Bid Corporation Limited (BID) Earnings Call Transcript & Summary

Good morning, everybody, and welcome to this trading update. On behalf of the Bid Corp team, we welcome you. It's our pleasure to update you. Hopefully you've had a chance to read the update that we put out an hour or 2 ago. These really are fantastic results. I don't want to use too many superlatives, but they are very, very pleasing results. And I think first and foremost, I need to pay tribute to our teams around the world. I think the strength of these results underlies the enormous effort that has gone into delivering these by our teams around the world. I think the numbers make it look easy and it's not easy. It's tough out there in the world at the moment; there are a lot of challenges, there are a lot of things that aren't necessarily going right in the world. And notwithstanding that, our teams have really taken the bull by the horns, have done what's necessary, they've continued to do what they always do and have delivered an absolutely phenomenal amazing set of results. It's a huge acknowledgment to the 25,000 people around the world or however many it is,. I'm sure it's more than that now. They really have done us proud and continue to do us proud and will continue to do us proud in this challenging world. It's not an easy place. The world's not easy, I'm sure all of you know and I'm sure you've all got lots of very interesting and challenging questions about this. But let me try and head off some of those questions of the past and talk about what's happened and talk about how we see the future. So basically we spoke at the end of August and we spoke about the strong trajectory that had started maybe February or March when the world started opening up after the COVID pandemic restrictions by and large started ending and we're seeing that momentum continue. It certainly continued through the Northern Hemisphere summer of July and August and some of September. But surprisingly, it's continued beyond that and we're seeing it across all regions of the world. Now obviously there is a little bit of seasonality that some of the European businesses do decline a little bit from summer through autumn, they pick up again for the festive season and then winter will see a slowdown again and pick up as we head into the summer next year. And notwithstanding that seasonality, the sales growth that we're seeing across the board is phenomenal and we've given you those numbers. That's somewhere in the region on a monthly basis between 25% and 35%. The currency is not really impacting that by all that much. Compared to 2019 BC, Before COVID, the numbers are even greater, we're talking 40% plus. Of course some of that's inflationary, but a lot of it is volume growth. I know you're all going to ask me to split out exactly the differential of how much is inflation and how much is volume and I'm going to tell you like I always do that we can't actually do that and it's not as simple an arithmetic or an analysis as you may think it is. Unfortunately, these aren't spreadsheet numbers. There are a whole lot of moving parts in very many complex businesses of different product categories, of us moving in and out of categories, of us moving in and out of customers, et cetera, which all have an impact on the inflation volume dynamic. But we are seeing very, very, very strong growth in all the regions around the world with the exception of Greater China. And maybe let's just talk about Greater China for a while and then we can get that out of the way. Hong Kong have released their restrictions to a degree. There still are quarantine requirements when you visit the country, the 3 days you have to home quarantine and then there's some other stuff you have to do, you got to get tested. There's still the threat of being sent away to a government isolation facility if you test positive. So Hong Kong really hasn't bounced back at all. The numbers we're getting out of Hong Kong are tepid, I'm not sure what other word to use. And hopefully as time goes on, the authorities will release those COVID restrictions and we will see the same bounce back that we're seeing everywhere else in the world. From a China point of view, from a PRC point of view, I think it's even a little bit more negative than that. The restrictions are very unpredictable, they're very harsh and there's no clarity as to where this is going to go. So we really don't know. A week ago you would have said that they were reopening, a day ago you would have said there's not a chance of them reopening. Notwithstanding the negative comments that I make about it, which are just reality and they're COVID related, our business is still profitable in Greater China. We are still operating, we're still trading, we still have customers, we're still importing product. It's just the volumes are very much depressed. I won't say suppressed, they're actually depressed and it's the one weaker area of operation in our business. To put it into perspective though, to the end of October Greater China accounts for about 3% of our operating profit for the 4 months and less than 1% of our HEPS. So it's not a significant impact and that's because Greater China has obviously decreased in size and the rest of the world has increased in size quite dramatically. So from a numbers point of view, it's not having a material impact. And for us, it's a positive story because at some point in time Hong Kong, China will open up and the bounce back will be exceptionally strong as we've seen in the rest of the world. So that's the China, Hong Kong story. As for the rest of the world, it's been phenomenal. Month after month we've seen record sales numbers. Our sales for last week were at an all-time record on a constant currency basis. I don't think the currency is making too much difference to the results now and David will talk a little bit about that later. But each week we're hitting records, we're hitting new highs and that's coming out of almost every business around the world. It just really is a wonderful set of circumstances that we face ourselves that we're facing at this stage. I suppose the question is why and that's a very, very difficult question to answer and we probably don't know the reason. We can speculate as to why it's happening, but we actually don't know why. There's no doubt that demand is strong, there's no doubt that there's revenge spending going on, there's no doubt that people are getting out there and enjoying things that they might not have been able to enjoy for 2 years because of COVID; but I think there's more than that. I do think our strategy is working, continues to work as it has for many years. Our focusing on the correct customer segment is freeing up capacity for us to grow into the more profitable areas of business and determine where we want to take this business as opposed to being dragged along a certain path. I also think the capacity we've put in over the previous years has absolutely put us in the position that we're in. We've had the ability to grow into some capacity and we can especially see that where we spend big amounts of money and historically we might have been criticized for spending too much CapEx, which I don't think we ever did by the way, and we can see the growth being strongest in those areas that received the most amount of CapEx and that CapEx is all infrastructure CapEx. That was all facilities that we created, which has enabled us to grow. There's no way to grow 40% from 2019 even with inflation and I don't know where inflation is running on a blended basis, maybe it's somewhere around the 10% to 15% mark over a few year period. Let's bear in mind we probably had deflation at the beginning of COVID and then we had no inflation and we've had very little inflation before then. So we've got a catch up now of inflation. But I still think maybe it's 10% to 15% over the full period, which still means there's a lot of volume growth that's come through our business. And we'll continue doing what we're doing in that regard because we believe that investment in CapEx is the safest investment decision we can make. We know we'll get the organic growth if we invest significantly enough and that's what's happened in the past. We've invested in the infrastructure and we certainly are getting the rewards. If we just run around the world quickly and I'll give you some brief highlights, which are all fully detailed in the announcement we made. Australia and New Zealand have both performed absolutely phenomenally. That is a superlative I'll use. Probably surprised as to the strength of the rebound. They're both operating at fantastic levels and we see no reason that that won't continue barring anything unforeseen and a macro type shock. We've exited some logistics business in both New Zealand and Australia and I'm pretty confident we won't see any blip as a result of that. In a very short period of time we haven't sold the capacity, but we've certainly been able to maximize what we're doing elsewhere and open up some very good capacity for profitable growth. And really, we've taken out between the 2 of them, there's probably about AUD 200 million or NZD 200 million worth of business and I don't think that will have any impact whatsoever on profitability, but does create a further opportunity for growth in many businesses that were constrained. So the Australian and New Zealand businesses are performing exceptionally strongly. The teams are highly motivated. They're in a good place. The biggest challenge they face, which I won't repeat, but that's faced in all our businesses is labor scarcity. It just is tough finding people to work and particularly in the lower paid the warehousing and the driver type of roles as opposed to the admin or management roles. And we really are struggling and it really is taking a toll on our people, it's very stressful. When you've got the growth coming at you and you can't find adequate staffing, it is a difficult pressure cooker. And they're also facing the issues of supply chain disruptions and product shortages; some of it's agricultural, some of it is just shortages of the product; but we're working through that. That's just business as usual caused by drought, caused by floods, caused by whatever else, demand shortages. If we move over to the U.K., they continue to have record sales weeks as well that do seem to be picking up a lot of volume and we would suggest that that's market share. We don't know that for sure. We don't want to be -- I reckon to say it's definitely market share, but it certainly would feel like its market share and the U.K. business is performing well. The one comment we do make about the U.K. business is it has a much larger proportion of larger type of accounts and those larger accounts are generally on fixed pricing contracts for a longer period of time than a smaller contract, which means you have a little bit of a lag effect in your pricing review. So we probably haven't seen the full extent of the increase in profitability in the U.K. operation yet and there's a little bit of a time lag, but that absolutely will catch up. Now through all the turmoil in the U.K., if we think about it in these 4 months, they've had 3 prime ministers and when you read the newspapers, you would think there's just no U.K. left. But week after week our guys have delivered. Results have been phenomenal, record weeks. The business is in good shape. We've got some good wins under our belt. We've made a small acquisition. We are looking at some other acquisitions and things are going very nicely in the U.K. Turning to Europe. That's a very, very similar story. All our businesses are profitable in Europe even the problem children who are no longer problem children. So well done to the teams in Spain and Germany. We're certainly out of the worst of it and now we face the future with great optimism in those markets and we're faced with the opportunity of what we do with those bases that we have. How do we grow it and how do we gain scale in those markets? In the core markets we operate, Netherlands is doing very, very well. On a cycle basis though their improvement will accelerate now because if you recall last year, the Netherlands went into lockdown sometime in November and got out of lockdown sometime in January. So that was awful. Whereas now we're trading at very strong levels, the business is doing well. Belgium, we exited a large national catering customer at the beginning of July and I looked last week our sales numbers are about -- I think it was 28% higher than they were for the same week last year. So once again that's freed up capacity, it's enabled us to move our resources around, use them more effectively and grow the business. So I'm very confident to say there's no blip as a result of exiting the business we chose to exit. Our Czech and Slovakian businesses is doing exceptionally well under the circumstances bearing in mind that about 30% to 40% of what they sell is to the retail segment and what we are noticing is that the retailers are under far more pressure than the out-of-home market and that's a global phenomenon. So we are struggling a little bit in passing on the price increases to the retailers on the product that we manufacture, which is all the product we sell into the retail segment in the Czech Republic and Slovakia. So everything we sell into retail is basically manufactured, which is feeling the impacts of inflation and we are having a tough time on passing that through the retailers. And we're confident that that's a short-term issue: it will normalize, it will stabilize. But having said that, please don't get me wrong, the business is still most probably performing at the levels of prior years. It just isn't seeing the same growth that some of our other businesses are seeing. The Italian business is doing phenomenally with strong growth, strong profit growth. We had a very good year last year. We're having a great year this year. So we certainly are seeing good growth. Sales growth I think is somewhere around -- I think it's 21% that we're seeing sales growth and profit growth is a lot more than that in the first quarter and in the first 4 months. Poland continues the great story. We've got a business now that's operating at world-class margins getting good sales growth. Fortunately, the horrible Ukrainian war doesn't seem to have had an impact on customer demand out of Poland so that business has done well. Similar story for Baltics doing well. Spain, Germany, profitable. Portugal, we've got a great business there. Our only regret is we didn't invest more in infrastructure a few years ago because we are operating at over 100% and there is a time lag as to how quickly the new infrastructure can be brought online. That is being done at the moment, but it does have a 1-year, 18-month time lag. But that business is a phenomenal business, a phenomenal base and is doing great and will become a sizable business in the years ahead. I don't think I've left anybody out of the European cluster. In the emerging markets cluster, it's a little bit of -- generally it's a great story. I've spoken about Greater China, which is off. Singapore, Malaysia are doing amazingly strongly both in Singapore and in Malaysia. Vietnam is very, very small and we're operating more or less at a break-even level there and we need to determine how we scale that business up. The Middle East is performing strongly. They're expecting a very, very strong November as a result of the World Cup. It would appear that it's not just a Qatar issue and we don't service the Qatar market, but it's benefiting the whole Gulf region and hotel occupancies are very, very high and there's a lot of money being spent as we speak and that will go on for another month. Notwithstanding that, the Middle East is doing very, very nicely and seeing some very strong growth. Turkey is one of those wonderful stories where over many years we struggled and suddenly you turn the corner and when you turn the corner, it's full steam ahead. We've had a great season there. It's quite a seasonal business. That summer is a lot better than winter in terms of the out-of-home market. There's a big differential in temperature and consumption primarily driven by tourism numbers. But the Turkish business is sustainably profitable now notwithstanding the fact that there is hyperinflation and there are other challenges there. I think that gives you the opportunity to trade and make some money if you're a good operator. Africa, our South African business is operating at record levels once again in a very tough environment with load shedding and whatever other issues you have going on, but it is a story of 2 halves. The Bid food business, the traditional foodservice business is performing exceptionally strongly. The Crown business is struggling a little bit primarily as a result of that retail story, it's the exact same retail story. The retailers are a little bit under pressure. They put us under pressure, that squeezes margins slightly. Having said that, once again don't get me wrong, it's nothing to panic about. They're just not seeing the growth that we're seeing in the other parts of the business, but they had phenomenal growth last year and the year before and same as the Czech business. So we really rode the coat tails of the retail boom and now we're just paying a little bit of that back in the retail-centric components of the businesses that we operate. Moving over to South America, I'll start with the smallest one first Argentina, which is a real surprise package. That business is flying. It's really, really doing well. I guess that creates a dilemma as to how much investment you want to put into Argentina. It's not big in the scheme of things, but it is a more volatile type of environment. But what we are seeing once again is the ability to make very good money. If you have access to capital and you're a good trader, you can make exceptionally good returns in those environments. Our Brazilian business is certainly much improved. We've made a couple of acquisitions. We're putting them together. That comes with a little bit of pain, which essentially we've been through. We've got a much bigger business now. I think the political situation has been a little bit unstable in Brazil in the lead up to the elections. Hopefully, that stabilizes now. But the business is profitable. It's almost at our acceptable levels of profitability. It's trading at all-time highs. So we're very happy with that. Chile is a slight challenge and I don't want to sound too negative because all of these, you're measuring them against their peers and their peers are performing absolutely phenomenally. And Chile is probably one of the laggards and they're going through some what I would just term growing pains. We've started with a greenfield operation there maybe 10 years ago and we've built a national presence of scale and that comes with a little bit of pain here and there. We got into the meat segment and that's requiring a little bit of learning and a little bit of adjustment as to what we do, but we'll get there. They had an ERP change about a year ago, which disrupted the business for about 6 months, which we're now well and truly around and are doing okay. So I think that's everywhere. I've covered off the world. Where do we see things going? Like I say on a week-to-week basis, we're seeing the sales numbers come through. They're tracking exactly where they should be tracking. We think we'll be in for a very good festive season around the world barring anything absolutely unforeseen happening. I don't want to talk too much about the negatives because it's real. There is inflation although we do see inflation slowing down. I said the same thing a few months ago. Energy prices generally are easing. They're not getting worse. I see the price of oil is coming down quite sharply. Europe appears to have enough gas for the winter. So we seem to be tracking the right way, but they still are inflationary pressures. We still have labor pressures. We still have supply chain disruption. We still have product shortages. But we reassured at this point in time the trajectory that we spoke about in August has continued. It's been a phenomenal 4 months, 4.5 months and I think we'll continue that into the future. I think the business has undergone a step change wherein we had 2 years hiatus through COVID and probably when you normalize all of that, probably where we should have been if we didn't have COVID and we had our regular growth. So I think we're back on that trajectory. Once again full thank you and credit to our teams around the world. They really have done phenomenally. I'm going to hand over to David to talk you through some of the more financially focused numbers.

Thanks, Bernard. Just on the sales, really talking about this [indiscernible]. Gross margins are down slightly compared to the previous periods, but we've already spoken about the [indiscernible] little bit in South Africa and the Crown business little bit in the U.K. But overall margins generally are holding up very well and as we expect. In terms of operating costs, the businesses have managed those particularly well. We can see the cost of doing business as we measure it has come down quite a lot compared to the previous periods. So despite all the cost pressures, we are seeing the businesses are really managing that just as well as they can. I think gradually despite the margin pressure, we are seeing some benefit on the cost side and we've seen a pickup in the trading margins. In terms of the EBITDA, just to clarify something that may not have been clarified. We compare that against the pre-IFRS 16 EBITDA so the traditional EBITDA is recorded. We've seen that tick up to about 5.9% in the 4 months of October. If you judge on the current vision base in terms of the IFRS 16, it's about 6.6%. So the EBITDA margins have been mostly tracking very decently. Just the working capital, that's just up. It's absolutely in line with our expectations considering the current circumstances of inflation and [indiscernible] growth that we've got on hand. Typically in this period we do see that absorption, which is normal and seasonal. So although that's up, we are not concerned about it, but obviously are watching it. The other measure that we do look at is what we call our working capital as a percentage of average revenue and that's tracking at the high end of our range as we indicated somewhere between 4% and 5%, but still obviously under control. Nothing really to add on the CapEx. I mean it's been syndicated at Spain to [indiscernible] joint effort so that's under control. There have been a few acquisitions, maybe ZAR 300 million spent in the period on a few businesses. Free cash flow is as we would expect in this period. There is an outflow little bit above where we were in 2022, but a lot of that as we indicated sits within the working capital. In terms of liquidity and debt covenants, there's no issues to talk about there. We've got significant headroom within the group to obviously [ grow ] organic and acquisitive and we remain well within our debt covenants. So this covers most of the highlights, Bernard, unless there's anything else you want to add.

No. Thank you, David. We don't have too many questions. So if anybody does have a question, I don't know if you know the process. Just you can send it through the Q&A box. I can only see 2 questions at the moment, of which one I don't think we can answer right now. I'll tell you what both questions are. The first one is how much of the growth is due to your initiatives offering well-priced options to customers et cetera as opposed to just COVID recovery? Once again I wish I could answer your question, but I can't. It's all over the place. Who knows? We don't know how much is from where other than almost every sector is experiencing growth. The travel sector is booming. The sporting sector has bounced back, I'm not sure exactly where it was, but it has bounced back. The cruise line industry is bouncing back at a phenomenal rate and capacity is coming back. So all segments of the economy are sort of bouncing back and who knows where that's from. All I know is we are taking whatever we can and doing what we can and that's reflected in these numbers. We've seen phenomenally strong sales numbers and that I think like I said, it's a reflection of the market is strong. There's no doubt. And I think we can see that in our peers around the world although our growth does seem to be a little bit more than our peers. But we also have this understanding, which might be wrong or might be right and I think it's right that we are gaining market share in most markets. So we're just happy to take the growth wherever we can get the growth and move on from there. Okay. I've just got a few more questions. Could you give -- sorry, they're just moving here. Let me start at the top because they're going the other way. What is the thinking around increasing the div payout considering a very strong performance? We'll talk about that in February. We have a div payout ratio and obviously if there's a strong performance, you're going to get a higher dividend at the same payout ratio. Whether we want to carry on increasing the payout ratio or reinvesting in the business is a different debate that needs to happen. And I think that absolutely reinvesting in the business is a very smart move at this stage that we will continue to do. Okay. This is from an anonymous attendee. What is the current standing on share buybacks given attractive valuation? I'm not sure what. Maybe the valuation was attractive at ZAR 270 and we missed the boat. I'm not sure what an attractive valuation is. You have to look and see if it's going to be accretive or not accretive to do a buyback and it is something we do look at relatively regularly. Our view is not to overtly jump into it. We are conservative in our gearing and our balance sheet. We'll continue to be so. Are you seeing wage pressures alleviating as the broader economies are slowing? Yes, we are and yes, we are seeing some more availability of labor. There's more of a normalization happening. Having said that, it's a very, very slow process. So it's probably not getting any worse is the best way to explain it. It's not getting better in leaps and bounds, but it's certainly tapering off and maybe we're just getting used to it. But we definitely are seeing that the pressures are normalizing and are a little bit easier to cope with. Can you talk us through any M&A activity that you're seeing in the industry? There's nothing overly major. There was a deal done in the Middle East on a competitor of ours that we declined to participate in the process for numerous reasons and a company in the U.S. called Chef's Warehouse purchased them. It was about USD 100 million business. We are looking at a couple of acquisitions. Some of them are a little bit larger than our normal bite size chunks that we take. They're still not monumental and aren't going to shift the needle dramatically, but they are bigger. There's a 50-50 chance they will happen and we will keep you informed. We've mentioned the countries that they're in. But we are seeing opportunity out there. They are fairly priced, i.e., there's no bargains and you just need to be a little bit careful in this environment because valuations are maybe coming down, not going up as interest rate rises. So we're just in that phase at the moment, but there is some traction on some M&A that is a little bit larger than before. Could you give an idea of how important LatAm is now and are there good inorganic growth opportunities there? Absolutely. I don't know what the size is. Maybe David can quickly just tell us what the percentage of EBIT that South America contributes. It's not a big number, but there's a huge amount of potential both organic growth and acquisitive growth. We really are scratching the surface. There are lots of product lines we're not in, there's lots of areas we're not in in terms of geographies, there's lots of customer segments we're not in. And we will build that business and scale it up quite significantly in the years to come. We have been taking a relatively cautious approach, which I think is correct because some of those markets are a little bit more volatile than others. But over the time, I think we've performed relatively well. We've got good basis from which to grow and I think we'll see some good growth coming out of the area in the years to come. Given rising interest rates and your eroding spending power in some of your key geographies, how do you reconcile that with the strong growth that you are seeing across the board? We can't reconcile it, yes. I do think though that there's good demand for out-of-home consumption. I don't think we're the only ones who are feeling it. Try and get on an airplane, try and book into a hotel in the U.K. or in Europe or in Australia or New Zealand, you're going to pay top dollar. So clearly people are spending, maybe they've shifted their spending. But there's no shortage of demand out there at the moment. In August the question was exactly the same and everybody was expecting a calamity in September at the end of the European summer. That certainly didn't happen and the sales trajectory carried on exactly on the same path. How is the health of your customers? Reporters now are saying that some restaurants are closing, but it's difficult to gauge based on a few anecdotes? Restaurants are closing and new ones are opening and poor operators aren't surviving and good operators are thriving, which is a normal story in the market. There's no doubt that our debtors position will deteriorate slightly because for 2 years you've had government support around the world. Businesses have been supported and government have been there to ensure their continuity and that support has been withdrawn. People are on their own and they're funding growth. So our good customers are growing pretty rapidly as well and are faced with the same pressures we're faced with in terms of rising costs and labor shortages, et cetera. But we certainly at this stage aren't seeing any real stress. We're seeing nothing significant. There is an uptick. There absolutely is an uptick in call it delinquency or stretch payment, but it's nothing to get concerned about at this stage. And it was probably trending back to a more normalized level of where it was pre-COVID pre-government support. We are currently -- this is [ Mark White ]. We are currently investigating acquisition in New Zealand, Brazil, Belgium, the U.K. and the Baltics. What size are we walking about -- talking about? Could you give some color, total value, material? They're definitely less than 5% and I don't know which of them are going to come off. Even if they all came off, it would still be less than 5%. But there are in-country bolt-on acquisitions that are quite -- I think would be quite important for the continued growth of those businesses. So we remain enthused. But once again we're not betting the farm, we're not making outrageous bids, taking outrageous positions and are being relatively conservative. I presume there is no reason why gross margins won't bounce back and you won't just absorb this pressure. Furthermore I assume cost of doing business can be kept around these levels and hence paves the way for further margin expansion. Maybe being a little bit optimistic. In high inflationary times, it is quite a difficult and tricky balancing act on the margin and sometimes you give a little bit of way and sometimes you make a whole lot more. You got to trade your product, you got to trade your customers and find the adjustment. Our margins have improved and we will continue to see very slight improvements, efficiency improvements, but they are cost increases. There's just no doubt that inflationary cost increases are there; energy costs more, diesel costs more although it's now costing less, new infrastructure costs more. So all I'm trying to say is don't get too carried away with thinking we're going to see a massive margin expansion. We're currently tracking just under 6% EBITDA margin. Yes, 6% is probably a very nice number. You get a couple of the other businesses performing to that level and 0.1%, 0.2% increase and you've got very, very attractive margins. Confident in your ability to get those margins back to 7.5% this year? Yes. You spoke in the past about the long-term ability to scale operating margins to the 7% to 9% region while scaling own brand, getting the customer mix right and as markets mature. Is this a fair assumption? Absolutely, but that's a long-term game not a short-term game. And I think you'll see it coming out of the regional analysis when we present that to you in February for the 6 months, probably give you more color on that. But that's a process and we will absolutely strive towards that and some of the businesses are already at that and there are 1 or 2 businesses that are above that. So that does give you a framework as to where we want to take this thing in the medium to longer term. How is the new customer growth in HoReCa segment in the overall business on new restaurants, cafe, hotels openings back to pre-COVID levels? Is it expected to continue? That's the first part of the question. Second one is private label growth, has it been strong especially with shortage issues or is branded products still demanded by the customers despite high prices? I'll answer the second one first. Private label has been hit just as hard in terms of product shortages as branded product. So there has been a lot of substitution both ways into branded and into house brand. There's a French fries shortage around the world at the moment so basically you take what you can get and that's going to be repeated on some other products, which is an agricultural issue. It's caused by droughts and floods and issues like that, which will normalize over a period of time. But our house brand strategy has been the same. We are growing our house brand and we are seeing growth and we'll continue to drive that to get to the correct equilibrium. I don't have the numbers here. I will probably not even give you the numbers in the middle of the year, but it is one of those important issues that we focus on in the business and we absolutely are getting greater house brand penetration and will continue to do so. On this issue of HoReCa, I think there's a little bit of a misnomer and we're not only in the HoReCa segment because a fair amount of what we sell around the world is into the nondiscretionary part of the market. We absolutely sell to hospitals and nursing homes and childcare centers and universities and educational facilities and boarding schools and defense forces and navies and I'm just trying to think of what other segments make this up. Age care, which is quite a big component of our business and it's probably somewhere around about 40% on average, which isn't impacted by HoReCa. And even within those segments, there are some very, very correct customers. Some of it is national, a lot of it's not national and fits perfectly well within our target market and our target aim of where we want to grow the business. So HoReCa's not for us all about restaurants. It's a much broader definition than hotels, restaurants and caterers. I'm not sure what catering really means in the context of HoReCa. But we're seeing the business is back to the trajectory of where it was. You've got restaurants coming back to life, you've got office functions happening again. We haven't had Christmas office functions happen for a couple of years. Those are happening again, office parties. People are actually getting back to the office although I'm sure a lot of you are still at home. The world is getting back to normal and we're just seeing the benefit of that across the board. I don't think we can stratify and target out exactly where the growth is coming from. The growth is actually coming from everywhere, which I think is a great position to be in. You're exiting some low margin logistics business in Aus/New Zealand. What sort of [indiscernible] are still remaining in these lower margin logistics business? As I've explained before, that's a moving piece. That's what starts out as a little customer, you pick up one guy who's got a hamburger shop and then he grows into 2 hamburger shops and that's great and then he's at 5 and that's good and then it's at 10 and then it's okay and then he's at 40 and that's average and then he is at 100 and it's not so great and then he's at 200 and it's time to go. And this happens all the time. So that keeps moving. There's nothing -- in Belgium there are a couple, sorry. In Belgium, there are a couple that we do need to exit over the next few years and we are having conversations with them. It's not that easy because there's not a whole lot of capacity in the market and we do want to be a partner of -- an honest and transparent partner as to why we're doing things. So you can't necessarily instantaneously turn these things on and off. So there's a big customer in Belgium, which once again won't shift the needle in any way from a group point of view. And none of this shifts the needle, but does free up capacity for us to continue doing what we need to do. Our views on Christmas trade, weather in Europe has only recently cooled down although it doesn't seem to be showing any November trends. Do you have line of sight on Christmas bookings? What we're hearing is everybody is expecting a good Christmas. If you recall last year, Christmas was canceled. There was the Omicron outbreak. The Netherlands went into lockdown. The U.K. basically went into a self-imposed lockdown I think it was the middle of December and Christmas was canceled and it was the same impact through the rest of Europe. So what we are hearing from our people is that Christmas is back and people are going to spend. So we're very optimistic at this point in time about where the festive season is and quite a lot of our sales at the moment are actually in relation to the festive season. And like I said, last week was a strong week because it's record levels once again. So we remain positive about it. Okay. I think that's it. We've answered the questions.

There is some clarifications about somewhere at 28%.

At operating profit?

[indiscernible]

South America is 2% to 3% and that's certainly got the opportunity to be a whole lot bigger and will be a whole lot bigger. Look, I think in summary, once again it's a phenomenal set of results. Our thanks go out to the teams around the world. Under very, very difficult circumstances, they've delivered once again and they will continue delivering. We don't think this is a flash in the pan. There's nothing in here that's one-off. It's coming across almost every single geography, every business and wherever we look, we're seeing a very similar trend, very strong sales growth, maintaining of margins, controlling of the expense base and then you get the appropriate leverage as a result of that. So our teams are focused on what they need to focus on. They're not focused on the negative. My advice is don't read the newspaper, don't watch TV. But certainly not as bad as the press and the media and the hub makes you out to believe. There still seems to be a whole lot of spending going on out there. So we'll continue down this positive way. We'll continue investing in the business. We'll continue down our strategic path of what we want to do in terms of the correct customer, our house brand strategy and import strategy, our value-add manufacturing strategy, geographic expansion, bolt-on acquisition. And if anything suitable in new geographies come along, we'll certainly have a look at it, but we're in no absolute urgent rush to get into new geographies. We think there's still heaps and heaps of runway growth ahead of us in our existing markets as we've shown once again. As I said, boring is beautiful. These boring numbers are beautiful and long may that continue. So thank you, everybody. Thank you for your attendance and I look forward to seeing you all again in February and continuing the story. So to be continued. See you soon. Thank you.