Bid Corporation Limited (BID) Earnings Call Transcript & Summary

Okay. Welcome, everybody. I believe we've got quite a lot of people on the webcast, and some people in Standard Bank in Joburg. It's very nice in Cape Town today. You guys should have all gone on the plane on [ SIA ] and arrived here, you would have come on an empty flight, and it would have been very comfortable. I think getting back to Bidcorp, I think looking from a Chairman perspective, this is a very well-run company. The executives are very focused, it runs a decentralized operation. We are in quite a difficult global world at the moment, lots of funny things happening, and they all can have an impact on a particular region. But overall, the diversification of this business, the very -- the focus of the executives, they run each business like it's their own, really helps make a difference. And just I'd briefly like to thank Bernard, Dave, Ashley, the Company Secretary, the management team, a lot of you who are here today, for the kind of effort that you put in to making Bidcorp into the company that it is. And it is one of the stars on the South African Stock Exchange, but it is very globally diversified company. There are also a number of Board members that are not physically here today that I'd like to thank for the contribution. Firstly, Doug Band retired as Senior Independent Director, so I'd like to thank him for his contribution over many, many years. We're still very fortunate to have Brian Joffe on our Board, who was the founder of Bidcorp. As I mentioned in prior years, I was there with him when he made his first acquisition, which is, today, still an associate of Bidcorp, and that was back in 1998, and I think this company has grown from strength to strength, and when you combine the market cap of Bidcorp and Bidvest, you get about ZAR 180 billion from a company that was acquired for ZAR 25 million in 1988. I would also like to thank other Board members, in particular, the Chairman of the Audit Committee, Helen Wiseman, who does a significant amount of work to make sure that there's appropriate governance around the organization, and we've also gone and made 2 new appointments in the past 6 months, Tasneem Abdool-Samad and Cliff Rosenberg, they both bring different skills to our board, and I'd like to welcome them to the board. So overall, I think, difficult environment, but very credible results. And I think it is a decentralization, entrepreneurial culture, and the overall diversification of the business model that enables us to produce decent results in what would be a very tough economic environment. So I'm now going to call on Bernard to give you all the facts and take us through the results. So again, thank you all for attending, and for those of you in Joburg, thank you for attending. For those of you on the webcast, thank you as well. And I'll hand over to Bernard. Thank you very much.

Okay. Good morning, everyone. Is that -- is the microphone working? You're happy with that? Okay. Good morning from Cape Town, and those in Johannesburg, like Stephen says, those on the webcast, those on the phone. It is a new world out there and technology does change the way we do things. So although I'm talking to a relatively small audience here, primarily based on Bidcorp people, and those of you who aren't Bidcorp people, you're welcome anywhere [indiscernible]. So firstly, thank you, Stephen, to our Chairman, to my fellow directors, certainly, Brian for his continued wisdom and input. It's always good having somebody with that amount of experience, particularly when times are tough and conditions are tough. And to the rest of our directors, including the new directors, thank you to all of you for your input. Most importantly, a welcome to our management team from around the world who are here with us at the moment. We've got a management conference the next few days in Cape Town, we'll stimulate the economy, so the results coming out of South Africa should continue to be positive for the next 6 months. So thank you to all of you and -- for spending your money. And to all of you who are attending, thank you for your continued interest in our company and our story. And hopefully, we can add some color to what has happened and what is going to happen. We certainly live in interesting times, challenging times, there are a lot of things going on. You can get overwrought by the negative, but we try not to. Because out of every negative situation comes a positive, and we like to focus on the positive. And yes, there are a lot of things that aren't great out there, but as the biblical wisdom says, "This, too, shall pass." And once it does, there will be good times, and we have to make sure that we're at the front of that, and really, to ride the wave when it comes in. And just talking to that, we believe the strength of our balance sheet is one of the greatest strengths we have, which we don't really talk a lot about. But over the years, we've had lots of pressure from various different shareholder groups to increase our level of gearing and gear the thing up. We're very happy with where we are in the strength, because that will absolutely give us the firepower and ammunition to do whatever has to be done and take advantage of opportunities, which will no doubt arise as a result of what's going on in the world at the moment and probably will carry on for a while. So that's just a bit of background about who we are. It's pretty much the same as before. As I've always said, we are borrowing. Borrowing is good, as long as we can consistently deliver upon our strategy and our message, that's what we'll continue to do. That's what the team is tasked to do. We have added another level to it, which I guess, recognizes our place in the world and the importance that we should all be placing on sustainability, on the environment, et cetera, and we talk about ourselves being environmentally conscious. And I think it's incumbent upon all of us just to try and play our part in making the world a better place and doing what we can to make sure that we do have a sustainable world for generations to come, and not just have a short-term focus. That's somebody's phone. Hopefully, it's one on my team, and it's a customer order. So there you go, this is what's going to happen. I see I'm up twice, which is very good, and then David. And then we'll have a Q&A session, which includes those on the web who can send their questions in, and then we'll read them out and answer them. So I guess, there are 2 ways you can look at the results. You can look at them in a positive, you can look at them in a negative. And yes, the accountants, God bless them, they certainly make life very, very complicated. With IFRS 16 and all these other wonderful creations that they invent, it makes comparability quite difficult. So I'm not going to talk about it, because I used to be a chartered accountant, I no longer am, and I don't really understand most of it. I'm just a simple baked bean salesman. And so we'll talk about the business in a like-for-like basis, excluding the impacts of IFRS 16. David will go into more detail about all that technical stuff, but we like to just look at the core fundamentals of the business. And in a very, very difficult environment, we believe the -- that the business has grown by over 4% at HEPS level, which we believe is a very credible result, and we put that down to the resilience of the business -- of our business model, of our geographic diversification. As I said in the opening, these are interesting times. And if you look at the challenges we've been through, I don't want to dwell on them too much, but I think we just need to put them in perspective. Over the past 6 months, we've had the civil unrest in Hong Kong, which basically started at the beginning of July and had a massive, massive impact in Hong Kong. Following on the same theme, we had civil unrest in Chile, which started in -- I think it was October, hasn't really settled down and is probably expected to bounce back again. We've had the Brexit uncertainty in the U.K. And let's not forget, Johnson only got elected in the middle of December. Up until that point, there was chaos in the U.K. with regards to Brexit, and there was uncertainty and there was fatigue, and there was poor consumer sentiment. And I think quite rightly, everybody's forgotten about that and is looking forward to the positive, but we've had to ride out the negative, and when you look at the retail statistics that came out of the U.K., Christmas was an awful Christmas. Retail was really hit very, very hard, and January hasn't been a bundle of joy either. We're still absolutely confident that the U.K. will bounce back and will be a very strong economy, but we are going through that difficult transitionary phase. We've had the bushfire crisis in Australia, which didn't just happen around about Christmas, those fires started in August. So from August, all the way through to the end of December, in that reporting period, Australia has had to contend with the impact of the bushfires and the impact that that's had on tourism and the local economy as well and that will obviously continue to have an impact. In South Africa, we've had the impact of a very sluggish economy of load shedding and all those other wonderful things that South Africa has had to contend with. And now of course, then going forward, and we'll talk about it more a little bit later, we've got coronavirus, which adds on to the ways of whatever else we have. But these are all short-term blips, and once again, notwithstanding all of these issues, we've managed to deliver growth. Our management teams have done what they do. They're focused on their business. They've kept to the strategy. They've stuck to the knitting, and they've done exceptionally well, and I thank them all for that, and I think they've done a fantastic job overall, not without its -- not without our problem areas. And I think we're pretty open about sharing with you where the problems are because the problems -- actually, a problem is only a problem when you don't recognize it as a problem. Once you've recognized the problem, it becomes a challenge, and out of that challenge rises an opportunity. So although we acknowledge we have a few problem areas or challenges, those are future opportunities. And when you have a portfolio as large as we do, it's very, very seldom that you get the thing firing on every single cylinder. And I think what we have managed to prove over many, many years is our ability to implement our strategy and growing our market. Yes, it takes a bit of time. Sometimes, the expectation is we can make -- we can sprinkle a little bit of fairy dust on it and fix it in 3 months. Unfortunately, it doesn't work like that. It's a little bit tougher in the real world, it does take a reasonable amount of time, it certainly takes a year or 2 or 3. But once you do get it right, you establish the base and it's onwards and upwards from there, as our business model has shown time after time after time. If we run very quickly through the geographies, Australasia, being Australia and New Zealand, is still the biggest segment, David. I know there's a little bit of competition between Australasia and the U.K., and it depends on exchange rates and all things like that. And they're pretty -- I think they're pretty similar overall in size. Absolutely sterling performance up there, with the trading margin now at 6.4%, which I think includes an impact of IFRS as well. But excluding IFRS, the trading margin still increased. There was revenue growth, and both businesses have performed -- have continued to perform exceptionally well, again, which is a wonderful story because I think for the last 20 years, I've been telling the same story, and hopefully, for the next 20 years, you'll hear the same story carrying on. Other than they're both coming off relatively large basis now, they are big businesses, they are mature businesses. And so that growth obviously does become more difficult, more challenging, but we're still absolutely confident about those businesses. They've both gone through the phase of -- and continues to go through the phase of changing the customer mix. New Zealand exited their largest customer in the beginning of July. Bear in mind, they exited their largest customer, that was a choice by us to exit that customer because, as I've said before, if a contract isn't mutually beneficial, what's the point of doing it? It's not just about the volume, we need to actually be able to make a return out of it. Australia is quite a long way through that process, but it is a continual process, because your customer mix does change and you continue to need to adjust the -- your business model accordingly. So both those businesses performing exceptionally well, very focused and along that, continue. The U.K. was probably the most -- I don't want to say disappointing, because it's been a very challenging environment, we did score an own goal there in our fresh business, which hasn't been going great for the last maybe 2 or 3 years. We have made some management changes there. We believe there's nothing wrong with the business. We believe there's nothing wrong with the market. We purely executed on certain issues relatively poorly, and we're in the process of fixing that, making some changes. New CEO started from within the business beginning of January, and we're confident of getting that business back on track in the medium-term. Don't ask me to define what the medium-term is, but it's not next week. Overall, the business in the U.K., the food business, they've increased their position from the previous year, which was a record year. And you will bear in mind that we have doubled the profits in that business over the last few years. We're also in a bit of a timing issue, because when you readjust your customer portfolio, you lose a little bit of business, you gain some business. But sometimes, the gains don't come on at the same time as the losses, and there's a little bit of an imbalance there. We're a little bit in that process at the moment, very confident about the future trajectory of that business. I think we've navigated the tough part of Brexit -- the Brexit uncertainty very well. Hopefully, it's a relatively smooth process from here and not disruptive. Consumer confidence returns, business sentiment improves, we're in a fantastic position in the U.K. to take advantage of it, and we are very, very bullish and optimistic about the future of the U.K. We only made 1 bolt-on acquisition this year, which was in the U.K., which is a small-ish local foodservice wholesaler. The reason we only made 1 is that was the only thing that actually excited us around the world in terms of presenting a value opportunity. There are a few in the pipeline that we are looking at, at the moment around the world. Vendor expectations have, until recently, been relatively elevated, maybe some more sanity will prevail. But also, I do think the tough times and impacts of various global challenges will change the dynamics and the value equation. Europe, another very strong performance, and we can see the margins improving up to 4.6%. So we're trending towards the 5% where we think we can get to in the fantastic medium-term I talk about. Most the businesses in Europe performed very well, and putting it in context, Europe is not in a great economic space. Germany, they talk about being in recession, and Germany is, obviously, the big driver of the European economy. The rest of Europe is -- has got very anemic growth, and it's tough in Europe, it's not a pleasure park. Notwithstanding that, our guys have done a great job, and all the businesses, except for 2, performed at record levels. So I think that's incredible. The 2 are Spain and Germany, which are both reasonably new for us. We've spoken about them before as being challenges. We absolutely acknowledge their challenges. We remain very committed and optimistic about the market and the opportunity they present. But these things do take a little bit of time. And sometimes, it takes a little bit more time and a little bit more money than you anticipate, but we're there for the long haul. We're very confident with the approach we're taking, and we do understand we just have to persevere, and we will get there, as we have in every other geography around the world. So when you look back in history, we've had similar situations, and they look tough, and they look impossible to overcome the hurdles. And somehow, we have managed, and you look at the base that gets established and then the momentum that comes from that, that's the success of how we've built the business, and we'll continue to. So a lot of this detail is absolutely in the pack and in the detail that we provide. Emerging markets is always an interesting selection of businesses. I think it's remarkable that we have grown profitability in the emerging market segment when we look at what the components are. So firstly, you've got greater China, which is China and Hong Kong. And Hong Kong went through an awful 6 months with a civil unrest. And in China, we actually had a very good 6 months, cycling off a previous year where we went through some challenges in the dairy segment, which we've explained before. So overall, we saw some growth coming out of -- we saw some small growth coming out of the Greater China business. Our Singapore cluster did very well and continues to perform nicely, being Singapore, Malaysia, Vietnam. South America, notwithstanding the challenges, we performed adequately well and have great positions there to scale that business up substantially. So we are very comfortable and confident about South America, but then it does come with some challenges. We've made an investment in Argentina, in -- I think it was May or June, and that's certainly very interesting when you're accounting for something with -- I don't know what the inflation rate is, 50% or 60%. That's a very interesting dynamic. But notwithstanding that, there's a fantastic local business there and catering to a local economy that performs very well. Then we have South Africa, and don't ask me how, but the guys have delivered 6% growth in South Africa again, and I've said that for a few years in a row. So from a South African buyers' point of view here, I get sent the -- Klaas sends me the stock exchange announcements of food companies in South Africa. I think he only sends me the poorer ones, he says he sends them all to me, and they're all poor. So they've done a fantastic job across all 3 businesses and continued to grow. So I think that's absolutely fantastic and a testament not only to the team, but to the business model that we've set up. The Middle East has gone through a very good patch, and we've seen phenomenal growth coming out of the Middle East, primarily driven by Saudi Arabia. We have the liberalization of the economy, which has given our business a huge impetus, because 50% of the population are now more actively involved in the economy, and that's having a hugely positive impact on the out-of-home market and out-of-home consumption. The last component of emerging markets is Turkey, where we're still in a loss situation, which is made up of 2 parts: our core business, the historical business, is absolutely now profitable and sustainably profitable, but we started a greenfield operation in an area called Antalya, which is a tourist destination, and greenfields' operations are costly. When you make a normal acquisition, you put a little bit of goodwill on the balance sheet, and then you don't have to worry about that. When you're a greenfields -- when you go in the greenfields' operation, all your costs go through the P&L, and you take the loss, and then get the benefits as the thing starts coming online. We're pretty hopeful that, that will be breakeven by the time the tourism season kicks off in the northern hemisphere of summer. So we remain very optimistic about Turkey in the medium-term as well, that's a very strong market. That was then. That was the 6 months that we just finished, and yes, history is history. It's no good looking in the rearview mirror. We don't manage our business in the rearview mirror. We look forward, and what does the trajectory look forward and what -- where are we sitting? I need to be careful what I say here, because I get told I'm too negative. But I think it's good to be realistic as well. We are going through a tough time, and coronavirus is going to have an impact. Don't ask me how much impact it's going to have. So if anybody has that question, the answer is, I don't know. I don't have the foggiest clue, and whoever does say they have a clue, is lying or is much cleverer than all of us. It is going to have an impact, and we don't know how long this is going to go on for. The impact isn't only in China. The impact is biggest in China, but the waves ripple out from there. And the impact in Hong Kong is pretty severe, the impact in Asia through Singapore, Malaysia, Vietnam is pretty severe, the impact for Australasia is not severe, but it's there. Tourism numbers are down significantly. China is the largest trading partner, it's the largest tourism partner in both Australia and New Zealand, and that has just stopped. It hasn't slowed down, but stopped. And as you get further away, the impact becomes less and less. Hopefully, they find a solution to this or it sorts itself out, or whatever happens, happens. But there will be a short-term impact, and we just have to be conscious of that. Out of that will arise opportunity, there's no doubt. We're already hearing in China that some of our competitors maybe aren't going to survive. We're certainly hearing in Hong Kong that through the civil unrest, and now with the corona impact, there are going to be some casualties in the market, and that, for us, is an opportunity. We're absolutely confident the market will bounce back. We saw that with SARS. Fortunately, people have very short memories. People have cabin fever, particularly those stuck on the Diamond Princess. But generally, there is an element of cabin fever. People are very well-disciplined at the moment. But as soon as they can, life is going to return back to normal again. And it absolutely will bounce back, and we need to be conscious that in Greater China, in Asia, in particular, our business is very focused on the tourism, leisure, hospitality market on restaurants, hotels, et cetera. As we get through to other markets, we have less dependence on them. It's obviously an important sector, but we have a greater proportion of hospitals, health care, military, aged care, educational, defense, et cetera, in our portfolio. So that gives you some type of resilience and balance against it as well, but it still does have an impact. So notwithstanding that, if we could put that aside and talk about all things being equal, we know we've got continuing challenges. The U.K. will bounce out of its Brexit slumber. Australia has still got to work through the bushfire -- the impact of the bushfires. South America has got a few issues to get over. South Africa is still in a tough place. I'm glad to see the lights still on, maybe Standard Bank has a generator. Europe, if things just carry on in Europe the way they are, we're okay with that. We can see our way through that environment, and we're pretty confident about it. The business is in good shape. We are very satisfied with where we're at. I'm exceptionally proud of what the team have delivered. I'm exceptionally proud of how they're focused on what's important, in transforming the businesses over many years, into making them resilient, into looking at cash generation, into looking at issues of working capital management and focusing on the detail, while not forgetting what our overall mission is. And obviously, we -- we're a food service player. We're all about the food. We're all about the service, and we're all about the technology. All of that happens, that's part of the DNA. We don't need to talk too much about it, because it's what we do. We're making progress, and we're not -- I think that's the wrong word, because that assumes that you're starting from a long way back. We're significantly down the path, and we continue to improve on what we do in all those areas. And I think that's reflected in our margins. Even through the tough times, we still managed to increase the overall margin. Yes, it's only a few basis points. But had we decreased it a few basis points, I think you'd all have a lot more questions about it. We can still see the opportunity to squeeze a little bit more margin, focus on what we're doing. There's the upstream -- the upstreaming of the margin opportunities, there's the customer base, stratification and getting the correct mix in the customer base. There's a continual look at the expense base and the disruption of the cost base to make sure it remains relevant. We need to always be the lowest cost operator for what we do, which doesn't mean we're the lowest cost operator. It means we're the lowest cost operator for what we do, for the set offering that we give. Sometimes, our customers just want the lowest cost, and they can have the lowest cost, but they can have the lowest service as well. So it's important that our cost base is reflective of the offering that we do give the customer. We are a part of the customers' journey, and I think that's an important responsibility of us through this crisis as well. We do have customers who need to be nurtured through these tougher times. We have 27,000 employees, and their welfare is obviously important to us, particularly those in the areas that are greatly affected by coronavirus, and that's probably the first and foremost responsibility that we do have, is to ensure the welfare of our staff, that they do have jobs to come back to once this passes, that we do have a business and that we are there for the long haul, which we certainly are. So I'm going to hand over to David, who's going to bore you to death with all this IFRS 16 nonsense, which nobody will understand. But all just please nod your heads in agreement with what he says, and then I'll take some Q&A afterwards. Thank you.

Thanks, Bernard. I mean, morning, everyone. I won't bore you, hopefully, too much, because sometimes we even don't understand what's going on. But I think, obviously, the big accounting change in this period is the IFRS 16 leases, and we'll take you through that. We have tried to -- because it does make a mess of parts of the P&L, so we have tried to show everything in the presentation on a like-for-like basis, so at least you understand it. And also, we just need to note that we do have 2 discontinued operations, which hopefully we'll be exiting in the next month. And we talk really mainly about the continuing operations. I think just to acknowledge, obviously, the operators around the world, they generate the pounds, the dollars, Aussie and New Zealand, but also the accountants around the world and the finance teams who put it all together. So just really running through some of the highlights, once again, on a continuing basis. There are minimal translational impacts in the period, so we're not going to give you too much constant currency information. Revenue was up 3.2%. Gross margins, up as the customer mix changes. So we see that improve on an ongoing basis, and that was up to 23.8%. EBITDA margins at 6%, slightly up from the 5.9% in the previous period. Headline earnings per share, up 4.3%, once again, on a like-for-like basis. And I think just to mention in the context of the results, to put them in perspective, we have, as Bernard mentioned, 3 businesses that haven't performed in the period. If they had just done what they did in the previous period, they would have added about 4% to the results. So some of our own goals have cost us a little bit. The interim dividend of $3.30 per share, similar to what we've done over the last period of time, the growth is in excess of what the earnings are, and that's the -- our confidence reflective of the business. Return of funds at 30%, which is probably a little bit lower than where we would like, but a lot of the CapEx that we've put into the businesses over the years still will generate returns going forward. So we still see -- hope to see that tick up over time. I mean I think one real highlight of the business is the free cash flow that we've seen in the period. There was a big focus on working capital towards the end of the period, and we've seen that reflected in the working capital absorption, which I'll talk about a little bit afterwards. On IFRS 16, just to cover that off, adopted from the 1st of July 2019, the impact on the balance sheet, ZAR 4.2 billion of assets that came on. Liability is ZAR 5.2 billion, and if you look at the P&L impact, which we show you in the pro formas that we've given, only about ZAR 6 million. So negligible impact from an earnings perspective, but obviously, a big impact from a balance sheet perspective. But even notwithstanding, adding that into the debt levels that we've got in the group, our EBITDA -- net debt-to-EBITDA coverage is still only 1.1x. So we are reasonably lowly good, and that is obviously a strength in the market as we see it. I think one thing about the IFRS 16 is, obviously, it's now given people the ability to compare businesses. We have, and through Bernard over many years, purchased properties, and we own about 70% of our property portfolio. And effectively, what we're doing is benefiting from our own credit. We're not allowing other people to build stuff for us and take the benefit, and all that has inherent value that still sits within the group. Just on the, I suppose, P&L. Organic revenue growth of 2.2%. I think that reflects, as Bernard said, some good underlying independent growth, but also this transition out of low margin contracts. So although on the face of it, it looks low-ish, there is absolutely a transition that's seeing -- we're seeing in the business. GP is up to 23.8%, as I spoke about. Operating expenses, up a little bit. But as one transitions to more independent customers, the cost to serve their customer base does tick up, and that would be expected. We have seen -- and we've spoken about wages, fuel and energy over a number of periods now, seeing those tick up. But I think what we are seeing is the rate of growth is moderating, and we're not getting those extreme jumps that we have seen in past periods. And I think also, to put it in context, we've invested heavily in the properties -- property portfolio across the group, and obviously, that impacts your cost base as well. Trading margins, 2 are up, Australia and emerging markets -- or sorry, Europe. Emerging markets is slightly down, and that's really principally what we've seen in Greater China and more specifically, Hong Kong. And then U.K. is down slightly, and that's driven by the fresh performance. Just carrying on, just to look a little bit further down the P&L. Interest charges are up a little bit. As I said, asset management got better as the period progressed, so we still -- we didn't do a perfect job in the early parts of the period. We have seen higher rates in Greater China, particularly Hong Kong, Singapore and the like, and that's impacted the charge that we've seen. And obviously, higher absolute funding or absolute funding of working capital, which has absorbed some -- or cost us a little bit, I guess, on the interest line. The tax rate is 24.2%, which is absolutely in line with guidance. So as we sit here today, we don't really anticipate that changing. There is some debate whether the tax changes in the U.K., the rate coming down is going to happen, but we'll have to wait and see. The associates, up a little bit, and -- but to a large extent, there's been some impact in the Chipkins Puratos JV going backwards a little bit, but the benefit of having Blancaluna in the result for the first time. Capital items, very small in the context of the continuing operations. And as I said, the discontinuing operations, to a large extent, we've provided for what we can in terms of the exit. We don't anticipate any material exit costs going forward, and hopefully those will -- the summing of the past after March. In terms of cash generation, not to harp on it, but generally, the working capital, typically, you'd know that we speak about absorption in the first half, and generation in the second half. We've seen very small absorption, and that, as I said, was a function of a large focus on working capital in the period, and that's despite larger inventory in a bigger estate. We are seeing structural, as business import more, those supply lines get longer. And obviously, some activity levels, which you've got to grow your absolute inventory or working capital in order to fund that. In terms of investing activities, a little bit elevated. I think we will see that moderate, I guess, in the next 18 months to 2 years. We have guided through the cycle of being somewhere between 1.5% to 2% of revenue, and we still stick with that. So hopefully, we'll see that come down a little bit. Cash and cash equivalents of ZAR 5.3 billion, very similar to a year ago as well as the end of June, and net debt at ZAR 4.9 billion, which from an EBITDA cover perspective is only 0.6x. And as I said, we are reasonably comfortable, and it gives us basically the financial capacity to do what we need to do in terms of organic and acquisitive growth. In terms of the balance sheet, not really anything to add here. There have been some changes in the equity, some of it dividends, some of it earnings, some of it the take on IFRS 16, and some put option liabilities that we've renegotiated. Liquidity management, de facto the group is long-term. We have less short-term debt than cash, so we have ultimately positioned ourselves in the long-term part of the market. The risk management, we don't -- we haven't changed anything. It still means we match our assets and liabilities in the countries -- in the currencies that we operate in. Solvency, all those ratios from our perspective are healthy, and no real changes there. So really, just to end off. As we said, our financial basis is strong. It's very supportive of the opportunities that certainly will arise as we go forward. We're cash generative. We will continue to focus on asset management as we have always done. Sometimes, you can't always predict these things. We have -- these businesses are decentralized. The traders do take position sometimes where they see an opportunity. And obviously, we allow them the freedom to do so. But overall, we're happy with the levels of working capital. Yes. I think, as I said, the philosophy of hedging assets and liabilities remains, and that won't change. We measure everything in -- from a returns perspective in their local currencies, so what you get in rands is what you get in rands. And obviously, currency volatility, as we've seen, will continue to play a part. Our shareholder base hasn't really changed very much, certainly over the last 6 months. We're still about 50% internationally held, we're 50% local, and I think, really, just to add, the business is economically and geographically diversified and certainly believe we have the management wherewithal and talent to take advantage of what opportunities present themselves as and when. So that's all for me. I'll hand over back to Bernard to take Q&A.

Thanks, David. I suppose we'll open first in the room, if there are any questions. Obviously, Nick couldn't resist the temptation. Thanks, Nick. We're limiting you to 5 questions.

I'll just keep it at 3, if that's okay. We've all seen major investment in the U.K., talking sort of warehousing distribution side. New Zealand, you referenced again here, and Australia previously. Where do you believe you are in this sort of journey? I know it's kind of -- it's a strategic focus, but those are relatively small countries, in a way. So just to get a sense of this level of investment. It's obviously there for the future growth, which is great. I'm just kind of wondering where you think you're positioned.

I think we're substantially down the path. It doesn't mean it ends, but I certainly think we're over the hump of what we do. If that growth continues in the U.K., for example, at the rate that it's continuing in the independent free trade, correct national type of business, we estimate we need a new depot every 18 months to 2 years. And each new depot comes at a cost of about GBP 15 million. So we're not talking a huge amount of money overall, but it's that constant investment that you need to put in to enable the future growth, and you have to do this 5 years ahead of the curve -- 3 years, 5 years ahead of the curve. In Australia, we are substantially through that program, and that will drop off relatively quickly. New Zealand has still got a way to go, because of the growth that they've had over many, many years. When you're growing your top line at 10% over -- and that's a real 10% over a 10-, 15-year period -- it's been 20 years on the 1st of April, by the way, in New Zealand. And just to put that into perspective, we've taken the business from ZAR 50 million revenue to, I think, going to be about ZAR 1.2 billion, ZAR 1.3 billion this year. Over 20 years in a stable currency, you need to put some infrastructure in. And when you look at the quantum that we've put in, it's actually not all that significant, which obviously generates the profit growth. Overall, we are comfortable at that 2% level. We're going to be slightly above it this year, I believe. But then we should trend to -- down to 1.5% until we see the necessity to reinvest as well. Because if you don't reinvest, you are going to starve yourself for growth in years to come.

Secondly, you've been struggling in fresh in the U.K. for probably an extended period of time, various reasons, and obviously, closed it down now in Australia. I'm just kind of wondering what you see is the opportunity to sort of persist in that sort of wholesale -- smaller wholesale market in the U.K. or other jurisdictions.

I don't think you can make the connection further to connect of the same, and you need to look at the circumstances of each individually. In Australia, it was a profitable business. It wasn't core. It was -- strategically, we were competing against smaller operators. We're a corporate with lots of structure and governance and procedures, et cetera, which made a little bit more difficult. And when the opportunity arose to sell it, we took advantage of that. In New Zealand, their fresh business is a very strong contributor and continues to be a strong contributor, bearing in mind that, that fresh top businesses are far more cyclical than baked bean businesses. Your -- the price of your product on fresh -- and it could be produce, meat, seafood, whatever it is, is very, very volatile, it's day-to-day volatile. Whereas on our foodservice business, there's far less volatility. In the U.K., in our fresh business there, yes, it has gone on for 2 years, 3 years. But what's interesting is when you split that up, the seafood business has performed exceptionally well. In a tough market, in the casual dining market, which has been very tough in the U.K., they've maintained their position and their profitability. The issues that we've had there have absolutely been own goals. First, in the meat business, we managed to shoot ourselves in the left foot, and then in the produce business a year later, we managed to shoot ourselves in the right foot. We just have to take those issues on the chin. We're only human, our team are only human. We do make a few mistakes once in a while. We don't believe it's all the structural issue. I know I sound a little bit -- maybe a little bit harsh, but it was down to a management issue. It was some purely executed decisions, which we're now paying the price for and need to rectify, and we will rectify them with -- both the meat business and the produce business in the U.K. were fundamentally very good businesses, which have performed very strongly in the past, and we believe we can get them back to that type of position.

And finally, just on Australia, and maybe a question for Rachel, as she's here. We're obviously getting these exiting of contracts still going on, so that the top line hasn't really done much for what we see. But there was a major investment going into the new warehousing distribution around the major cities. Is it possible to give us any color on what you've seen as a result of that? Whether it's from a volume, new customer wins type perspective, to give us a sense of maybe an underlying run rate? We know it's a mature market, but there was obviously quite a focus around that investment.

Yes, I mean what you can see is the margins out of Australasia have gone up, and that's both Australia and New Zealand, so they both contributed to it. It's not like Australia went down, New Zealand went up more, and on average, it went up. Both businesses showed an increase. So in Australia, the revenue is, in fact, flat, and that's because you've got the exiting of fresh, you've got the exiting of a residual logistics-type customer, and you still have some cycling out of some other business. But you've got a whole lot of new business -- and I don't want to call it independent business, because it's not. It's correct business and correct business is quite a large basket of customers, is coming on at the rate of about 5% to 6% in Australia at the moment. Bearing in mind, Australia is not in a great place. The economy is tough there. You've got the impact of the fires, now the floods and whatever else. So they're getting real, real growth. When you look at what they did in splitting the metro distribution in Melbourne, which is the one we've been at the longest, we're still seeing phenomenal growth. I don't know what the number is, but I don't think I'm far wrong with saying that our profitability is up 20% or 30%, and this is now the second year in a row. Brisbane, Southeast Queensland and Sydney are a little bit slower, but we're absolutely seeing the benefit of that very focused businesses absolutely picking up customers in the right space. The one issue that you have to contend with at the same time is there's a little bit of margin pressure, because the economy is not so great. Everybody's out there chasing a little bit of business, which does put a little bit of pressure on margin. But we'll fight for our patch, and that goes for most markets. The margin pressures are a little bit better, and that goes with the cycle. Are there any others on the floor here? No? Okay. I think we're going to go to the web, and you're going to read the questions out.

We have a question from Anthony Geard, Investec. Fantastic cash flow performance. Well done, David. Some of your peers have experienced growth and margin pressure as a result of rising protein prices. I'm curious to know why you have not experienced this in the same extent, especially given the China exposure.

Rising protein prices. Why haven't we have seen that?

We are seeing it. There is some pressure on margin on protein. That's biggest in the pork category, where we had the impact of the African swine fever, but it's only one part of our portfolio. So once again, you got to this diversification that our product range isn't necessarily protein-focused or vegetable-focused or further processed or poultry or whatever else, it's a broad -- it's a broad product range that we have. And by and large, we have been able to pass on a significant amount of the price increase through to the customer, because that's the nature of the business and the customer base that we do have that we're not taking a long-term view in our pricing with customers. We're not fixing pricing for a year or 2 years or 3 years, precisely for those reasons. So there absolutely is some -- there has been some upward pressure on protein prices. Those are actually expected to come off quite quickly. You've got demand that's fallen off the edge of a cliff in China now. Consumption is down quite dramatically. The -- as I understand, the impact of the African swine fever is diminishing relatively quickly, and the herd is getting back up to speed again. Apparently, beef prices are on the way down, because there's more supply out there as conditions have changed in various markets. So we absolutely did feel some of it. But through, I guess, our resilient business model, we're able to navigate that without too significant of an impact to overall profitability.