FY '25, so this is effectively from November -- end of November through to June, the drag on earnings, if you like, was about -- in terms of EBITDA, was about $40 million. And what I've said is, as we see those facilities increase in volume, and Matt took you through a little bit of what we see in terms of the outlook there, we would see a progressive improvement in that -- in those earnings through FY '26. And we're really pleased with how they are actually improving from an earnings perspective through that. And we would see a better second half '26 and we'll see it in the first half of '26. And the first half '26 is an improvement on where we found ourselves in FY '25 as well. So we're really pleased with the financial performance. But you need to think about those. They're not theoretical. It is a $40 million, if you like, drag that we are improving through FY '26.
Bryan Raymond: Okay. That's helpful. But just to clarify then, just on the $40 million. I assume that was quite skewed to the second half given the timing, as you mentioned, late November when you started -- they started kicking in those underutilization costs. Should we -- for example, whether you want to clarify or not, but if it was, say, $10 million first half, $30 million second half, should we be expecting that $30 million to annualize up to $60 million and then start reducing? So into FY '26, it could, in theory, be more than $40 million given that second half would have been higher than half of the $40 million. Does that makes sense, Charlie?
Sharbel Raymond Elias: Yes. Look, Bryan, I don't -- look, I don't intend to go into sort of splits between the halves, et cetera. I think your early comment about more skewed to the second half, there are more trading days post transition in the second half than first half. So that would be safe to assume that was larger in the second half than the first half impact. But in terms of all I was talking about in terms of FY '26 is we would -- as volumes grow, we'll see a significant improvement in the first half of '26 and that will further improve in the second half.
Operator: The next question comes from Phil Kimber from E&P Capital.
Phillip Kimber: I mean, great result in Supermarkets. I was going to move over because there's been lots of questions on to the Liquor business. You're obviously going through a lot of change there, and you've assumed another $20 million cost, sort of one-off, in FY '26. I mean, should -- given the sales momentum in that business, is it going to be difficult just mathematically to generate ex that $20 million underlying profit growth? Or should we be assuming that given the tough trading conditions, probably the underlying profit flat or goes backwards a bit and then you add the $20 million one-off cost to that?
Sharbel Raymond Elias: Thanks for the question, Phil. We're really confident that what we're investing in Simply Liquorland that we're going to get very strong returns on that capital. Everything that we're seeing from the stores we've converted to date suggest that. I think that in terms of us transitioning into the first half of FY '26, I think the key messages that you should take from second half '25 is that really, there's one factor that is out of our control at the moment, which is how much will the market recover and by when. But there are 3 really important factors that are in our control, which have been our focus, which has been to make sure we're improving the customer value proposition, which we've certainly done a lot of work on that through the second half, whether it was moving to one price file and promotional plan earlier in the half or now kicking off the rollout of Simply Liquorland, and we think that everything we're saying that, that has been a good thing for us in terms of sales. We think in terms of costs, we had a very strong result in the second half, which is pleasing. That's a result of some measures that we implemented in the first half that we got a full run rate of benefits for in the second half. And then there's also, as we roll into Simply Liquorland, there are some more cost benefits that started to come through in the second half also. And so when you look at those things and when you look at what we think was a very pleasing result in terms of gross profit to still be slightly up year-on-year in the second half at a time when we heavily invested in value through moving to one price file and promotional plan as well as bringing other mechanics that have had a real impact with customers in terms of our value perception, we think that even in a softer market than we would have liked to have underlying earnings growth in the second half of 6.8% is a very pleasing result. And we -- and that has the team feeling optimistic around our opportunity to continue to improve moving into FY '26 and then we'll just watch to see what the changes in consumer behavior are and when these cyclical headwinds start to abate, but we think we're very well positioned for that.
Operator: The next question comes from Ajay Mariswamy from Macquarie.
Ajay Mariswamy: My question is around the Coles Finest brand and continues to be a strong growth contributor there. Can you just talk to some of the key drivers for this? And how are you seeing equivalent branded products performing in that upper tier? And is it due to a bifurcation of consumer behavior between different income brackets or particular areas? And can this be an offset to customers going back out to eat when things turn?
Anna Croft: I'll take that. Look, we are very pleased with the Own Brand performance and actually across all the tiers, what we're seeing is volume outstripping proprietary brands. And as you say, Finest was a standout at 13.6% for the year. The key driver of that really being the focus on innovation and quality, and we'll continue to do that. Actually, we -- it's not in every single category. So we've got a significant amount of headroom going forward to grow the brand. And actually, what we're really focused on is what is right in every category and what's the right tiering from Simply [indiscernible] and Finest. And what we're seeing and how we're bringing that brand together are collective and certainly through seasonal moments, the real opportunity to divide kind of restaurant-quality meals for customers at home. And I think you're seeing categories that are emerging so freezer categories where we've had big and sustaining ranges or some of whether it's the Coles Finest risotto coming through in terms of driving new occasions and actually driving customers to the fixture where they haven't previously been shopping. So we're really energized around what that brand can do in the future, but we're really focused around all of the tiers on Own Brand and how we make sure that we get it right in every category, and we look to continue to strike both volume and value and make sure we're delivering the right proposition for customers.
Operator: The next question comes from Nicole Penny from Rimor Equity Research.
Nicole Penny: And just further on Own Brand and as that scales further, do you see the engagement with branded suppliers change materially? And just to confirm that you've seen the demand for those labels continue to increase in quarter 1? And just secondly, yes, compared to 2 years ago when you took positions, what changes in the operating environment across customers, competitors and suppliers have been most material in changing your thinking? And what do you need to do differently in response to ensure continued success over the medium term?
Leah Weckert: Thanks, Nicole. I might pass to Anna to answer your third question on the Own Brand, and then I'll come back and answer the one around the changes over the last couple of years.
Anna Croft: I'd say, look, as I've just mentioned, the Own Brand, we think, has significant opportunity to fill white spaces and categories. But this is about getting the right offer in every category and our brands play a very important role for that. And customers are seeking brands, but they're also seeking private label opportunities. And where we can innovate, we believe actually together between branded and private label we can grow categories, and that's how we're working. So we actually don't see them competing in that way. What we want to do is grow the thinking about it, and we're thinking about at a category by category level. And it's also worth noting that many of our Own Brand suppliers are also branded suppliers as well. So a significant opportunity, we think, by really focusing. So we are seeing good growth and we have got big plans in this space, but we're working very collaboratively with our suppliers, and we think we've got the right offer -- we'll get the right offer in every category, whatever the tiering and whatever the brand will be driven by the customer need.
Leah Weckert: Nicole, on your question on what has changed, well, I think it's actually been quite a turbulent period with the early part of that with the inflation that we were seeing coming through. Many customers have radically changed their behavior in how they shop, whether that's trading down to more affordable options, shopping across multiple retailers, actually cutting back on a lot of lines like liquor or treats, even things like bottled water. And so we've had to work hard to respond to that changing customer needs and we've really refined our customer proposition to line up with that. We've also very significantly changed the business in the last couple of years with the introduction of 2 automated DCs and 2 customer fulfillment centers. And that has given us lots of flexibility to feed into that customer proposition that I was talking about, but also build for the future. And as we look ahead, we think there's further opportunities to go after in areas like the Coles 360 and retail media. Thank you.
Operator: The next question is a follow-up from Shaun Cousins from UBS.
Shaun Robert Cousins: Just a question for Charlie. Just on net interest. Should we apply the similar approach for fiscal '26 that you suggested for D&A in that we look at half of the increase in fiscal '25 should be coming through at fiscal '26? I'm just conscious that I can see -- that I see consensus estimates at around $548.5 million for fiscal '26 and your net interest in fiscal '25 is $541 million. I may have my numbers off there, but just any clarity that you can put on the record around net interest guidance would be helpful, please.
Sharbel Raymond Elias: Not a problem, Shaun. Thanks for the question. Look, in terms of interest, you will recall into FY '25, we did see a step-up in interest and that was more related to AASB 16 as we brought the large transformation programs onto the balance sheet. But really look at interest into 2 buckets, if you like, the debt-related interest. And if I sort of break up the FY '25 amount, $117 million of the interest related to -- or about 20% related to the debt facilities and the balance of that $424 million related to the leases. So if I look at both of those components, with respect to the leases, apart from the normal lease -- at least churn through store renewals and new stores coming on board, we don't actually expect a significant change in the interest related, in the financing cost related leases. So I guess that's bucket one. The other side of it, it really is the interest on our debt facilities and you need to look at it from 2 ways. One, we will see some benefit from lower interest rates. About 50% of our debt is actually floating. So we'll see some benefit there. But you also have to factor in effectively the annualization of the new note that we issued back in April '25, the $300 million. So look, net-net, I actually expect interest to be broadly in line with FY '25.
Operator: The next question is a follow-up from Ben Gilbert from Jarden.
Ben Gilbert: What strategic sourcing means within submarkets? And how big or material an opportunity is strategic sourcing?
Anna Croft: Yes. When we think about that, Ben, it's how do we partner with our suppliers. We're looking, as you know, to do longer, deeper partnership that really drive long-term value for the customers, for our partners and for the business and we are really moving in that direction to partner deeper to unlock end-to-end efficiencies all around actually that change the customer proposition. So that's the direction we are taking, and we've had some good success for this, this year and we'll continue to do that over the long term to step change the customer proposition.
Ben Gilbert: And how progressed are you? Did you start that back, what, beginning sort of late March quarter, is that right? So I suppose in terms of -- probably takes a bit of time for that to come through and then annualize, so is it relatively early days on that front?
Anna Croft: Look, it's kind of an always-on program and we're making progress over the last kind of 18 months on that, but we really want to continue as BAU to really think about how to really use partnerships to unlock greater customer opportunity and differentiation. So it's always on, but we're probably kind of 12, 18 months into this way of working.
Operator: The next question is a follow-up from Tom Kierath from Barrenjoey.
Thomas Kierath: I'm just thinking about the half-to-half profit growth in '26. I guess, based on the ADCs taking a bit longer to kind of contribute and then in the first half you're lapping the Wooly supply chain kind of stuff, is it fair to assume that you kind of get growth in first half but then faster growth in the back half?
Leah Weckert: So you're talking from an earnings perspective, Tom?
Thomas Kierath: Yes. Sorry, yes. Yes, sorry, yes.
Leah Weckert: Yes. I mean, we probably won't be spending a whole heap of time breaking it down by half, but I think a few things to probably think about. One is exactly right on the ADC, which is from a phasing perspective at the back end of FY '25, we did have Kemps Creek starting to deliver. And so you're probably going to see a bigger contribution of that in the first half and early part of the second half before we cycle that. From a CFC perspective, as Charlie described before, we expect as we continue to grow volumes throughout the year, the earning trajectory on that improves. And so you would expect to see a bigger drag in the first half than the second half in that. And then the other factor, which within last year that we will cycle over the top half is the competitive disruption that was in November, December last year. But equally, there were some significant weather events in January, February and March in FY '25 in New South Wales and Queensland.
Operator: The next question is a follow-up from Bryan Raymond from JPMorgan.
Bryan Raymond: Just another clarification question. Just on corporate costs into '26, there was a reasonable step up there in '25, particularly in the second half. How should we think about 2H annualized? Or should we be taking kind of FY '25 as a good baseline for '26?
Sharbel Raymond Elias: Yes. So Bryan, look, corporate costs did step up a little in FY '25. They're actually higher because of higher insurance costs after the year. So they stepped up about $107 million. Look, in terms of corporate costs as part of the other division, I think you should think of that as pretty much flat year-to-year from '25 into '26.
Bryan Raymond: Right. And so for the overall Other line, Other earnings should be sort of, I think it was $109 million loss this -- in '25, should be sort of broadly similar to that $109 million in '26, just to clarify.
Sharbel Raymond Elias: Yes. Well -- yes, so Bryan, I think that's a good way of looking at it. And look, let me just break it up though into the 4 components because I think there's 4 elements to it. One is the supply contract that we have with Viva, the product supply agreement. As you know, that's the revenue line in the Other, and that's obviously been impacted by tobacco sales. So you should expect that from a sales revenue perspective to decline because of the tobacco sales. But the actual earnings on that, about $9 million, that doesn't change really from year-to-year because it's sort of a flat fee, if you -- is the way to look at that. So that should be the same. Corporate costs, which is the other element I spoke about, that would be flat. Flybuys. So Flybuys in F '25, pleasingly the net loss was about minus $5 million, which is better than the '24 number. And that's some great work that the team had been doing with Flybuys and Flybuys itself in relation to improvements in simplifying the operating model, which was positive. And then the swing factor really is property, right? So in '24, we had a gain in property. In '25, there was a $6 million net loss. As I look forward, I wouldn't expect too much difference from a property perspective in FY '26 at this point.
Bryan Raymond: Sorry, too much difference to '25? Or just a flat outcome or like 0?
Sharbel Raymond Elias: Flat outcome to '25 is [ proper perspective ].
Operator: The next question is a follow-up from Phil Kimber from E&P Capital.
Phillip Kimber: So my follow-up was really just around you talked about the green shoots and you've done an amazing job really simplifying your range and leaning into the consumer preferences that we've seen in the last few years. Just trying to get a sense of how quickly, if those green shoots pick up, can you pivot back the other way. I don't know whether it's adding more range and things like that. Maybe just talk conceptually about that?
Leah Weckert: Yes. Thanks, Phil. I think from a range optimization perspective, we've had a big push on this in the last 12 months in terms of building our capability, but we would now consider it to be sort of always on. As I said in my initial comments, it's not something you can just set and forget. You've got to constantly be working at it to optimize it for every store and every sort of customer community that shops at that store. And so we see that as an ongoing effort that we'll be doing year in/year out from now on. And that really is about removing duplication to give space to bring new innovation in and simplifying the offer so that we have it simpler for customers to shop. And as I said in the presentation, we've seen some really good early results from this. So we're very pleased with how it's going. We're about 40 categories in at this stage that we've done in the last 12 months, and so we'll be looking to roll out more as we move forward into this year.
Operator: The next question is a follow-up from Craig Woolford from MST Marquee.
Craig John Woolford: Just a quick one on that trading update with the strength of sales of 7% ex tobacco was a good number. Is there any other color you can provide on, say, fresh versus packaged performance trends? And any inflation impacts in the sort of momentum that you're seeing?
Leah Weckert: Probably limited color on breakdown from a category perspective. Happy to talk a little bit about inflation, though. I think we obviously have quite stable inflation in Q4 at the 1.5% or 1.2% if you take tobacco out. As we're starting to look ahead now on what's our expectations of what might be coming through in FY '26, we are seeing lamb starting to experience some supply constraints, and that's putting a bit of pressure on prices. Probably the big one, though, that we're watching very closely is beef because export demand out of Asia is putting pressure into production and process capacity here in Australia. And I think on the other side of the ledger, we're starting to see some deflation in chicken and pork, which is pleasing from a customer perspective, but potentially looking into a bit of a remix of what customers are buying as those prices settle into a system next year.
Craig John Woolford: Okay. Yes. I mean, the nature of the question was the 7% sales versus 1% ex -- to the 1.2% ex tobacco inflation. It's a very healthy volume figure, probably feels better than green shoots, Leah, in terms of...
Leah Weckert: Look, it's been a pleasing start to the year. It was a pleasing Q4. It really is continuing that momentum that we had from Q4 into Q1. I think it's our job to be cautious about that and be thinking ahead at what the customer is going to want, particularly as we head into the really important trading period for Christmas. And so we're really focused on what is that customer proposition that we need and how do we need to make investments to keep that momentum going in the top line, but we are pleased with it, Craig.
Operator: At this stage, we're showing no further questions. I'll hand the conference back to Leah for any closing remarks.
Leah Weckert: Thank you very much. Well, I think, in summary, we're pleased with the strong financial results and the strategic achievements that we've delivered over the course of the last year. As we look to the year ahead, we're pretty clear on what our priorities are. We will remain focused on ensuring our value proposition and offer resonates with the customer and that includes delivering consistent quality and availability and continuously improving the customer experience in store. We also will continue our laser focus that we have on costs and really focusing on unlocking the full benefits from our ADCs and CFC investments, both for the benefits of customers but also shareholders. And excitedly, we'll look to continue to grow the Coles 360 retail media business, which we think is a big opportunity for us in the year ahead. So thank you, and I look forward to speaking to you again not so far away at our first quarter results in October.