Bid Corporation Limited (BID) Earnings Call Transcript & Summary

Good morning, South Africa and the U.K. and everywhere else in the world, good evening to anyone from Australia. Welcome to Bidcorp's half year results for the period ended December 31, 2020. Just a brief introduction, I'm Stephen Koseff, I'm Chairman of Bidcorp. And I think that these results, again, are reflective of kind of strength of the Bidcorp business of corporate, very diversified. Obviously, this has been another tough period with COVID hitting many of the markets in which we operate, particularly in the latter part of the half year or the second half of the half year. And I think Bidcorp again showed very strong resilience, generated significant amounts of cash and showed up as a quality company. So unfortunately, during this period, we did have a loss of one of our directors, Dolly Mokgatle passed away, not of COVID. I'm not sure exactly what, I think a heart attack. And we're very sad to hear that, Dolly was a very dignified individual and really made a great contribution to this board. Back to results, I think I'm going to hand over to Bernard as soon as possible. But again, I think just well done to the Bidcorp people, I think they have continued to show resilience in what has been -- continues to be a very challenging world. I don't think if we stood up here at this time last year, we would have believed that we'll still be dealing with issues like COVID. But certainly, this is not something that is going away too quickly. And I think that Bidcorp is reasonably well positioned to continue to navigate very difficult circumstances. I'm going to now hand over to Bernard, and he will take you through the results. Thank you.

Thank you, Stephen, and good morning, good evening, everybody. Thank you for taking the time to attend this. In hindsight a year ago, we did this from Cape Town. And I did talk about the impeding COVID crisis that was happening, but not in any of our wildest dreams did we think that it would get to the proportions that it has got to and would have such dire consequences. But anyway, that's the way the world works. You need to be nimble, agile, adaptive, responsive and deal with what life throws at you. It's fair to say that our business is absolutely [ coped ] in the process of this crisis. When you look at our customer base, generally, they are the types of people who have been impacted most severely by the pandemic. The hospitality industry, leisure, tourism, cruise ships, airlines, stadiums, sporting events, et cetera. So I think in the context of all of that, our numbers are truly commendable. It's very difficult to say they are a good set of numbers when you're 46% down year-on-year, but the fact that we are profitable, and they are as robust as they are, I think, is a great achievement. I think, first and foremost, I need to pay a tribute to 25,000 Bidcorp family around the world who've done an absolutely amazing job through this very, very difficult time. Bearing in mind, we've kept open every single working day in every single geography that we operate in, with the exception of Wuhan, China, for a few weeks in February, March last year. So besides that, all of our businesses have kept open. We haven't had the luxury of working from home. We've been absolute frontline workers providing meals, providing food, providing necessities, packaging, sanitizers, whatever else, to hospitals, aged care homes, nursing homes, schools, whoever requires the inputs that we provide. So our business has carried on through this, through some very trying times in different geographies where we have been impacted by staff members contracting COVID in lots of geographies. We've had to contend with that. We've had to break workforces up into A teams and B teams and C teams. We've worked with less staff numbers. So it's been difficult, and it's a true tribute to our people around the world, our management team and all our staff that we have weathered this crisis so well so far, and it still has a way to go. It's not over yet. We saw in the U.K., the road map was announced yesterday. Maybe it will be quicker than that. Our hope is that it will be quicker. But at least there's a road map and there's some optimism that, yes, there will be green shoots of recovery coming through. I don't want to dwell on the numbers for too long because the numbers are numbers. You've got a book full of numbers, you've got a book full of statistics and ratios. They're historical. Things change on a daily basis. And I don't think it serves any purpose to do an in depth analysis of what the numbers actually were. I think what's more important is to give you a taste of where we find ourselves and what we think about the future, and how the future is going to look and the part we will play in that going forward. So you know who Bidcorp are; we haven't changed. We believe that our fundamental philosophies, our guiding principles have put us in a great position to be able to weather the storm as best we could under the circumstances. Our decentralized philosophy, our geographic spread, our diversification, our customer diversification, our focus on the correct customer, our agility, our financial strength have all given us the tools and the ability to navigate this crisis, we believe, relatively well. Each country has its own set of circumstances. And I'm really not going to go through each of them because they are all different, every country has handled the pandemic in different ways, that's had different elements of luck or management from a country point of view, sometimes good luck, bad luck, good management, poor management. Certain countries have been able to support their economies better than others. Others have been left to fend for themselves. So it really is a -- we operate in 35 countries, and there are 35 different circumstances that are changing relatively regularly. What we are fortunate to see is what the other side looks like, hopefully, based on the experience of a few countries that are emerging out of this pandemic. And we led that with China, which basically recovered relatively quickly from about April, May last year. And although they had some snap lockdowns and some regional lockdowns which are ongoing -- I think Beijing went into a lockdown a few weeks ago for a few days -- our business in China has gone from strength to strength, and we've seen real growth, and we are now cycling through the weak -- we're starting to cycle through the weak months in February. So we're seeing some real strong growth coming out of China. The next [ cable of the ring ] showing us what the good side looks like on New Zealand and Australia, where fortunately, they're islands far away, and I think they've both done a very good job from a country point of view, from a sovereign point of view of navigating the pandemic really successfully and have both effectively managed to keep the virus out. That's not to say in the 6 months, it's all been plain sailing. We had State of Victoria in Australia, locked down for, I think it was better part of about 4 months in the period we're talking about. And that was one of the strictest lockdowns in the world, with people were allowed out for 1 hour a day and that was all. New Zealand, the largest city, Auckland was shut down, I think, it was for the month of August. Subsequent to that, we've had snap lockdowns of 3 days or 5 days in various different geographies that happen, that don't happen. You have an Australian Open with crowds, and then you have an Australian Open without crowds for 5 days, then they allow the crowds back again, then the crowds boo when you tell them that the vaccinations are rolling out. But anyway, that's all just part of it. But if you look at the Australia/New Zealand business, they're doing very, very well. And the numbers that we're starting to see out of them are very, very pleasing. And without telling too much, those businesses are basically operating at or better than where they were pre-pandemic. And that's with large swaths of the customer base still not operational. Anything to do with the cruise line industry, anything to do with the airline industry, anything to do with large stadiums, anything to do with conventions and conferences isn't happening. But we are seeing a greater trend of local, of staycation, of sporting local happening, which has been great for the business. And there's no doubt there is a pent-up demand. When people have been stuck in their house for 4 months, they actually do want to go out and eat; and as soon as they've got the confidence that it's relatively safe to do so, they do so, fortunately for us. So we are seeing a very sharp rebound in those markets. We're seeing a very similar story in the Middle East, where basically up until a few weeks ago, we were tracking quite comfortably ahead of last year. And then Saudi went back into the stage of lockdown. And that's obviously dampened the sales a little bit. If we look at South America, they have had a great deal of difficulty handling the pandemic, but it's more -- to a large degree, it's been allowed, I guess, to run its course. And we're seeing ourselves rebounding relatively strong. Also in the summer, Northern European, months July, August, we saw a very, very strong rebound in our business. So when you look at -- when you're analyzing our results, which I don't think you have the numbers to do, you'll see that July and August were very strong months and then September started weakening as the -- as lockdowns and restrictions started coming into play again. And then it got worse as the year progressed. November wasn't great, December got very bleak in the Northern Hemisphere and in the U.K. and January continued to be bleak. February is no great performance and probably March won't be all that great either, but we are starting to see some green shoots in Eastern Europe. And things are improving. People have learned to adapt to the new normal. And that's showing up positively in our results. One of the highlights, I think, of our numbers is notwithstanding the fact that we've been trading on lower revenue. We have managed to generate a lot of cash. And that's from -- I guess it's from 3 different factors. There has been a greater focus on working capital management. And we haven't seen the -- I guess, the feared state of customer distress that maybe we thought we would see, which I think speaks to our customer base and the diversification in our customer base and the type of customer as well as the fact that there is a lot of support out there generally in the world for businesses and banks have been supportive, governments have been supportive and trying to keep as many businesses alive as possible. So we've had a very strong emphasis on working capital management. Our CapEx program has maybe been pulled back a little bit. I say it's a little bit because we certainly are optimistic about the future. And there are a lot of plans in place to continue our rollout, to continue investing in CapEx, to continue investing in facilities and to grow our business. These things have a 2 year, 3 year, 4 year life project stand before they come on stream. So we're making decisions now for the next few years. And we're optimistic about that, and know that we need to do it now for what's going to be a very buoyant future. And the other aspect of the strong cash generation, obviously, has been the disposal of 2 properties -- one in Hong Kong, one in Sydney -- which did generate a fair amount of cash. They weren't done to generate cash. They were done to take advantage of market opportunities where yields are at historically low levels, investor yields, which means that you can generate a fairly significant uptick in the value of your property. And these properties were both approaching end of life. And so it's part of our strategy of reinvesting into new property, you need to turn over some of the older stuff so that you can invest in new, technologically advanced, state-of-the-art -- automate or whatever else is necessary in those jurisdictions. So they have been done on the sale and leaseback basis. They are -- one is 5 years, one is 7 years in terms of sale and leaseback to give you some idea as to where our thinking is on that. We've decided to not pay an interim dividend. That was a subject that had a lot of discussion. We are in a very strong financial position. If you look at our borrowings, they're significantly less than where they were a year ago and where they were 6 months ago. We have continued to generate very good cash returns. But as a Board, we took a view that it would be inappropriate at this point in time to pay a dividend. The world is still in a very, very uncertain place. We have many of our businesses in the Northern Hemisphere, in Northern Europe, in the U.K., where we have significant numbers of staff on furlough. We are still receiving government support of various forms in certain geographies. And we feel the timing of a dividend now would not be correct and would only be in the interest of shareholders and not all stakeholders equally, and we believe we've got a responsibility to more than just shareholders. We need to balance those responsibilities, but we have a responsibility to our employees, to governments, to all stakeholders in the community as well. So we'll reassess that in August when, hopefully, there's more certainty and the benefits of the vaccine are rolling out and the economies are opening up again. And if we can, we'll pay -- we will pay a dividend in accordance with our normal dividend policy. So the decision not to pay a dividend is absolutely a very well debated, well thought out decision, which is a timing issue, reflecting the appropriateness of paying a dividend in this particular point in time. As I said, I want to pay a tribute to our people. They've done a phenomenal job. In my mind, they're all heroes. I don't really want to pick any out for special mention, other than 2 of our senior team in the U.K. were awarded MBEs for their work in the rollout of the shield program, the shield care program, Steve Clarke and Jim Gouldie, and we really are proud of them. But I think it's not about them. It's about the team. And the importance that Bidfood could play in ensuring the most vulnerable were looked after. And just on that, we're involved at the moment with getting schools back, not only do we provide the food, but we are actually providing the lateral flow testing apparatus and peripherals that go with it, that's enabling the education system to get back on its feet in the U.K. So we're very proud to play our part, and that goes around the world. We're supporting governments, we're supporting feeding schemes, we're supporting nursing homes, frontline workers, whatever else. And it's great to actually be part of a business that can contribute in some way and can be part of what is a very challenging, trying time for the whole world and for all of us. If I can just do a very quick run around the world and just give you a very brief overview of conditions. Like I say, the detail is all in here. They're all numbers. I mean, I know a lot of you love your numbers and you love your percentages and you love your spreadsheets. But I think these times really are unique, and it really isn't about what the numbers say because the numbers are actually irrelevant. The forward look is nowhere similar to what the historical past might reflect. But just to give you a feel as to where we believe the market is in various jurisdictions. I've touched off on Australasia, and you can see the numbers have held up very, very well there. And profitability margins are actually higher than they were a year ago. And I think that gives us a lot of confidence around the world that the same is going to be repeated, which, like I say, was reinforced in July, August through the rest of the world when we were trading strongly. So both the Australia and New Zealand businesses continue to perform strongly, have great market positions, are definitely gaining market share and are giving us a lot of confidence about what the future looks like. Moving to the U.K., that's a story of 2 halves, a great first few months, terrible second 6 months, will be an awful third quarter that we're currently in. That's just the way it is. When all hospitality is closed, it's very difficult to do too well and to be too effusive and glowing about your performance. But that business will absolutely bounce back exceptionally strongly. We've had some great customer wins for when these customers reopen. There's a very high level of morale in the staff, notwithstanding the fact that roughly 50% of our staff are on furlough. We've taken the remedial action necessary in the fresh business. We have pulled out a whole lot of costs, we've extracted synergies between the 2 businesses, whilst not losing the sales focus and the USP of our fresh business. We are a fresh business and we're a foodservice business. But behind the scenes, there is a combination and a sharing of resource. And I think that bodes exceptionally well for the future. I think the U.K. is well primed for some good growth. Europe, yes, generally, those businesses have held up as good as can be expected. We -- Spain is our problem child. We have had a management change, which we've spoken about that happened about July -- I think July or August. We're very happy with our new management. And as soon as some of the customers reopen, we have no doubt that we'll start seeing the necessary sales to pull that business through. And there are components of the Spanish business that were great, remain great and will continue to be great. Portugal, we've separated from Spain. We believe that our Portuguese business has enough momentum, strength and scale to stand on its own, and we'll be investing further in Portugal and expanding that footprint. Germany as well is a work in progress. A lot of the hard stuff has been done. And we're not going to see it until some type of sales and normality resumes. Through our more developed businesses, we're -- for the 6 months, we were profitable in all of them, which is quite an achievement, other than Spain and Germany, and I think it was Spain and Germany. So the Dutch business remained profitable. The Belgian business is profitable, not hugely profitable, but notwithstanding the fact that there's a crisis going on. The guys have managed to adapt rightsize the business accordingly, greatly assisted by government help on the employee side. Now a lot of you are asking questions about -- quite rightly -- about this government assistance. But it's, in my opinion, it's sort of a zero-sum gain because governments, yes, they're assisting you, but you're passing that straight on to employees to keep them employed. And if governments weren't assisting, you'd obviously have to take a different decision with regard to the livelihood and the future of employment opportunities within the group. So it's not something that just goes on top of; it enables you to keep your staffing levels at a reasonable level. And the money comes in and plays basically straight out to staff to keep the employment engaged. Our Czech business, Czech and Slovak business held up reasonably well. They do have a retail component where we do sell things like ice cream and value-added foods, and seafood and fish and meat and game, and all other types of things. So that held up reasonably well, notwithstanding the fact that at one stage, Czech was leading the world rankings in the number of COVID cases and went into quite a strict shutdown. We also did have a fire in -- I think it was November or December -- in one of our processing plants in Kralupy, which is Prague. Fortunately, we were only operating at reduced capacity because of COVID and were able to move the production to other facilities relatively quickly, within a day or 2. So we actually didn't experience any great business loss. Obviously, there was a loss of property. Fortunately, there were no lives lost, there were no injuries, and the rebuilding process has happened. So it was a significant fire. But fortunately, the damage was relatively limited, and the fallout was relatively small. Poland, we had the most fantastic few months in -- I think it was about July through October, absolutely an all-time high, followed by a lockdown. We know what happens next, but it gives us great confidence in where that business is heading. The Baltics, they have soldiered through it. We've got a very solid small business there now. So that's fantastic. Italy, we are profitable, not hugely profitable. I must say, Italy was also in the eye of the storm for a long, long period. Summer was good, followed by a series of lockdowns. And we have no doubt that we're seeing a lot of stress in our competitors, particularly the smaller competitors in Italy, which will be good for us in the shorter and medium term. I think that covers off the European segment. Emerging markets is obviously a collection of multiple businesses. You've got China in there that's done very well. Hong Kong have done very well under the circumstances, bearing in mind that Hong Kong have operated with social restrictions for almost the entire period. And there was quite a strict lockdown. I think November, December, they were in a relatively stringent form of lockdown. Macau has been basically closed. They just closed casinos; there was just no one traveling there. Macau has a population in total of 500,000 people. So the whole industry is based on tourism from Mainland China predominantly, which was absolutely cut off. They're now slowly starting to bring that back to life. And we're seeing that in our business, which is now kicking back to life in the last few weeks. South America, we are -- I'm very, very enthused about what's going to happen in South America. We picked up significant new lines of business in all our 3 geographies: in Chile, in Brazil and in Argentina. They are a very entrepreneurial, creative bunch of guys. They've seen an opportunity, and they've developed new markets and new product ranges that I think is going to bode exceptionally well. South Africa has also been a bit of a mixed bag. 2 out of the 3 businesses have performed well, which is Crown Food Ingredients and the bakery business, primarily because they sell into more the retail channel than the foodservice channel. And they've done very, very well. Crown Food, in particular, done fantastically. And for all of you in South Africa, I encourage you to go buy some of the Six Gun Grill. They tell me it's the best thing since sliced bread. So please make sure you all go stock up on it and make sure you use a lot of it. The Bidfood business in South Africa has struggled with the alcohol bans, with the lockdown restrictions, with everything else. And the mix of their business changed quite dramatically as well, which had an impact on margins, disproportionately, I guess, to anything else we've seen anywhere around the world. It's a temporary issue as to where the mix of business is and how they have tried to counteract that by developing new channels, which has come at a cost to margin. But we do believe that is short-term and that will correct itself as soon as you get some type of normality back in the market. So overall -- obviously, I'm disappointed that we are 46% down but I can't really sound disappointed. I'm thrilled with what the team have done. I'm thrilled with the performance, the resilience, the cash generation, the fact that we are profitable, the fact that we are in such a strong position, just waiting for circumstances to change. Now we've really got a great team of people. We've been together, most of us have been together for 10, 15, 20 years, which I think has been an integral part of our success through this difficult time. And so I remain totally enthused about what the future looks like. But just a couple of other points I want to make which might cut off some of the questions. We do get some questioning about why we don't cut further in our expense base. Our expense base is about 65% payroll. And people are our most important asset. And we could take a very short-term, short-sighted, naive view of drastically reducing our headcount to save some short term costs, which basically means we wouldn't have a business when it comes back. When it comes back, it comes back within a day, within a week, and you need to be ready and waiting. So it's very short-sighted to panic, get rid of staff, and wait until the good times roll again before you start hiring. There are a few issues regarding that. Firstly, many of our staff are very sought-after commodities in this environment. The retail environment is doing very well. The logistics environment supporting e-commerce is doing very well. And our people are very competent, capable, well-trained people who are fair game for those industries to try a poach. And it's very important for us to keep our staff engaged, enthused, motivated and retained. So that answers the question as to why we're not cutting the base further. It will bounce back. It will bounce back at almost 100% relatively quickly, and we need to be ready and waiting for that. The other question is, why haven't we made heaps of acquisitions? It's a great theoretical debate to have that says a lot of your competitors are in trouble, and we do believe a lot of our competitors are in trouble. But there's a lot of life support going on at the moment. Banks are very, very generous. Governments are very generous. And no owner who can see this through is going to absolutely panic and give his business away because of a short-term set of circumstances. They have a longer-term view. They have the ability to ride it out, and so nobody is falling over themselves to get rid of their business for nothing. These things are going to take time. We've got to wait for the bounce back, you've got to wait for things to get back to normal. You got to wait for banks to get back to normal, for government support to get back to normal, I think, before deal flow is going to start happening effectively again. There will be opportunity. There's absolutely no doubt. It's very, very difficult to do a deal in these circumstances. We don't have motivated vendors. And it's also very difficult to get around and kick tires and actually do any type of due diligence, particularly when you look at Europe, for example, where you can't travel. Even in Australia, we're looking at doing a few deals. But up until recently, I couldn't even get to Perth if I wanted to. So even internally, in those countries that are doing well, we still have orders and limitations of what we can do. So I think I've rambled on enough. Once again, I do just want to thank the team. I think it's superlative results without looking at the numbers. The underlying contribution has been fantastic. I want to thank all of them. I'm going to hand over to David Cleasby, our CFO, who'll take you through some of the absolute numbers. And then we'll have a Q&A session afterwards. I'm not entirely sure how you're going to get your Qs to Ashley. I think there's a methodology that you can submit them to her via a messaging system on the webinar. If not, we'll find out during what David speaks about. So I'm going to hand over to David. Thank you.

Thanks, Bernard. Good morning to everyone. And I will go through the numbers; otherwise, I've got nothing to do. As I start all these presentations, just to reiterate: the numbers have been prepared in terms of IFRS and using the same accounting policies as we normally do, or have done. And there are no real new material standards that have been introduced in this period and likely for the full year. As Bernard, just to reiterate, certainly my thanks and particularly to the clients, people around the world that compile the numbers, obviously the teams that generate the numbers. But it's like everyone, it's a tough time in terms of doing all this stuff, working remotely and the like. And just my thanks to everyone, particularly our corporate office team. We're still in the midst of a pandemic, as you've heard from Bernard, and there's still a reasonable amount of certainty -- uncertainty around. So we've retained what I would call our conservatism in terms of the way we prepared the numbers, and I'll give you some sort of sense of that as we go through them, but I would refer the -- I'd refer these as clean numbers, if I can put it that way. If we go to the highlights. Overall, from a financial perspective, certainly a very good performance, supported by strong cash flows. Revenue was down 10.9%, constant currency revenues 21.9% down. Gross margins held up relatively well other than in 2 areas, which I'll deal with a little bit later. Free cash flow, one of the highlights certainly of the period of ZAR 2.7 billion, which is about ZAR 1.8 billion better than the comparative period. We've given you a number here of what one would call the pandemic-era free cash flows of nearly GBP 160 million, and that excludes the dividend that we paid in March, and excludes the benefit of the 2 property sales that Bernard just spoken about. So very, very good free cash flows from effectively the beginning of February of last year to the end of January this year. Working capital have also good performance, better by 8 days. And that's on average. So it is relative to the level of trading that we're seeing in the various jurisdictions. So great performance there. Our receivables provisioning percentages have been maintained largely at where they were as at June. And that's -- there, I'll refer to our conservatism. Net debt at ZAR 2.6 billion. That's non-IFRS, what I would call real debt, significantly better than a year ago. And also as of June, Bernard has spoken about the impact of the lockdowns, particularly into Q2 in the Northern Hemisphere; notwithstanding that, Q2 trading was EBITDA positive. Headline earnings down 46%, headline HEPS down 46.2%. And Bernard has spoken and given you the rationale around the interim dividend, which I guess will be reassessed in August of 2021. In terms of the P&L, I think the -- we've obviously seen a decline in sales, largely driven, I guess, in the second quarter by the impact in the Northern Hemisphere. Gross profits have held up reasonably well, slightly down on the comparative period and impacted, I guess, by 2 things. Firstly, we've had to liquidate inventories. Typically what these lockdowns did, and one would know that they come relatively quickly, without any warning. And that means your market has shut down almost immediately, or reduced, and we have to deal with the inventories on that basis. The other thing is there has been some discounting, price discounting into the market to gain some market share and maintain market share. So I think, overall, gross profit has held up particularly well. I think on the expenses, Bernard spoke about effectively cutting the fat and not the muscle of the business. We do have a component of fixed costs around about, I guess, 35%. So -- and as we've warned that, you don't get a linear reduction in costs as you do in revenues. So if we look at it on a constant currency basis, revenue was down about 22%, but we managed to reduce costs through the same period of about 17%. So I think a great performance by the businesses. There haven't been any real changes, as I said, in the provisioning levels. So as I said, it's a relatively clean result. And there are no real significant COVID-related costs. And I refer those to receivables and inventory obsolescence and/or restructuring that I think we categorized as at June, or in the June results. Interest is down. Well, overall, it's up, but I think if you strip out the FX and the imputed interest on the DAC put option, it's down around about 22%. So we are seeing the benefit of better asset management and the strong free cash flows despite the low profitability that has been generated. We've got some capital profits of about ZAR 192-odd million. And that really is a combination of the profits on the sales and leasebacks, which Bernard spoke to, offset by some impairments, both to PPE -- some of that related to the fire that we had in Kralupy in Czech Republic -- as well as some intangibles, which is really software, I guess, end-of-life that we've taken the decision to impair. The tax rate is up a little bit. We, for some time, guided at around 25% on a normalized basis. But I think the only thing that has changed here is the Australasian contribution to the overall mix has gone up. And Australia and New Zealand, both have higher tax rates, and that's really the only reason for that having increased. In terms of the cash flows, going on to the next slide. As we've spoken about, excellent free cash flows. And I think really just 2 things to note. Firstly, the working capital, we generated ZAR 0.5 billion of working capital this period versus ZAR 200 million around absorption in the comparator period. And the net average working capital days of 6 days, which declined by 8 from a year ago. So I think a very, very good job done by the businesses. If we look at -- and it's a measure we do measure the businesses by to see where our working capital is normalized. We're running at net working capital as a percentage of annualized revenue of about 3.1%. We normally track under normal circumstances of between 4 and 5. So the businesses have done a great job in terms of pulling that back. But I think just to warn that as life returns to whatever the new normal is, and we do see markets reopening, we do expect there to be some absorption and that working capital percentage to go back up to where the normal levels are. In terms of the investments, investing activities, we see a cash inflow of about ZAR 400 million. That's largely driven by the proceeds on the sale of -- leaseback of the 2 properties. And Bernard has spoken about the methodology and the reasoning for doing that. It's not a wholesale sale of properties that we're doing across the businesses. It really is taking advantage of -- from our perspective, end of useful life. And that's really been -- the CapEx, to a large extent, is lower. If you look at the percentages, it's about 1.2x depreciation and amortization. Normally, we've been around 1.5x to 1.6x. And if you look at it as a percentage of revenue, that's sitting at 1.6%. And you'll recall that we had been tracking at somewhere between 2% to 2.4% of revenue over the last few years. So it is down; it's under control. But as the regions open up and particularly, Australasia, we are planning, and investments are already underway in that region. Cash and cash equivalents of ZAR 7 billion versus ZAR 5.3 billion in the prior year. Just really tracking, I guess, the COVID era cash flow evolution from the group. You can see how we've performed relative to the previous year. Granted, there isn't a dividend in there, but when I looked at the -- when I was talking about the free cash flow, we did also exclude the benefit of the property sales. But you can see that the group has managed through the crisis particularly well, and we're very proud of the way the cash flow has evolved. And I think that's a testament to our management teams around the world. In terms of financial position, don't really want to dwell on it. We -- the group is in a strong position in terms of solvency, all our ratios are basically much better than they were a year ago. And in many cases, better than they were at June. So the balance sheet is in a very healthy position. In terms of the guidance, I guess, looking forward, it's certainly -- we are going to see a bounce back in the U.K. and European sales. I guess it's only a case of when restrictions are eased. And as Bernard said, we have indicated -- we've seen some light starting to shine in terms of a road map in the U.K., and I'm sure Europe won't be too far behind that. The financial base we've got is absolutely supportive of the business recovery and growth, as and when it returns in the various jurisdictions. We're cash generative, and we've been profitable, healthily profitable through H1. And we're confident that that will continue into H2, maybe not in the first quarter as much as certainly the second quarter. Our debt-to-equity is low at 9% compared to about 19% in the prior period. As I've spoken, we do anticipate a bit of working capital absorption, a little bit difficult to say because that's really dependent on market recovery and when they open. We are managing the liquidity of the group. Well, we do have some short-term debt maturing, and we're working on terming that out into term facilities, obviously market conditions and pricing being dependent. The strength of the business is what it is. We are decentralized, and I think that's given us the wherewithal to really operate and see through this crisis particularly positively. CapEx, I've sort of spoken about. No real change in terms of our philosophies and how we manage the group. Forecasting risk remains high, obviously, due to ongoing uncertainty. But we are -- we believe we are conservative in terms of the way we're looking at the risk going forward, and certainly is our best estimate as we sit here today. Currency volatility will continue to be a feature. But it's always going to be a feature if we're reporting in ZAR, but we do manage the businesses in their home currencies, and we do give you a sense of constant currency trading so you can make sense of the numbers. Largely, our international shareholder base is stable, hasn't really gone up and down. There's obviously some rotation within that, but it has been stable for some time. And we're not providing any growth projections until we've got more visibility on the extent of the recovery, particularly in the Northern Hemisphere. So on that, I don't really have anything further to add. And if I can hand back to Bernard, and we can take some questions. Bernard, you're on mute.

Thank you. I didn't put me on mute, so I'm not sure how that happened. Okay. I've got some questions, here, and please excuse me, if I get your name slightly wrong. If you do have questions, please type them in, send them to Ashley, and Ashley will send them to me. So here we go.

From Rowan Goeller. Please, could you talk about whether consolidation is happening in the global foodservice sector? Have competitors closed? Are there opportunities in new geographies? Like I said, we're not really seeing anything happening in the M&A space. We're not seeing the consolidation. Most people are on life support and in a state suspended animation. So we're not really seeing too much happen. There will be some activity happening in the future. In terms of opportunities in new geographies, we have looked at 1 or 2, but when you can't get on an airplane and meet people -- firstly, you're not going to get a vendor who's going to sell to you over a Zoom call unless they're really desperate. And in a new geography, we wouldn't take on a business unless we were very comfortable with the people we were acquiring on the other side. So yes, we're just going to have to be patient for those opportunities. The next question is from Warren Riley. Can you comment on food inflation across your markets? Are you expecting food inflation once markets completely reopen? There's a lot of talk about inflation. We're not really seeing it in the food space, other than on some commodities like we always have that are impacted by weather and climatic issues. What we are seeing is there's a dislocation in shipping markets at the moment, so shipping freight rates are very high, which is obviously being passed through on product price. Hopefully, that will normalize over a period of time. But in pure price inflation, we're not really seeing it. But we do believe that there most probably will be more of a likelihood of there being some type of food inflation as opposed to deflation. And as we've always said, as long as that's on a manageable number in the low single digits, that's a positive for our business. But we're not really seeing anything of consequence across the world at this point in time. That's Warren. Another one from Rowan. Have dark kitchens established, given the lockdowns, and if so, is this a permanent switch? What could it mean for you? For us, it means another customer. So basically, all a dark kitchen is it's a restaurant without a front, and with no tables or chairs. So you have still got a kitchen with somebody cooking food and making burgers and pizzas, et cetera. And we are working with numerous dark kitchen operators who generally are restaurateurs anyway. So they're shutting down some restaurants temporarily. They are opening dark kitchens. And it's just an alternative customer source for us. So we don't see it any different to any others. Although they say that dark kitchens maybe are owned by Deliveroo or Uber Eats or Delivery Hero or DoorDash or whoever it might be. Generally, they're only fronting them, and somebody else is actually operating the kitchen and doing the work, ordering the food, making the pizzas and then using the Uber platform delivery or whatever it might be to deliver the food. Is it permanent? I would say, it absolutely is permanent. Is it going to carry on growing at the way it's growing? I don't think so. I think people are going to go back to wanting social interaction as opposed to staying home, and I think most of us have had enough of staying at home for 4 months at a time. So I think they are permanent, but I don't think it's going to take place of a restaurant type of experience. I've got a question from Paul Steegers, which I think has been repeated from a number of -- by a number of people. Could you quantify the positive impact from government-supported trading profit in the first half? David will quantify the number. I actually don't know what the number is. But like I say, it's a bit of a red herring because most of the government support is there to support wages. So it comes in and it gets passed through to employees, by and large. We're not like luxuriating in money being thrown on us by government, just because I feel bad for us that our industry has been hit. Almost all of the government assistance is there to maintain jobs so that when things come back to normal, the jobs can be maintained. So David will quantify it. But I think it's -- I just think it's incorrect if you say our profits have been inflated by that number. All that happens is we haven't reduced our wages by a similar number, and maybe have had to incur a one-off redundancy cost in making these people redundant because we weren't going to -- we didn't need the services and there was no government support for it. So that's a philosophical debate, but David will happily give you that number. But we're absolutely firmly of the view it's a flow through, by and large. Okay. I've got some questions here from Munira Kharva. Can you give us some detail around the type of restrictions, if any, on restaurants in markets like Australia, which is now open, i.e., are there laws around things like reduced number of diners, et cetera? And the second question, price discounts to customers, do you expect these lower prices to remain or will it be clawed back when the environment settles? In other words, are these discounts almost one-off COVID concessions? So firstly, on the restrictions. These things change, like, by the day. But yes, there are restrictions. If we look at Australia, each state has its own set of restrictions. But generally, there's a square meter rule, which generally means that restaurants are operating at less than full capacity. So in New South Wales at the moment until, I think, last Friday, we were operating at one patron per 4 square meters. That's now gone to one patron per 2 square meters. That effectively works out of 4 square meters. Generally, it's worked up to about 50% capacity at 2 square meters, they're getting back to 60%, 70% capacity. There's also a limit on the total number of people that you can have. And like I say, in New Zealand, it's slightly different, I think, other than Auckland, which is back in a more restrictive environment, the rest of New Zealand is more open. China has no restrictions, as I understand. But even in a place like Australia, there are restrictions on weddings, there's restrictions on what they call vertical consumption, which basically means standing up and drinking. So you can't partake in vertical consumption in certain states. There's no dancing. Night clubs aren't open. So notwithstanding all these negatives -- and I'm just going through it to give you an idea of the negatives that the market is still experiencing -- our market is holding up exceptionally well. And people make a plan, and there's lots of opportunity out there, and our sales are tracking at the levels they were a year ago, if not in excess of it. So yes, that's a positive in that. On the price discounts to customers, overall, our margins actually haven't declined by all that much. But I guess what we are seeing is a lot of customers have a lot of time on their hands at the moment. Because they, unfortunately, aren't operating their restaurants. So they're looking at every cost they can, and they're inviting suppliers to tender, to retender, looking at alternatives, how to procure cheaper, what the alternatives will be. And that's both a benefit and a negative to us. We're picking up some business on that basis. Likewise, maybe we're losing a little bit of money, losing a little bit of margin and maybe losing 1 or 2 customers. But I think we're a net beneficiary of that because we have maintained our staffing levels. We have kept our salespeople on. We have kept the people active and busy as opposed to just running for the hills and trying to trim the costs. So yes, I think your summation of it as a COVID concession is hopefully correct. Although it's fair to say it hasn't had -- there hasn't been a material impact on our overall margins. Belinda van Staden asked a question on government support. Again, the same question. Yes, we do believe it's a wash through, but David will provide that number. From Nick Webster -- what took you so long, Nick? On the resumption of the dividend, you mentioned it would be in line with normal cover. So just to clarify, if resumed in August, it would include a catch-up on the interim not being paid now? Question #1. And are you concerned about any permanent demand erosion as a result of working from home practices in particular, but also larger events such as conferences, and prolonged weakness in travel and tourism globally? Okay. So firstly, on the dividend. I'm not a fortuneteller, nor is anybody else. But if tomorrow, the vaccine worked and everybody was happy and all our staff came back from furlough and business bounced back and everything was hunky dory in August, at this point in time, looking at it what we know now, our dividend would be at the normal payout ratio on the full year's profit. So we wouldn't just look at the second 6 months' profit, we'd look at the full year's profit. But it's obviously too soon to tell that. That's certainly our intention. We understand the importance of a dividend. We haven't changed our policy, and it's purely just inappropriateness of paying a dividend at this point in time. Are we concerned about any permanent demand erosion? We actually aren't. And maybe we're naive, but I believe things are going to bounce back relatively normal. This work from home, I am most probably in the minority, but a lot of people don't like working from home. You actually can't build a culture over a Zoom conference. There will be, I think, far more flexibility. But this work from home isn't going to be work from home. And after working from home for 4 months, the last thing people want to do is actually work from home. So there is going to be a resumption of some type of normality. Sporting events will come back again. If we look in New Zealand, stadiums are back sort of to normal capacity. In Australia, before we had some cases in December, we had stadiums that were almost full -- almost back to normal capacity. So I think we're creatures of habit, and we're going to bounce back to our normal habits as soon as we have some confidence and safety that things are safe to do so. But like I said, I'm no fortuneteller and I'm no epidemiologist. From Anthony Sedgwick: can you quantify the extent of the furlough, which cushioned trading profit margin across the regions? Like I said, I'm not so sure that that wording is correct, but that's okay. David will provide that number. Okay. I'm getting there. I'm getting there. Wow, there are a lot of questions. Sorry, I'm just a little bit lost here. Okay. Let's carry on. How much -- this is from Paul Steegers, and I don't understand the question. How much do you think MIC has benefited your gross margin in 1H, given lower revenue from lower margin -- large, lower-margin contracts? I'm not sure I understand that. How much do you think we made? Maybe if you could resend that question. From James Twyman: cost savings were 17% down, how much of this do you think is sustainable when volumes recover? Also emerging markets, sales fell 5% in the period, but up sharply by year-end. Can you talk about some sort of scale improvement we are seeing versus pre-COVID? There will be an element of cost saving as we go forward because there certainly have been some efficiencies that we've identified in our businesses. And that's even in the businesses that are back to normal levels of operation. It's not going to be as marked as that. And bear in mind, our margins were relatively good, but there will be points of percentages of margin improvement due to efficiency gains from being forced to think differently and out the box about how we do things. Anonymous attendee: to what degree have government support schemes allowed you to retain people? In other words, what percentage of the staff base might have had to have been cut off, if you did not receive said government support? I actually can't answer that question because in many countries, we've got absolutely 0 government support. And in some countries, it's been very admirable, like in the U.K., to a degree, Belgium, Holland, and some others, which I'm not really too sure of. So I actually can't give you a number on that. But it is fair to say that a number of countries, there has been absolutely 0 from government. Belinda van Staden: can you please comment on the percentage split between different client business types compared with normal -- example, hotels, eventing restaurants, workplace catering institutions, et cetera? Yes, there is a slight swing. Like I said, cruise ship business is 0. Airline catering is almost 0. Hotels are picking up. And once again, hotels is split. So what you find is CBD hotels that will cater to international travel aren't doing all that great. Those in more regional type of areas are doing absolutely phenomenally from staycations and the like. So there's been a slight shift. Also, this work from home issue has resulted in CBD volumes being down, but it's been reflected by an uptick in suburban lodgings. So you got coffee shops in suburbia are doing exceptionally well at the expense of the city. What we are seeing in many places -- and we saw in China, we see it in New Zealand, we are seeing it in Australia -- is that CBDs are coming back to life very, very quickly. The people are learning to catch elevators again, and they're learning to navigate lobbies, and things are returning relatively simply and relatively quickly. Vikhyat Sharma, some gross margin will sacrifice to gain market share. Is competition aggressive on pricing to gain some market share, what is the state of competitive pressures? I think we've spoken about that, with our customer base being relatively unengaged with actually making food at the moment in many geographies. They're more concerned about back of house stuff. And like I say, we haven't seen a huge impact overall. I believe we're a net beneficiary. In some markets, we've got some great contracts waiting to kick off as restaurants and venues can reopen. So I don't see that as a fundamental shift. We are in a strong position. And we're not seeing the competitive pressure being ridiculously stupid. We actually aren't seeing our competitors doing really stupid things out there. It's just normal competition. I know you don't report Q1 and Q2, but could you give us a split for that ZAR 3.92 HEPS number, i.e., 100% zero or 50-50? I don't know if David can do that. That's not 100%...